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As Tories privatise the post, Labour must expose where the market has failed

Royal Mail stamps, pic by 123rf.comThe imminent privatisation of Royal Mail once again draws attention to the deficiencies and failures of private markets. It is going to cost the country £12bn as the deficit on the Royal Mail pension fund is dumped on taxpayers. The underpricing of the sale will also cost the country at least a further £1bn, the price of stamps is likely to soar in the next three to five years, the universal obligation to deliver post at the same price to anywhere in the country is unlikely to survive (despite government claims to the contrary) more than another five years.

And the new private owners are likely to cut jobs, pay and terms and conditions in order to force up profits. Where is the public good in all of that? Nor is this Tory ideological fanaticism confined to the Royal Mail. It applies to all the other public services they’ve meddled with in the past.

In the case of housing, 200,000 houses were completed in 1979, equal to the annual increase in demand for housing, but by the end of Thatcher’s regime that had shrunk to just 167,000, and Tory austerity reduced it even further to only 98,000 last year, the lowest level since 1923. The decimation of housing supply under Thatcher and then under Blair inevitably led to rapidly rising housing prices. Between 1980-1992 public subsidies for privately rented and housing association homes rose 16-fold from £183m to £2.9bn.

So instead of delivering supply for the public benefit, the market delivered costs for the public purse. The trend continued under Blair-Brown: public subsidies for private tenants – money that went via the tenant direct to the private landlord – soared between 1990-2010 to no less than £8.4bn. Ironically, around 40% of private sector housing benefit payments go on ex-council, right-to-buy property now owned by private landlords. Instead of providing more housing which is desperately needed, much of these sharply rising housing benefit costs now subsidise private lending to social landlords, the buy-to-let industry, and private landlord profits.

Then there’s the privatised energy sector: has that been a success? The private retail supply of electricity and gas was supposed to produce real competition and lower prices. It has produced neither. Moreover a private energy market has proved incapable of dealing with today’s most pressing problems – mitigating CO2 emissions and ensuring security of supply in the face of energy shortages predicted in the latter part of this decade.

Nor have the remedies so far promulgated remotely worked. Accumulated directives, rules and subsidies have not cured the industry at all of its short-termist profiteering comfort zone. Miliband’s idea of a 20-month freeze on electricity and gas prices is eminently justified, but it still doesn’t begin to get to the heart of the problem which is the massive failure of the private energy sector to deliver any of the goals the country urgently needs.

5 Comments

  1. m.o.smith says:

    Why, when the public have never had such a cynical view of the press, are Labour so reticent to ask for an open and public review concerning the nationalising of all public utilities, energy, water etc as well as railways and the pharmecutical industries? Instead they still seem scared stiff of any bad press from the very papers that will never give support to the party anyway.

  2. Jon Williams says:

    I’ve been told that taking shares in Royal Mail employees have given up the right to strike – is this correct? Shocking if true!

  3. Robert says:

    Legally all workers have the right to strike unless laws and regulation are put in place so that any grievance can be sorted out by other means for example the Police force.

    So will people who take the shares and who would turn down maybe £1000 in shares.

    But the still have the legal right to strike and nobody can remove that legal right, but will they want to strike, I think the Tories out footed the Union, the sale is now virtually over and then you go on strike, we are told to ensure the right and pension and wages are protected if they get that sorted it done and dusted.

  4. James Martin says:

    Sadly the CWU leadership put far too much faith in political campaigning via the Labour Party rather than industrial action pre-privatisation. And honestly, why on earth would you trust such a slippery character as Chuka Umunna who made it clear he just thought the privatisation could have been done better?

    Personally I wouldn’t trust him to go to the corner shop for a loaf of bread. You’d give him a tenner expecting a load of change, but hours later he’d return from some posh deli clutching some ‘artisan’ rubbish that doesn’t even fit in the toaster and argue that you owe him extra for his trouble, and that in any case he was doing you a favour by actually being anywhere near someone who wasn’t a millionaire…

  5. Robert says:

    Few like that in the labour party upper middle class types who do not fit in with Labour being working class, then again sadly you could say the same about many within labour these days. Poverty to them is not being able to buy a second Aston martin when the other is dirty.

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