Sir John, Lord Redwood is a former MP for Wokingham and a former Secretary of State for Wales.
Polling says that rail and water nationalisation are popular. Labour is rediscovering its inner drive for state control, throwing away the Blair years when free enterprise was largely accepted.
However, Ministers and their advisers should pause and think through the meaning of the recent mass cancellations and delays of train services rippling out from Manchester. They were caused by the failings of long nationalised Network Rail who were unable to provide a working back up system for a very short 90 second interruption to mains electricity.
Signals went to red and the railway came to an embarrassing, nationalised halt. It was particularly symbolic that the epicentre of the crisis was Manchester, the origin of Labour’s revived old thinking about the joys of public control.
There are three main problems with nationalisation. The first is that it usually creates or sustains a monopoly, meaning none of us have choice or can escape when they behave badly or fail to deliver. The second is that we, the taxpayers, stand behind them financially, so they can load onto us any amount of losses, waste and poorly guided capital spending and we are left to pay the bill.
The third is that the government are to blame for everything that goes wrong. However much they may seek to distance themselves from the bad decisions of senior managers, the public will hold Ministers accountable. Ministers, after all, could change anything to make it work better.
Free enterprise usually avoids all three of these difficulties.
It is true that there exist bad companies. There can be bad service, for instance a company can let you down or charge you too much. It is also true you do not have to put up with it. As long as there is competition, you can go elsewhere to get it fixed. Bad performance leads quickly to bad reputation. Failure to correct it leads to bankruptcy as the customers walk away. The losses incurred by bad businesses are paid by their shareholders and bankers – not by taxpayers. Government is not to blame and can come in from the outside to demand improvement, or to close them down, and to prosecute any law breakers.
The UK has avoided nationalising the supply of food and clothes. There is no bread shortage. Hot cross buns are not put on ration when many more people want them at Easter. There is no UK clothes shortage, no waiting list for popular trainers. There is a huge range of choices in food and clothing stores, with a wide range of prices, discounts, price promotions, loyalty cards and credit terms.
Contrast that with what happens where the state runs things. I am not proposing ending free healthcare under the NHS, but the current nationalised model of delivery means very long waiting lists and waiting times for care, a shortage of GP appointments and hospital beds. It has also meant a lot of worrying deaths, particularly of babies. There needs to be an improved model to deliver great free care.
Nationalised roads means regular congestion through inadequate provision. Some Councils are proud of their incompetence, and put up permanent signs warning you to expect delays. Imagine a supermarket which had, at the entrance, a permanent warning that you should expect them to be out of bread most of the time. The Highways Agency and Councils regularly shut main roads for work to be done when people wish to use them. They do not shut down the main runway at Heathrow for maintenance when fee paying planes wish to land. The road authorities allow utility companies to dig up the highways to put in pipes and wires and to mend them instead of requiring such works to be in submerged channels with access points for repairs and replacement, preferably not under main highways.
Nationalised Network Rail has been the main cause of train delays and cancellations for most of its years of existence. Nationalised HS2, under state control and with access to unbelievable amounts of taxpayer money, has failed to deliver a new railway line to budget and on time, with a likely overrun of more than a decade before the first trains can use it.
The nationalised Post Office got away with taking money off of its Postmasters for years based on a failed computer system which was stealing from these key staff. It put many of them in jail on false charges. It still lacks a business model which could deliver a profitable business, using the network of counters it still owns or rents.
The state prisons service fails to stop drug use in prisons, puts up with a high repeat offending rate from prisoners and closes down enough older prisons to ensure the many new prisons built on the instruction of the last government did not add to capacity.
It is true the water industry has failed to put in enough new reservoirs to handle the extra demand from a fast increasing population, and has failed to renew and expand enough pipes and treatment works to avoid dumping sewage in the rivers. The whole country is united in condemning this. The problems arise because these are heavily regulated monopolies, meaning you cannot change suppliers to enforce better conduct or get lower prices.One of the main influences preventing the additional provision needed was a Regulator controlling prices and saying No to some needed investment.
It does not mean a state owned monopoly would be better. Indeed, we know it was worse when we had one in the 1970s and 1980s. It did not even tell us how much sewage it was dumping in rivers and around our coast at sea. When the government started measuring the outfall we were called the dirty man of Europe for sewage defiled beaches. The Camelford water poisoning also occurred in the dying days of the nationalised industry.
Nationalising water would be an expensive way to make things even worse. The one thing privatisation as monopolies did achieve was to take all the large spending on better facilities away from the taxpayer and the national accounts. Given the tightness of current public finances, there is no room for the payments to shareholders to take over these businesses, nor for the large and increased expenses of putting in new reservoirs and pipes.
I wanted water privatisation to include competition to keep them honest and drive lower prices and better technology. That could still be done. I was told as we only have one pipe into the house there could not be competition. Most of us only have one gas pipe and one broadband cable into the house, but there is plenty of competition in those markets. Who is to say if one pipe only is best, when maybe there could be a pipe for drinking water to high standards, and another pipe for toilet flushing and garden water to a lower standard, or collected off the roof?
The government will run out of money before it can buy up all the water and energy companies it lusts after. Where it does succeed in gaining control, as it is doing with the railways, it will find it is not easy to get any improvement. On past form, it is more likely that it will end up making the inherited problems worse. Meanwhile, taxpayers will be asked to pay yet more money as they spray cash at badly run state concerns in the hope something will get better. HS2 shows that does not work.
If Labour is to get its nationalisation to achieve anything worthwhile it needs to train its Ministers to offer business leadership. The sad lack of progress at British Steel shows that the Ministerial blunder in not agreeing the take over with Jingye first might prove costly as the Chinese demand £1bn of compensation. It also shows that changing owners does not suddenly make an old works young, or create steel demand that did not exist before.
It does not suddenly bring costs down or allow charging much higher prices. The losses simply get worse and the poor old taxpayer has to pay all the bills. For how long will they manage to preserve the jobs? Government should not overclaim for what it can achieve when there is no-one else left to blame.
(UKR)
