17 December 2014

Britain was built by private enterprise – so why is ‘privatisation’ so unpopular?

Lately there’s been a lot of talk about the ‘P’ word: privatisation. Ed Miliband’s team hasn’t done the hard policy work to revitalise Labour as a party of government, and it is beginning to show. His platform for next May has a lot of sticky plaster policies, but very little that addresses structural problems like the housing market and transport costs, to name two issues close to my heart. Instead, catnip like ‘no privatisation of our NHS’ and ‘reversing the privatisation of the railways’ is being wheeled out to fill the Left’s policy void.

This conveniently ignores the Blair and Brown government’s enthusiasm for market – rather than state – solutions. Some people know about Hinchingbrooke, the NHS hospital so ineptly run by the state that Andy Burnham ‘privatised’ it when he was Secretary of State. Fewer know that Circle – the private sector company that took control of Hinchingbrooke along with a 50 per cent staff mutual – has done a decent job of turning around something that was – if you’ll excuse the pun – a real hospital pass.*

Just why is privatisation seen as so politically toxic, when much of what we love in Britain has been shaped by private enterprise? Take tertiary education, where students attend the privately run institution of their choice. Our universities have always been ‘privatised’, with the model of academics and faculties competing for research funding well established. Yet the idea of such a system for our primary and secondary schools would currently be politically unacceptable, even though universities like Cambridge and UCL are world beaters – just look at the latest QS rankings, where four out of the world’s top six institutions are British.

And that’s the whole point of privatisation: creating a market where competition drives improvements in quality and efficiencies in price. Try telling that to the British public, who overwhelmingly want to see the railways renationalised – including a majority of Conservative voters. People dislike their trains being run by foreign state operators, but isn’t the point of the railways to move people around, rather than be some sort of national bauble?

Competition has been fantastic for train passengers in the post-British Rail era. This is hardly surprising given that the great triumphs of Britain’s railways were the product of healthy rivalries between private companies – from the Rainhill Trials through to the speed wars in the 1930s that resulted in Mallard, the world’s fastest locomotive. Our railway infrastructure was delivered by companies not wanting to miss out on market share, but today the government is desperately playing catchup after decades of neglect under state ownership – and building HS2 at a pace that would have appalled our Victorian ancestors.

The 2015 General Election campaign is already well underway, and perhaps you’ll hear someone talking about the evils of privatisation in a queue at the Post Office, only to realise that you’ve never had to endure a 40 minute wait at Sainsbury’s or Tesco. That’s because the supermarkets are in competition, and if they made their customers wait that long they know they’d be out of business. They’re also fairly good at keeping down costs for their users – something that we desperately need in our NHS if the principle of free healthcare for all is to survive the challenges of an ageing population and increasing treatment costs. So that’s the sort of privatisation we should be talking about: driving up quality of service, bringing down costs – and no lengthy waits before the automated voice directs you to ‘Till Number Three’.

First published by Coffee House on December 17th, 2014

* About two weeks after this was published Circle announced that it was handing back its operation of Hinchingbrooke to the state. Writing in the Guardian, former Labour MP Tom Levitt said that 'the failure of Circle at Hinchingbrooke hospital, in Huntingdon, where the company very nearly managed to remove an operating loss inherited from the public sector, was due to the failure of the NHS to deliver its side of the bargain, not least the over-demand on A&E which was well above what the company was told to expect.'

8 December 2014

David Cameron and the Pope as bosom eurobuddies? I didn’t see that one coming.

Did you miss the big speech on Europe? Fresh from pushing his followers towards a more liberal line on gay rights, it was David Cam – actually it was Pope Francis who made the most telling intervention on the future of the EU, warning MEPs in Strasbourg that the European project was ‘no longer fertile and vibrant’ and ‘slowly losing its own soul’.

He is right. Millions of British small businesses already know that the EU’s appetite for regulation is denting their competitive advantage – Brussels-approved oven gloves being the most recent example of a regulatory mindset that is at odds with the founding vision of creating wealth and security through trade between nations. Everyone in business has their own examples of how Europe’s bureaucrats have given them the benefit of their limited wisdom: vacuum-cleaner manufacturer James Dyson is critical of ‘sustainability legislation that rewards sustained mediocrity and waste’ and is taking the European Commission to court over its latest efficiency regulations. I know who I’d trust to make decent domestic products – and it isn’t Jean-Claude Juncker.

That the European Commission is so blind to the realities of commerce is hardly surprising. Only a handful of the 28 commissioners have any meaningful commercial experience running the sorts of businesses that ultimately pay their bills. The vast majority come from the law, academia and professional political careers, which perhaps explains their surprise that an unexpected bill for £1.7bn might piss off the unfortunate people having to cough up the readies. Likewise a shortfall to the tune of €259bn would prompt a fairly robust internal efficiency drive in the business world.

There is an arrogant culture of command economics, and you know we’re in deep trouble when the Commission President says ‘If Europe invests more, Europe will be more prosperous and create more jobs – it’s as simple as that’. Pope Francis’s description of the ‘bureaucratic technicalities’ of the EU’s institutions is spot on.

Over to the other speech on Europe: David Cameron was very good. Immigration is a big concern for people – I certainly found that canvassing back before the last general election. The UK’s system for redistributing wealth does throw up some clear incentives to up sticks from countries less well off than the UK. But remember that freedom of movement can also equate to asset stripping of nations, and in the past decade we’ve undoubtedly benefitted from harvesting some of the brightest, most laborious and entrepreneurial people from the EU’s newest members – and what their home country has gained in remittances, it has certainly lost in people with energy and innovation to drive their domestic economies forward. Tighter immigration controls may well be more palatable to scrapping tax credits for migrants (which I worry risks creating an underclass of migrants living on very, very little) but the depth of EU reform needed to restore controls over movement might require divine intervention.

So the battle to shape the future of the EU was laid out by two very different voices. One rooted in pragmatic politics, with a tougher line on immigration pitching to Labour’s blue collar voters as much as it is aimed at neutering, if not shooting, Nigel Farage’s fox. But it was the man from the Vatican whose critique resonated strongest with me, given the immense challenge of reforming the EU in the face of inertia from beneficiary states, not to mention the 23,000 people employed in Brussels’ ivory towers. Cardinal Bergoglio’s career was built on humble service and fiscal discipline with the Church’s resources, which sounds like something that the lawyers and professors of the Commission should be up for. But David Cameron and the Pope as bosom eurobuddies? I didn’t see that one coming.

First published by Platform 10 on December 8th, 2014