This year, the traditional summer silly season has been less frivolous than usual but equally daft. My facebook feed included several opportunistic posts from the Trades Union Congress suggesting that they have finally been persuaded as to the benefits of public ownership. “We are now calling for the public ownership of energy companies.” Note the “now”. Apparently, the idea has only just occurred to them and has not been, as we supposed, an obsession since at least the 1940s. They claim this will reduce bills, although quite how it would bring down the wholesale price of energy, the main cause of the present emergency, is not vouchsafed. Unfortunately, opinion polls suggest that enthusiasm for what used to be called nationalisation is becoming endemic.
Obviously, the TUC calls for public ownership rather than nationalisation. There must still be many voters with a clear recollection of the last time they were forced to fund a bloated public-sector. For us, the term is as abhorrent as the name of Voldemort. Much cosier to promote the quaint notion that the interests of the “public” might receive some trifling consideration when the Labour Party’s TUC paymasters come to carve up our vital services between them.
Historically, nationalisation inflicted what might be called a “quadruple-whammy” on the people of Britain. Exempt from any kind of commercial discipline, important services were provided in a dilatory fashion, cost far more than necessary, but nevertheless required ruinous subsidies from the taxpayer. Worse still, the enterprises ended up at the mercy of far-left trade union demagogues who saw the public as little more than cannon-fodder in their political power games. By the 1970s, these wielded all but plenipotentiary power and their demands had become insatiable.
Labour Chancellor Dennis Healey was forced to borrow profligately. There is a rumour that the International Monetary Fund’s swanky Washington HQ has been fully funded through the interest on British loans. In October 1976, with the pound close to free-fall and even interest rates at 15 percent failing to attract punters, the government was once again reduced to rattling a tin mug on the steps of this lender of last resort. The loan narrowly staved off bankruptcy but its conditions made it impossible for the treasury to buy even a modicum of respite from the public sector unions thereafter. Two years later, Britain endured a winter during which even dying did no good because the gravediggers were on strike.
In implying that nationalisation could significantly reduce bills, the TUC advert is clearly disingenuous. Wholesale energy prices would remain the same, whoever runs the companies. But what would be its effect on other costs? Happily, we don’t have to guess. In 2015, to great fanfare, Nottingham Council launched Robin Hood Energy, a not-for-profit company intended to undercut the “Big Six” providers. The money not paid to shareholders would be used to reduce bills, particularly for the worst-off consumers. It was a fantasy. In fact, competition is so fierce in the energy market, and margins so tight, that there was never the remotest prospect of such a public sector dinosaur being able to survive.
But the far-left zealots had begun to believe their own propaganda and the company even featured in Jeremy Corbyn’s leader’s speech to the 2016 Labour Party conference. There can be no doubt but that this is the kind of “public ownership” the Labour Party and the TUC are intending to impose on us. It was an unmitigated disaster. To the amusement of sceptics like myself, Robin Hood Energy actually managed to invert the eponymous legend. Far from benefiting the poor, Ofgen reported in 2019 that the company had swiped £9.5m in renewables obligation (RO) payments from its cash-strapped customers and had kept the loot for itself. Finally, on the 16th 0f September, 2020, all its customers were transferred to British Gas. The loss to the taxpayers of Nottingham has been estimated at more than £38 million. A few days later, a similar fiasco in Bristol was sold to Together Energy for £14 million, which is somewhat short of the £36 million Bristol City Council has ploughed into the business.
It is salutary to consider what would have happened had these abortive enterprises not faced private sector competition. In both cases, the additional cost inherent in nationalisation has been borne entirely by the taxpayer but, without the private sector setting a limit on the prices that could be charged, the customer would certainly have been clobbered too. Bills would have gone through the roof, as in the past. Extortionate costs take us merrily back to the glory-days of state enterprises but we also mustn’t forget the dire consequences for the economy of their inefficiency. There is a charming Monty Python sketch featuring the chaos which ensues as the local gas board seeks to install a new cooker. It lacks verisimilitude only insofar as it shows the various workmen, officials, and jobsworths queuing patiently outside a modest terraced dwelling, each waiting to make his bureaucratically demarcated contribution to the debacle. In real life, you’d be lucky if two of them turned up during the same month.
In this context, nothing did more damage to Britain’s post-war recovery than Post Office Telephones. I had just started school in the early 1950s when my family moved to a new-build estate on Merseyside. It was hardly the back-of-beyond and the developers had included a telegraph pole within a few yards of the front door. Nevertheless, it took the Post Office six years to install one of its anachronistic bakelite monsters. Calls were so expensive in those days that domestic use averaged not much more than three minutes per day. Local calls were considered to be too cheap to meter by the competing phone companies in the US, but the Post Office used to dream of persuading us to pay for an additional fourth minute. Commercial customers may have fared a little better, provided they could pay for the privilege, but Britain’s communications environment was no match for that of our competitors.
