By Mike Phipps

Public ownership is back in the news. As at the time of the economic crash 14 years ago, campaigners are questioning why public money is pumped into privately-run services, only to see it drain away into the pockets of shareholders.

Rail

Take rail: the government claim they have to cut public funding, after putting £16 billion into keeping the network running during the pandemic, as a recent Labour Hub article pointed out.

What’s proposed is crippling: pay and staff cuts, worse terms and conditions, removing guards from trains and the closure of nearly all ticket offices. Yet every year, between £725 million and £1bn goes out of our railways into shareholders’ pockets.

First Direct paid nearly £500m to shareholders last year before telling rail unions that employees must take a real-terms pay cut for the company to stay afloat.  Another company, Abellio, which runs Greater Anglia, East Midlands Railway and West Midlands Railway, last year contributed £305m to the profits of its sole shareholder, the Dutch state railway. Public ownership could use this money to invest in improving the rail system.

Rolling Stock Companies paid out £2.7bn over the last ten years to their overseas owners, most of whom are based in Luxemburg. Train Operating Companies made £600m in profits in 2020-1, largely thanks to the government’s emergency funding. Much of this goes to the state-owned railway systems of other European countries to fund their railway systems. Again, this is money that could be reinvested in the network here.

Critics of public ownership often cite cost as an obstacle to the policy. But a Labour government could bring the railways substantially back into public ownership without paying out to buy back the private companies. This could be done at no cost at the end of their franchise, or by using the mechanisms available to the Department of Transport to persuade the owners to give them back before the franchise ends.

Any cost would be offset by huge savings. The campaign We Own It estimate public ownership of rail would save £1 billion a year.

Once in office, Labour could get on with this quite quickly – it already has a detailed plan for returning rail to public ownership, published by former Shadow Secretary of State for Transport Andy MacDonald in March 2020.  

Even the current government recognises that the existing arrangements are unsustainable. It produced the Williams-Shapps Plan for Rail, with its proposals for a new public body, Great British Railways, which would manage railway budgets, have control of ticketing and own stations and infrastructure.

ASLEF’s response to the Williams-Shapps plan was: “The private companies will still pocket a profit, but all the risk – the revenue risk – is being dumped back on the public purse. The government is changing the model, but protecting the privateers, and privatising any profit.”

So, no change there. There is also a strong environmental case for a publicly owned expanded, fully electrified network.

According to a 2019 YouGov poll, 64% of the public want rail fully in public ownership. Labour’s 2021 Conference voted to support public ownership of the railways as part of an expanded and integrated public transport network and before that, it was one of the ten pledges made in 2020 by Keir Starmer when he ran for the Party leadership.

Keir Starmer said recently he wants to be pragmatic about public ownership. With parts of the rail network already in public ownership, and other parts run by state companies from other European countries, the case for full public ownership of rail is overwhelming.

It’s also common sense – a natural monopoly being run as a public good with a green agenda. Embracing the case for full public ownership of rail would enable Labour to occupy a common sense high ground and paint its opponents as ideological extremists, wedded to outdated dogmas even when they are proven not to work – which of course is what they are.

Water

The same could be said of other natural monopolies. Water companies have paid out £57 billion to shareholders since 1991 and in 2021 alone, company bosses pocketed £15 million in pay and bonuses, up 20% on the previous year.

At the same time, six water companies have been found to be avoiding millions in tax. The Environmental Agency has called for heads of privatised water companies to face jail terms for breaching the law in serious pollution incidents. There were more than 400,000 water pollution incidents in 2020 alone. Currently only 14% of English rivers are achieving “good” ecological status.

Last month a report from the Environmental Agency declared: “In 2021, the environmental performance of England’s nine water and sewerage companies was the worst we have seen for years.” The report concluded that the “sector’s performance on pollution was shocking.”

Additionally, water companies leak more than 3bn litres a day, enough to supply almost 22 million people with their daily water needs. In some areas, companies are leaking nearly a quarter of all the water they are expensively treating. Thames Water is the largest and the worst culprit.

England and Wales are the only countries in the world to have fully privatised their water supplies. The result has been under-investment, with repairs to old networks painfully slow and higher bills – water for households costs more here than in most regularly drought-ravaged countries in Europe. Since privatisation, no new reservoirs have been built – in fact, some have been sold off, despite a 10 million growth in population.

In Scotland, things are different. Scottish Water remained nationalised after a 1994 referendum and bills have remained steady for 17 years, while infrastructure investment is a third higher than in England.

Public ownership of water – also one of Keir Starmer’s ten pledges when running for the Labour leadership – remains popular, with 63% of people – some surveys say over 80% – wanting water in public ownership. That figure is even higher among ‘Red Wall’ voters. Additionally, it could save £2.5 billion a year and re-investing this could reduce leakage levels by a third.

