Private enterprise flourishes at public expense
By George Monbiot. Published in the Guardian 8th April 1999.
Sir Alastair Morton’s appointment as chairman of the Strategic Rail Authority follows a certain pattern. Lord Simon, as deputy head of the European Round Table of Industrialists, hammered on the doors of the EU demanding special concessions for big business. Now he is minister for Trade and Competition in Europe. Lord Sainsbury’s family firm is among those being investigated by the Office of Fair Trading: today he is a minister in the department to which the OFT reports. Ewen Cameron owns several thousand strictly private acres of Somerset. As head of the new Countryside Agency, he is responsible for tackling social exclusion in rural areas. Now the man whose Channel Tunnel consortium incurred legendary cost overruns is in charge of the body which should force the railway companies to provide good value for money.
If the SRA had any powers, Sir Alastair’s past might cause some concern. But the authority, which arose from the one seed of common sense in John Prescott’s transport proposals to have broken through the Downing Street contraceptive, is stillborn. There will be no Railway Act before the summer recess. We will suffer the railways’ fragmentation, overcrowding, delays and cancellations for a long while yet.
Our rail services are in an even worse state than we have been led to believe. Within the next few weeks a report commissioned by the rail regulator will show that Railtrack, one of Britain’s most profitable companies, has invested far less money in infrastructure than it had promised. Its targets for making the trains run on time have been missed by 50 per cent.
We all knew this was going to happen. The privatisation of British Rail was the apogee of bonkers Tory dogma. But until now we have had no indication of just how expensive this public mugging has been. A new study by Dr Jean Shaoul, a public finance specialist at Manchester University, offers a few clues. The chaos, fury and incipient collapse over which the private rail companies have presided during their brief and victorious tenure have been achieved with the help of an annual public subsidy three times that which British Rail used to receive.
Britain’s rail accounts are a jungle of conflicting measurements and tangled finances, but Dr Shaoul has hacked her way through it to discover several astonishing relics. British Rail, she has found, was, by contrast to its popular image, efficient. Its labour productivity was consistently higher than that of any other European service, while its state subsidy was significantly lower. It was, however, permanently hobbled by the mess left behind by bankrupt private owners, and by the government’s insistence that its investments (unlike roads) be financed by debt rather than by grants.
When the rail service was privatised, franchise operators set, in effect, their own public subsidy levels: these were the basis of their bids. The grants now add up to £1.8 billion a year, much of which is passed on in fees to Railtrack. Railtrack receives almost as much money for running only the infrastructure for Britain’s passenger services as British Rail needed to run the entire railway operation. But it has been able to pay its grateful shareholders tremendous dividends.
You might have imagined that John Prescott, who is acutely aware of the privatised rail industry’s failings, would have learnt something from all this. But the covert privatisation of the London Underground’s infrastructure he’s planning is, in important respects, identical to that of British Rail. The Tube will be privately run and publicly regulated. It will be sold before its future liabilities have been fully assessed, which will mean huge public subsidies. Private ownership will cost the taxpayer more than public ownership.
Dr Shaoul has an interesting explanation for what is going on. The private sector, she points out, has squeezed just about all the possible efficiencies out of its operations. Now its only remaining means of increasing its share value is to seize those parts of the economy controlled by the state. It is this imperative which drove the privatisations of the 1980s and early 1990s. It is this imperative which is driving the government’s “Public-Private Partnership” today.
Neither programme has anything to do with efficiency or an improvement in public services; they are simply the means of feeding a stockmarket whose insatiable demands no government can resist. Rail operators, construction firms, even car manufacturers now demand massive public subsidies. Forget all the guff about free markets and the entrepreneurial society. In the new world of corporate control, private enterprise flourishes only at public expense.