Tuesday, October 14, 2008

Deregulation has failed, has privatisation done any better?

From: Tribune.

Michael Meacher M.P. says that no one in their right mind should want privatisation, given that it has led to economic disaster and social misery.

THE Government’s announcement that there are now three million – and rising – households in fuel poverty means the demand for a windfall tax on egregious oil and gas profiteering will not go away. This year, Shell’s profits are expected to be in the region of £16 billion. BP is predicted to make £13 billion. Centrica (which owns British Gas) is in line for profits of £1 billion after raising gas prices by 35 per cent.

And the whole wretched saga of the Government’s appeasement of the oil lobby raises an even starker issue.

First, ministers backed off from a windfall tax when the energy companies kicked up. Then they backed off from a commitment of £150 to all families on child benefit to protect them from rising energy bills. Now the energy companies are even threatening an investment strike if they are forced to make a contribution to reducing fuel poverty or improving energy efficiency.

So what exactly was energy privatisation for: to enable fuel companies to hold the nation to ransom and exploit the market with impunity while the Government stands by, apparently helpless? Wasn’t it supposed to benefit consumers?

The are three progressive options for the Government. One is a windfall tax (carried in the vote at Labour’s Manchester conference), which has been used in the past by both Tory and Labour governments to drain off very large unearned profits.
The second option is to impose a levy on excess oil and gas profits while the energy price spike remains high in order to establish a legacy fund to invest in a sustainable energy infrastructure to succeed fossil fuels before the oil runs out in 40 or so years’ time.

The third option is for the Government to charge for permits under the European Union’s emissions trading scheme. Energy regulator Ofgem recently warned that British generators could make £9 billion profits from being allowed such permits free, while at the same time being able to pass on nearly the full cost of carbon emissions to their customers.

Sadly, none of these options would seem to be a starter, as Labour continues to put more store by big business and the City of London than the three million families being squeezed into fuel poverty – a number growing by a further 0.4 million with every 10 per cent increase in energy prices.

The moral in all this is that, once politicians surrender to the market in a privatised economy, the sharing of the spoils is drastically unequal and social justice evaporates. So the case for looking again to a public sector role in the energy sector could hardly be clearer.

Nor is this the only area where privatisation has delivered perverse results. The modernisation of the London Underground infrastructure, which Gordon Brown as Chancellor insisted should be funded via privatisation rather than through the issue of bonds within a publicly-owned enterprise, resulted in bankruptcy and the taxpayer having to pick up a £2 billion bill. It also led to the five big contractors which held all the equity in the privatised company carving up the contracts between themselves without any competitive tender and then, after making thumping losses, walking away with impunity.

The building societies were de-mutualised and turned into private sector banks to allow them to increase their profits by taking greater risks within the market. This led directly to the collapse of Northern Rock and now Bradford & Bingley.

Hospital cleaning services were contracted out to private firms with the aim of cutting costs, but then poorer standards almost certainly contributed to the MRSA and
C. difficile epidemics.

Transport functions within the public service have been outsourced to private firms, again supposedly to save costs, but then private contractors lost the personal details of 25 million child benefit claimants, the personal records of recruits to the armed forces and the records of three million learner drivers. Further, 200,000 National Health Service records have been lost by nine privatised trusts.

Other privatisations have not exactly been a huge success. After the debacle of Heathrow Airport’s Terminal Five, the third runway farce and frequent chaos at Heathrow as a consequence of giving preference to profitable shopping malls over speedier security clearance for passengers, BAA is having to be broken up.

Railtrack collapsed into notorious administration. Rail service standards under privatisation have never regained those of British Rail.

In education, the outsourcing of test results for 11-14-year-olds to the American private company ETS produced a comprehensive catalogue of errors. In health, the private sector treatment centres set up to reduce waiting lists ended up being paid in full even if no operations were performed.

It is still widely believed that the private sector is more efficient than the public sector and that markets and the profit motive will secure the best value for money. The facts suggest otherwise. In April this year, an Office of Fair Trading report found that 112 building firms had rigged bids for multi-million-pound public contracts, inflating estimates and submitting false bids at unrealistic prices in order to give the pretence of choice.

In the same month, Balfour Beatty increased its bill for constructing the aquatic centre for the 2012 Olympic Games to £303 million – more than triple the estimate in London’s Olympic bid.

The record of privatisation and all its consequences, which Margaret Thatcher initiated and Labour continued, needs to be officially reviewed – by Parliament if the Government declines to do so. It isn’t just the current ignominy of a Government seemingly helpless in curbing the excessive profiteering of the oil and gas companies to reduce fuel poverty; it’s the whole record of incompetence, inefficiency and occasional corruption which has grossly short-changed taxpayers and continues to do so.

Michael Meacher is Labour MP for Oldham West and Royton

1 comment:

Anonymous said...

Privatising public transport in Melbourne was supposed to create a more efficient system. Conductors lost their jobs and were replaced with ticket thugs. The trains are overcrowded and don't often run on time. A public system would seek the best service, but the private one seeks to maximise profits therefore additional trains are not forthcoming.

Telstra is just as bad. Expensive, high fines and charges, a line fee double what it was ten years ago. John Howard promised privatising would lower costs. Aside from corporate PR, he was also the Prime Minister for a while.