WHO WANTS PRIVATISATION IF THIS IS WHERE IT LEADS?
The Government announcement that there are now 3 ½ million households in fuel poverty, and rising, means that the demand for a windfall tax on egregious oil and gas profiteering – with likely Shall profits this year of £16bn, BP £13bn and Centrica (which owns British Gas) £1bn after raising gas prices by 35% – will not go away. But the whole wretched saga of Government appeasement of the oil lobby raises an even starker issue.
First the Government backed off a windfall tax when the companies kicked up. Then the Government backed off the leaked promise of £150 to protect all families on child benefit from rising energy bills. Now the energy companies are even threatening an investment strike if they’re forced to make a contribution to cutting fuel poverty or improving energy efficiency. So what exactly was the privatisation of energy for – to enable the companies to hold the nation to ransom and exploit the market with impunity while the Government stands by helpless? Was it not supposed to benefit the consumer?
The Government has three options. One is a windfall tax (carried in the vote at the Manchester conference) which has in fact been used in the past by Tory Governments as well as Labour to drain off very large unearned profits. A 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 (before the oil runs out in 40 or so years’ time) to invest in a sustainable energy infrastructure to succeed fossil fuels. The third option is for the Government to charge for permits under the EU emissions trading scheme. Ofgem recently warned that UK generators could make £9bn windfall profits from being allowed such permits free while at the same time being able to pass on nearly the full cost of carbon to their customers.
None of these options however is a starter because New Labour puts more store by Big Business and the City of London than by 3 ½ million families now being squeezed into fuel poverty, a number growing by a further 0.4 million with every 10% increase in energy prices. The moral in all this is that once Government surrenders to the market in a privatised economy, the sharing of the spoils is drastically unequal and social justice evaporates. 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 tube infrastructure, which Gordon Brown as Chancellor insisted should be funded via privatisation rather than through the issue of bonds within a publicly owned enterprise, led to bankruptcy and the taxpayer having to pick up a £2bn bill. It also led to the five big contractors who held all the equity in the privatised company carving up all 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 increase their profits by taking greater risks within the market, which led directly to Northern Rock and now Bradford and Bingley. Hospital cleaning services were contracted out to private firms to cut 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 personal details of 25 million child benefit claimants, personal records of recruits to the armed forces, records of 3 million learner drivers, and 200,000 NHS records lost by 9 privatised Trusts.
Other privatisations have not exactly turned out a success. BAA, after the terminal 5 debacle, the third runway scam and frequent chaos at Heathrow through giving preference to profitable shopping malls over speedier security clearance for passengers, is now having to be broken up. Railtrack collapsed into notorious administration, and 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 widely believed that the private sector is more efficient than the public, and that markets and the profit motive will secure the best value for money. The facts suggest otherwise. The OFT report in April found that 112 building firms had rigged bids for multi-hundred million public contracts, inflating estimates and submitting false bids at unrealistic prices to give a pretence of choice. Balfour Beatty, for example, recently increased its bill for constructing the 2012 aquatic centre to £ ¼ bn, triple the estimate in London’s Olympic bid.
The record of privatisation and all its consequences, which Thatcher initiated and New Labour continued, needs to be officially reviewed, by Parliament if the Government declines. It isn’t just the current ignominy of a Government 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 the taxpayer and continues to do so.
This article first appeared in Tribune on 10 October 2008.

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