And it was hardly ready for the “white hot” technological revolution Labour Prime Minister Harold Wilson was soon to promise us. When a later PM began privatisation of the sector, I was intrigued as New Scientist magazine sought to provide support for its left-wing stablemates, New Statesman and New Society, with what we would today call fake news. A series of apocalyptic articles described in detail the catastrophe that would ensue were the torpor of this natural monopoly to be disturbed. Six years for a new phone? These days, six hours would be considered sluggish!
We can’t leave this topic without considering the other enterprise for which public ownership is presented as the panacea – the railways. Again, we have a recent example to clarify the situation. In 2002, the Labour government nationalised Rail-track as Network Rail. The company is the owner and manager of almost all the rail network and infrastructure in Britain.
It immediately showed a characteristic state-owned”indifference towards costs and productivity and has accumulated debts of £54 billion while failing every performance indicator in the book, from punctuality to level crossing safety. Successive governments have resorted to Byzantine contrivances to keep this sum off the official public debt and it is now held by a “special purpose vehicle” called Network Rail Infrastructure Finance Plc. As interest rates climb, their time might be better spent finding ways to pay down this national millstone. Many of the problems blamed on the train operators actually originate with Network Rail. A typical example would be the Great Western Main Line fiasco. In the run-up to the 2010 general election, the Labour government announced a £1 billion programme to electrify the whole line, from London to Swansea as well as to Bristol Temple Meads.They acknowledged that the scheme would take forty years to pay for itself.
By 2015, costs had nearly tripled to £2.8 billion, which was £1.2 billion more than the estimate a year earlier. No guess has been forthcoming as to when the scheme would break-even at the new price. Substantial parts of the electrification, such as from Bristol Parkway to Bristol Temple Meads, were “deferred indefinitely” in 2016 while that from Cardiff to Swansea was cancelled altogether the following year. The rail operators expected the state-of-the-art electric locomotives they had ordered from Hitachi to cut costs, pollution and journey times substantially but these have had to be retrofitted with diesel engines. Passengers and taxpayers alike dread the day, currently scheduled for 2023, when Network Rail and the train operators are merged to form Great British Rail and the whole melange is run with this kind of public sector insouciance.
George Santayana tells us: “Those who cannot remember the past are condemned to repeat it. The current paroxysm of amnesia leads one to fear the worst.
My full answer to Mr Casper is in another thread on this blogsite. The Mail’s description of me was incorrect, unless the word “fascist” describes someone who believes in free speech all round and regular free elections open to candidates of any party or opinion. The journalist responsible for this epithet turned up without warning while I was bedridden after an operation and intimidated my wife at the doorstep by saying that my name was on a list of attendees at a neo-Nazi conference in Italy, an absolute fabrication since I had not travelled to that country or ever attended any such conference anywhere, as was his claim that he had found our address on the electoral register, also false because we were on the confidential council list (a wise precaution for teachers). The purpose of the visit was to obtain dirt on someone I had met just three or four times at Oxford in or around 1960 and, although I gave what minimal assistance I could by email, I was then repaid with an extensive but undeserved smear to entertain over a million readers – with no right of reply. I am in good company because his newspaper has constantly sniped and sneered at the Prince of Wales for decades past.
I appreciate the clarification.
The Daily Mail has to live down Rothermere’s “Hurrah for the Blackshirts” in January 1934 and his friendly telegram to Hitler in June 1939.
The Mail on Sunday, 28 August 2022, on more than one page, does indeed confirm your point about its hostility to the Heir to the Throne, who of course is lumbered with the predominantly non-European and republican “Commonwealth” and its expatriate activists here, and as a well-intentioned future monarch now has to keep his long nose clean and his voluble tongue woke.
However, this paper is not all bad: (1) Peter Hitchens reports that foreign workers from outside Europe have gone up to nearly 4 million among 6.3 million born outside this country, almost one in five of the total, with 5.3 million people on out-of-work benefits. (2) Chris Hastings reports on the BBC as a “modern inclusive organisation” warning its employees against 170 forms of mental bias.
(3) Carole Graham reports on the 10 year old transgender catwalk “model” capable according to a Hollywood agent of making $2 million next year. “It’s not the kids who are trans, it’s the parents who want them to be trans.” It’s fair to say that this level of plutocratic insanity would not have been possible in the fair land of Giovanni Gentile, Luigi Pirandello, Corrado Gini, Achille Funi and Laura Argnani.
@ NJC
And don’t forget Giorgia Meloni – she’s like amaZING!
