New Zealand is in tune with the times- Britain's lagging

By Seumas Milne, The Guardian, Thursday 3rd July 2008

New Zealand has long had a record of being ahead of the political game. It was the first country in the world to accept women's right to vote, in 1893. In the 1930s, it emerged as a pioneer of the modern welfare state. Fifty years later, in the 1980s, it was the first state to declare itself nuclear-free. Less creditably, during the same decade, New Zealand became host to the first social democratic government to embrace a free-market programme of wholesale privatisation, liberalisation and deregulation.

Named after New Zealand Labour's then finance minister, "Rogernomics" was all the rage on the global new right for a time - and laid the ground for neoliberal social democratic governments like Tony Blair's - until it finally imploded amidst a litany of social and economic failures: stagnation, unemployment, bankruptcies, crime and rampant inequality. Two decades on, another New Zealand government, this time a more progressive Labour coalition headed by Helen Clark, is again at the forefront of political change - leading the revival of public ownership.

On Tuesday, Clark's government renationalised the country's railways and ferry services, privatised in the early 90s and subsequently run down and asset-stripped by the Australian owners. Launching the new, publicly owned KiwiRail, finance minister Michael Cullen declared that privatisation had "been a painful lesson for New Zealand". Nor is this the first renationalisation by the Clark government, which took over Air New Zealand after it nearly collapsed in 2001 and has also built up a successful state-owned retail bank - named Kiwibank, needless to say.

And unlike Gordon Brown's government, which strained every nerve to avoid nationalising Northern Rock to avoid seeming "old Labour", Clark has championed the takeover of rail as exactly what is needed to build a modern, environmentally sustainable transport network. Against a background of global warming and rising fuel prices, she argues, rail is a "central part of 21st-century economic infrastructure".

Given Britain's similarly disastrous experience with rail privatisation, you might think that taking a leaf out New Zealand's book would be just the kind of popular policy to help dig Brown's government out of its hole. Despite the modest improvements achieved by putting the lethal Railtrack out of its misery, Britain's railway system remains a byword for bewildering fragmentation, unreliability, overcrowding, delays and exorbitant cost - which has only now completed a high-speed link to the Channel tunnel, 15 years after its state-owned French counterpart.
Fleeced by the private train companies and rolling stock contractors (some of them pocketing 30% rates of return), it is now the most expensive, opaque and inefficient rail system in Europe. As the Campaign for Better Transport reported yesterday, walk-on fares are on average nearly five times those booked in advance - and all ticket prices are set to spiral in the next few years. Meanwhile, renationalisation is strongly supported by the public and is in fact official Labour party policy.
But far from planning to end what has been a disastrous experiment, the rail minister, Tom Harris, last month insisted that if the Tories hadn't privatised the railways, New Labour would have sold them off when it came to power in 1997. In a surreal aside that will baffle most UK train passengers, he insisted that "the private railway has provided a level of investment, innovation, imagination that wouldn't have happened if BR had stayed as it was".

This is nonsense. Investment in the railways comes from farepayers and government subsidy, now around three times the level before privatisation (£2bn a year goes to the train operating companies alone), while the leakage of cash from the industry to private investors and lenders is estimated at £800m a year. The rise in passenger numbers is simply the product of economic growth, and the case for a reintegrated, publicly owned rail system - at the heart of a national investment programme to encourage more people to move off road and air travel on to rail - is overwhelming. It has the added advantage that most services can be taken back at no cost as franchises expire.

But the government is still in the grip of an ideology that sees privatisation as the only way to reform the health service, and nationalisation as a throwback to be avoided at all costs. As global economic conditions increasingly undermine the credibility of free-market economics, however, real life is pointing in another direction. The revival of public ownership in countries as diverse as New Zealand and Venezuela reflects a wider disillusionment with the neoliberal experience of the past decade.

As the writer and Work Foundation chief executive Will Hutton recently argued in a BBC programme on nationalisation, the takeover of Northern Rock, Railtrack and Metronet has begun to force a mainstream reappraisal of what had become a political taboo - just as academic research has been rehabilitating the productivity and costs record of Britain's postwar nationalised industries.

But it's also clear that, if there is going to be an effective new role for public enterprise and intervention, it will have to be about more than bailing out the failures of the private sector in traditional industries, and engage with the cutting edge of the economy. In Britain, the credit crisis has exposed the dangers of the reliance on finance, the rundown of manufacturing, and the chronically low rate of investment in the economy. The case for a national fibre-optic network, for example, giving universal fast broadband access to the home is a powerful one, both on economic and social grounds - countries such as South Korea are far ahead of Britain. But the private sector won't deliver the necessary multibillion pound long-term investment. A publicly owned network, on the other hand, could do - perhaps funded by service providers as part of a universal service obligation, as the Communication Workers Union argues.

What is certain is that the Brown government's kneejerk resistance to public intervention and ownership will have to end if it is to have a hope of riding out the crisis and dealing with the new economic reality. By making a stand for progressive common sense, New Zealand has at least helped break the spell that privatisation is somehow the natural order of things in the modern world.