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.