It’s interesting to compare Mr Salisbury’s effective summary/analysis of the the disadvantages of nationalised industries and services with the trenchant comments made by Peter Hitchens of their equally incompetent privatisation and subsequent passing into foreign control under the risible and possibly even corrupt puppet regulatory regulatory bodies set up to ostensibly control and direct them.
Was the breakup of BTs predecessor really worth the quintupling of gas and electricity prices, the chronic water resource shortage, our total dependance on foreign fossil power supplies?
It would not appear so at the present time and or in the foreseeable future. Of course it is possible to argue that the strategic direction of government policy is separate from operating the levers controlling the administration and operation of the systems which provide the nations infrastructure. By freeing the latter government could leave the ‘free’ markets it had created to manage and bear responsibility for the unthought consequences of its catastrophic climate change policies.
The inevitable result will be the re-nationalisation of much of the privatised sector, the replacement of Mrs Thatchers Blue Guards with, if not Red, at least Pink guards. We can say with certainty only that it will be very expensive, done with the maximum of incompetence and that the results will be far worse than the planned solutionand replacements.
That’s Dr. Salisbury to you, Mr. Noa. Otherwise, “Iain” will do fine.
You’ve evidently missed the point of my note. The fourfold increase in energy bills is due to the wholesale price and could be in no way mitigated by nationalisation. Moreover, we know from abortive projects like Robin Hood Energy that nationalised businesses cannot compete with the private sector so other costs would go up.
The question of whether domestic enterprises should benefit from foreign expertise is moot but, if we return to the headline topic of the railways, it’s how many European countries operate. Lumping the whole industry together in the Great British Railways omnishambles is, as I say above, a nightmare to come. Countries such as Holland and Germany put their passenger services out to tender and welcome international competition. Holland has three foreign operators while Germany has five, including the British Go-Ahead.
Iain’s article is amusing and beautifully written, though with a touch of hyperbole here and there (there never was a national gravediggers’ strike).
But I must take issue with Ricardo’s assertion that energy prices have increased because input costs are higher. That definitely isn’t the case. They’ve increased because the after-effect of the lockdowns and then the Ukraine war and associated sanctions caused global shortages, so the price of the raw materials has been bid up as governments and industry struggle to secure their energy supplies. Nothing to do with the average Joe’s wage increase.
Of course the extraction companies (not the companies in the intermediary supply chain) have profited hugely from this. That may or may not make them “bad people”, depends on your politics I suppose. But it’s nothing to do with wage increases or “socialism”. The same problems would be faced by any government, and can’t be dealt with by price controls in their domestic markets, not in the short term anyway. The only long-term solution is for the UK to generate its own energy, and that means a big nuclear programme, perhaps with a bit of fracking in the meantime to tide us over.
We were world leaders in civil nuclear power until the 1980s. Then Mrs Thatcher privatised electricity. End of the British nuclear industry. Now we depend on state-owned EDF of France to build us new nuclear power stations. So much for the free market.
You know you’re over the hill as a hack journo when you miss the print deadline and get consigned to the website. Still, on the bright side, I get no money for the mag and even have to buy my own copy. I’ve been promised thirty quid for a blog-post [you’ll be lucky – Ed.] [there’s always The Critic – Iain].
I’m relieved somebody noticed that the piece is supposed to be at least a little light-hearted. As a horny-handed son of toil (retired physicist), I harbour no literary pretensions but I do try to avoid clichés like the plague. Particularly leaden stuff about “winters of discontent”, “rubbish piled in the streets”, “plagues of rats”, etc.. If I actually wanted to be boring, I’d point out that I never claimed that the gravediggers’ strike was national. But it generated gallows-humour at the national level: who knew what the desperate undertakers were adding to the kerbside heaps?
I’d forgotten about the Comments until a friend in Vienna expressed amusement at the suggestion that I might not be able to paint my own house. Evidentially, you could extract more sense from Ricardo’s impertinent post than could I but I wonder how far he could depend upon his own artisan skills. Has he ever cooked a bird that wasn’t “oven ready”? Yes, I did celebrate my 70th by cobbling together that shed. It’s the last place in England where I can smoke my pipe.
Looking at the text, I suspect you can’t post a link here but you might be able to find me on Flickr THE PARTRIDGE PLUCKER | Flickr
Please note that my Flicker pseudo name is Iain Brumetal.
This is where academics become almost delusional, or at the very least totally removed from any resemblance of reality.
The price of a product or service, any product or service, including energy, is entirely predicated upon what an individual will pay, and the cost that goes into production. In other words, there are two primary variables: 1. What you are willing to pay (if you buy a $40 shirt, that costs $2 to make, then you are an idiot but I’m going to keep selling to you at that price). 2. Whether I can produce that product below the price you are willing to pay, so that I can profit from said product (if you are willing to pay $1 for the shirt, but I can only produce at $2, then I simply won’t produce any.
