Earlier this week, with a free evening, I pottered along to a nearby cinema to see Alien. It’s one of those films I’d always claimed to have seen to impress film-buff girls at parties. I enjoyed it, even if, much like The Godfather or Planet of the Apes, cliché has long since robbed it off its originality or surprise. But as well as it being much more exciting than the latest soul-crushing leadership husting, it was also a veritable font for hackneyed journalistic analogies.
Because – and this really is a leap – much like the titular foe of Ridley Scott’s classic, there are certain bad ideas that are irritatingly difficult to kill. One of these is nationalisation: the go-to socialist solution for any problem in the private sector. Unlike Sigourney Weaver, we have no opportunity to flush this depressingly ludicrous policy out of an airlock. Instead, the best we have are eager young hacks like moi making the points that I instinctively know, that you instinctively know, but that still can’t penetrate the skulls of the left’s densest outriders.
Current calls for nationalisation are drawn by problems with our water companies. The Guardian has lead the charge, claiming that the privatisation of our water has enriched investors and senior executives at the expense of investing in infrastructure. Their position has an obvious root. When we are having hose-pipe bans whilst headlines are made by billions of gallons of water being lost to leaks or sewage being pumped into rivers, it seems that Thames Water et al are letting the public down. Water is a utility, not a thriving marketized asset. Surely it would better be run by the benevolent spods of Whitehall rather than greedy capitalists?
Hence why, according to polls, two-thirds of the public back bringing the sector into public control. When members of the public hear the words “public ownership”, they assume it will mean a management that takes the interests of the public into account – a water or energy firm that works for hard-working, tax-paying, cliché-fulfilling folk who face bills spiking and a garden looking like the Outback. But nationalisation doesn’t do that. It empowers bureaucrats, stifles free choice and competition, and removes the power of the consumer. When failure in the market is no longer an option, the incentive to provide a good quality service disappears.
Compare BT pre and post privatisation. Previously (so I’m told – my voice has barely broken), getting a phone line installed involved Soviet-style waits, a bit of gentle bribery, and the eventual arrival of a surly and uncaring technician. Shedding the dead hand of the state meant BT becoming far more efficient, as excess workers were sacked and the company gained an incentive to provide a good service. Of course, nationalisation doesn’t even ensure better working lives for employees, since research by the TaxPayers’ Alliance found that public sector staff are 15 times more likely to strike than their private equivalents. One assumes that security of employment means taking a day off to wave a Socialist Worker banner about becomes much easier.
That isn’t the only obvious problem with nationalisation. Take those aforementioned big bad water companies. The ever-eloquent Robert Colville puts it far better than me, but our H2O industry is a clear example of where privatisation has been a roaring success. That may not seem the case from current headlines, and especially when our two rivals to be Prime Minister are hammering away at the companies for not doing their jobs. But the problem lies with the regulation of the industry, not privatisation in itself.
Water companies, as Colville puts it, are “essentially contractors”. They provide our water along the rails and conditions produced by the government of the day. 20 percent of our water is lost to leaks – but that is because that is the agreed level of leaks permissible between companies and the state. When, in the 1990s, the Government decided too much was being lost to leaks, they reduced the threshold – and the industry followed their example, reducing leaks considerably down to 20 percent. Continuing problems stem primarily from regulation. If we want less water to be lost through leaks, set the threshold lower.
Meanwhile, productivity in the water sector is up 64 percent since privatisation, and costs 27 percent lower. Prices did increase when the industry was initially privatised. But that was to make up for the investment that the state had failed to put in when it had been under ministerial control. When an industry is nationalised, funding for needed investment competes with other outlets from the Treasury’s pot. More elections are won by paying for more teachers or police officers than by funding for water infrastructure, so the latter loses out.
So, nationalised industries have less influence for the public, are more expensive and more inefficient, and lose out when it comes to investment to whichever public sector lobbyist can shriek the loudest. But privatisation doesn’t just make industries less bad – there are clear successes one can point too. Travel by rail has more than doubled since privatisation, and the quality of sandwich offered by the buffet car has apparently much improved. Privatising British Gas, BT, and other industries has allowed million to buy shares for the first time. And we have set a precedent that has been copied across the world – by far Mrs Thatcher’s greatest global legacy.
Those problems that still exist in former nationalised industries are usually the role of poor regulation. Our energy sector is hemmed in by NIMBYism, price caps, and more diktats than inter-war Germany. Our railways suffer from infrastructure run by the state, and ministerial instructions that constrain everything from how much they can charge to the width of their trollies. And the most obvious example of a state-run sector in the UK today is our National Health Service: the dumpster fire we consider our national religion.
Reagan’s words ring true – government is still our problem, and not the solution to our problems. Those baying for nationalisation are as wrong as they always have been.