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2013: the year to commit to roll back the failed privatisation juggernaut

Britain has been de-industrialised over the last 30 years, but beyond a decimated manufacturing capacity there are also services essential for an efficient productive economy. These include transport, energy and communications as well as education, health and housing. All of these have been, or are being, privatised and the results have been devastating.

The McNulty report on the railways in 2011 found that costs were 40% higher than comparable state-owned rail industries in the rest of Europe. Far higher subsidies were required from the taxpayer to finance inefficient and inferior services.

In energy several parliamentary inquiries have exposed equal levels of profiteering and inefficiencies as a result of fragmentation, as well as so great a rundown in investment as to threaten national security of supply. Dieter Helm, an energy expert, now believes that £500bn investment will be required to achieve an internationally competitive level of infrastructure over the next decade because of the accelerating failure of privatisation.

Much the same applies to telecommunications and water. The most authoritative analysis of privatisation in Britain – The Great Divestiture: Evaluating the Welfare Impactof the British Privatisations 1979-97, by Massimo Florio – utterly destroys the myth that privatisation has led to any long-term gains in productivity or efficiency, and documents the major costs in terms of welfare and communal benefit.

In addition there has been a key loss of strategic control. Previously, during the high growth of the post-war years (1948-73), R&D investment in energy, transport and telecommunications has positive feedback on manufacturing. Over the last 30 years however the sharp decline in British R&D has cumulatively weakened the UK industrial effort.

Strategic intervention in the national interest now hinges on the government trying to manipulate private investment decisions which, even if successful at all, is usually unnecessarily costly. Notoriously, once the provision of housing had been handed to the private sector, no amount of government inducements can now get investors to meet the enormous shortfall in availability.

At the same time however the banks and financial institutions were frenziedly active in high-margin mortgage lending to those in desperate need of housing. This inflated housing costs at double the rate elsewhere in Europe – 2.4% a year in the UK against 1.1% in the EU, much of this inflationary cost in the UK being due to speculative lending by the finance sector in conditions of housing scarcity. Which points again to another critical factor in Britain’s economic decline – the gross over-dominance of finance.


  1. treborc says:

    I do not know it’s to late really and I doubt to many people will believe that Miliband would even know what to do, I suspect whom ever wins the next election will see banking and the financial sector as the answer.

  2. Alan R says:

    The privatisations haven’t stopped, next stop Royal Mail (don’t get me started on that topic!).

    Yet we now have a gargantuan statue of Reagan in London and plans for a state funeral for Thatcher.

    Very depressing.

  3. Quintus says:

    Good piece.

    There is a widely held view among ordinary folk that there isn’t a lot of difference between the 3 main parties – and the continual privatisations / PFI (that haven’t worked and been v expensive) is one of the factors that leads people to that conclusion.

    It’s time that Ed showed the country that he isn’t David, Blair or Brown and made a bold decision – at the very least renationalisation of the railways.

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