Carl Menger discusses this elegantly.
Oil prices have increased, but not because oil companies are bad people, but because the input costs are higher, because inflation is higher, and if inflation is higher it means nominal wages are higher. And who pays those higher nominal wages, and those variable costs after the government prints in excess? Yeah, the oil company who employs joe. He has to pay a higher nominal wage, because Joe can’t eat.
Therefore, he increases the retail price so that he can still profit. That eventually reduces your “real wage”. Do you want to pay the higher price? Oh, you don’t. Okay, well then stop production, grab a lot of blankets, and stop driving your car. Use coal or wind.
But you want the good things in life, you need those things, or at least you think you do, so you continue to pay the asking price. But its not the oil company that is doing this to you; it’s the government. All the oil company can do is try to profit, and to offer you a product or a service. That’s it.
Stop vilifying businessmen. You would have nothing without them. I presume you don’t know anything about drilling. You don’t know how to make a phone or a computer. You probably cannot even paint your house. So get a grip with reality. Monopolies are certainly undesirable, and certainly cartels can effect price, but let’s not pretend that these companies are the primary problem. The problem is legislation and excess printing; the problem is socialism; the problem is NOT the oil company.
You can have capitalism or socialism inside your small but densely populated island economy but if you can survive tolerably only by successfully importing what is lacking in food and raw materials from a world that is more highly competitive and more dominated by the geopolitics of overpopulation, dictatorship and conflict than in the days of the other Ricardo 200 years ago, then you have a problem. The production and consumption of manufactured commodities are also not the only “goods” in – or purposes of -human life. Is it wrong to complain about the selling of “national” assets to foreign governments like those of China or Saudi Arabia, but not about their disposal to external private equity interests?
Should Britain unilaterally abolish all regulations except those that control force and fraud between adult individuals? Should their enforcement be funded by voluntary insurance rather than compulsory taxation? Should all health, sanitation, education, libraries, pension provision, communication and defence networks, be removed from taxation altogether? If not, why not?
And what about “fractional” reserve lending?
@ Mr Rockford
Your questions take me back to the “good old days” of the late Chris Tame, a friendly sparring partner, and “anarcho-capitalism”. Has it been tried successfully anywhere? Answers on a counterfeit $1 bill please.
You do not have to accept the Marxist theory of surplus value to wonder if directors of companies pay themselves far more than their efforts deserve, or if the reduction in labour costs, i.e. wages, also reduces the capacity to purchase the products of industry. The “business cycle” may suit some who live by owning the means of production, but suits few of those who live by earning. Capitalists, bankers and currency speculators may include some who know how to make a computer or find oil or invent a new vacuum cleaner or start an automobile company from a modest garage, but the real drivers of industrial progress are inventors, scientists and engineers who are mostly employed not employers. See also e.g. Paul Craig Roberts vs Ricardo in the Mises Institute debates on “free” trade.
@ Karin & Ricardo
Karl Marx got his fallacious “labour theory of value” from David Ricardo.
It was Vladimir Lenin who pointed out in developed capitalism that the movement of international finance superseded movement in goods, and argued that it contributed to colonial rivalry and therefore war.
For a geopolitical system, alternative to both finance-capitalism and state-communism, for a Britain fatally dependent on export-import competition, consult for interesting information: Andrew Gamble, “Britain in Decline” [1994], Bernard Semmel, “Imperialism and Social Reform” [1960], Paul Coupland, “Farming, Fascism and; Ecology” [2016] and Oswald Mosley, “Last Words…1970-1980” [2019]. Good ideas can always be used without naming the source!
@ N. J. Casper
I have just noticed Duncan Weldon’s highly-praised history of our economic and political predicament during “Two Hundred Years of Muddling Through”, but have no idea, as yet, what he says about your apparent hero, who nine decades ago “alone rose to the occasion” (according to Prof. Alan Taylor), and to whom Mr Weldon himself was reportedly attracted in a moment of youthful madness. Britain faces far worse problems than those of 1929-1932, but our next Prime Minister is exactly as described by Matthew Parris (The Times, 19 August) – just as he got “Phony Bliar” exactly right.
Whereas Marx was wrong over “proletarian immiseration”, Lenin correctly pointed out during WW1 that although commodity production was still regarded as the basis of economic life, it had been undermined by international banking and the big profits went to the “genius of financial manipulation” which “penetrates every sphere of public life”. To make his own revolution, however, he relied on capitalist contributors.
@ David Ashton
Weldon described himself as a “young fascist”, but didn’t the “Daily Mail” so describe you not long ago?
“Increasing immiseration” not true? – circumspice!