Energy

There’s similar support for the public ownership of energy. As Jon Trickett wrote on this site in April, “Energy bills are soaring through the roof. Many families are having to choose between heating or eating. On our current trajectory we are expected to fail to meet our carbon reduction targets to keep global warming below 1.5 degrees. Meanwhile the UK’s Big Six energy companies raked in more than a billion pounds of profit ahead of their record hike in household bills this month.”

Excessively high prices are estimated to generate about £2 billion a year for the Big Six energy firms. As an article on Labour Hub pointed out two years ago, international examples strongly suggest that public ownership brings lower prices.

Public ownership of energy could also accelerate a transition towards greener energy. Exxon spent more last year on its CEO’s pay than it did on investment in the low-carbon transition. Britain is the only major western European country not to own its own grid.

Renationalisation of the Big Six was adopted at Labour’s 2019 conference.  Starmer recently ruled this out, despite his earlier pledge to support it. Yet campaigners estimate public ownership of energy networks would save £3.7 billion a year.

Energy prices are set to rise steeply again later this year and vast profits are being extracted, for example by the French state-owned company EDF – profits which could be going to the UK Treasury. Yet Starmer recently rejected the obvious solution of renationalisation as “ideological”.

In reality, it’s the retreat from public ownership that is ideological. A Momentum spokesperson said: “Public ownership of rail and utilities is not just vital to tackle the huge climate and cost-of-living crises we face – it’s highly popular too. To ditch this commitment is not smart politics – it’s neoliberal dogma.”

That’s absolutely right. It’s estimated that Labour’s latest plan to bail out the energy companies could cost £29 billion – a six month sticking plaster solution – more than ten times what it would cost to bring them into public ownership on a permanent basis, as Andrew Fisher pointed out recently in a piece detailing how it could be done.

Royal Mail

Royal Mail is another business ripe for renationalisation. Since its privatisation on the cheap, Royal Mail has made enormous profits – £702m for the tax year 2020-2021 alone. It has paid out large sums to shareholders – £400m at the end of 2021 – and senior management. CEO Simon Thompson was paid £753,000 according to the annual report.

Former boss Rico Back got a £6 million golden hello on his appointment in 2018, received £94,000 in 2020-21, and owns shares now worth £9.8 million. He received £480,000 as part of his termination agreement.

This is despite reports of serially poor customer service. Royal Mail has been repeatedly fined by Ofcom for its failures in quality of service, and conditions of work have significantly worsened since privatisation.

Re-nationalisation is favoured by 69% of the public. It could save an estimated £171 million a year. Labour’s 2021 Conference voted to bring Royal Mail back into public ownership, reuniting it with the Post Office and creating a publicly owned Post Bank run through the post office network.

Again, one of the ten pledges made in 2020 by Keir Starmer when running for the Labour leadership was common ownership of mail services. In July, he rowed back from that commitment, saying: “It’s very hard to see how you can nationalise within the fiscal rules, but that’s not to say that there isn’t a problem that needs fixing there.”

His true motive has more to do with distancing himself from Jeremy Corbyn than anything else. He said: “I don’t want a Labour Party that, as it was in 2019, was basically saying we can spend on anything.” He claimed he needed to “show the country that we’re credible.”

Credibility

But it’s Starmer’s fudging itself that lacks credibility. Public ownership of key utilities and services has been popular since before Jeremy Corbyn became leader in 2015 and undoubtedly contributed to his election as leader at that time and Labour’s strong showing in 2017.

Labour embracing public ownership would underline that it is serious about giving the general public more control over the services they use, something mentioned by Starmer in his wordy 2021 pamphlet, The Road Ahead. It’s an opportunity to imagine a new model of public ownership – more participatory and accountable that the bureaucratic nationalisations of the Attlee government.

Worldwide, city and state governments are rejecting the failed privatisation model. In many European countries, public ownership of key services is the norm. As seen above, it is frankly daft for European national rail operators to run services in the UK and use the profits to support their own networks at home.

Maximum pressure needs to be mounted on the current leadership to re-commit to public ownership. It should be a major priority on the agenda of this month’s Party Conference and the grassroots need to work with the key unions to ensure its success.

Mike Phipps’ new book Don’t Stop Thinking About Tomorrow: The Labour Party after Jeremy Corbyn (OR Books, 2022) can be ordered here.

Image: License: Creative Commons 3 – CC BY-SA 3.0. Attribution Link: Pix4free.org – link to – https://pix4free.org/. Original Author: Nick Youngson – link to – http://www.nyphotographic.com/. Original Image: https://www.picpedia.org/real-estate/t/transfer-of-ownership.html