Don’t rock the boat

In the 1980s and 1990s I worked in the research department of a large public sector union leading on the anti-privatisation campaign.

We certainly had a lot to get our teeth into. Thatcher’s hatred of the state sector fuelled an ideologically driven onslaught that left few public statutory corporations untouched in the UK.

It was in Thatcher’s second term that the vision massively widened to the sale of state utilities, starting with British Telecom in 1984, followed by British Gas in 1986, with the British Airports Authority (BAA) a year later and the water companies in 1989. Electricity transmission and distribution companies were sold by Thatcher’s successor, John Major, in 1991, and Railtrack in 1997. Meanwhile, the disposal of competitive industries continued apace. British Airways, Rover, Rolls Royce, Jaguar Cars and British Steel all moved into the private sector.

Central government was also under attack. As well as providing the private sector with the opportunity of getting its foot in the door of the more lucrative parts of this sector, the intention was to weaken the power of the central government unions. Thatcher started slowly. Initially through an approach called ‘’market testing’ where in-house teams had to bid against private companies. This was a hugely expensive process, and usually ended with the in-house teams being successful. The private sector whined that it was not a level playing field, as, of course, the in-house teams had the expertise and were not looking to extract a profit.

Ignoring the evidence that maybe private sector involvement in the public sector did not represent value for money, the government merely moved on to contracting out key areas of work seen as profitable such as cleaning and facilities management.

In repeated meetings with the Treasury, we would ask where the economic rationale was for this approach. Private companies had higher costs because of their need to reward their shareholders with handsome dividends and, of course, the public sector could always borrow money at a lower rate than the private sector. They would mumble something about so-called private sector efficiency and, of course, these borrowings would not be on the public sector borrowing balance sheet. Declining qualities of service was not a consideration

The public sector borrowing rate (PSBR) was clearly the driver for John Major’s love affair with the Private Finance Initiative, the latest in the long line of procurement policies, which allowed private companies to fund and manage infrastructure projects (such as hospitals, schools, or transport) on behalf of the government. In return, the government makes long-term repayments to the private sector.

Well, we know too well the cost of this efficiency. PFI debt for the British taxpayer is more than £300bn for infrastructure projects, with a value of £54.7bn. To put it into perspective, the PFI debt is four times the size of the budget deficit used to justify austerity.

Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), made an astonishing admission on BBC1’s Question Time in 2018 when he stated that the PFI has been a “fraud on the people”.

These are not unintended consequences. Campaigners at the time produced numerous leaflets and policy documents highlighting these risks. The loss of expertise to manage contracts, the domination of large corporations, the lack of flexibility to respond to emergencies because they weren’t included in the contracts along with the ongoing financial burdens were stressed repeatedly. The fact that these contracts could never provide value for money, as the public sector would always ultimately carry the risk of collapse, was again proved to be correct with the failure of Carillion in 2018 . Having built a huge empire by providing outsourced services to public authorities, the public sector was left to pick up the pieces.

In many respects though, as a union we knew what we were up against. We hated the Tories. They were the enemy. We expected nothing less from them. We didn’t like what they were doing but we were clear in our opposition.

When Blair won the landslide in 1997, the unions were initially optimistic then bewildered as his government embraced the PFI procurement policy with the same enthusiasm as John Major’s government. The Modernising Government White Paper published the year after they came into office suggested a range of managerial initiatives to achieve savings, including in procurement. Departments were each set individual targets for generating efficiency savings

However, the key difference was that the campaigning stopped. The research department was not allowed to point out the risks or the inconsistencies in these policies. This was the Labour Party and the mantra was ‘don’t rock the boat.’

With the likelihood of another landslide Labour government under Starmer the same issues are coming to the fore. Labour has proudly announced that it will pursue the same economic policy as the Tories. Its manifesto sets out modest tax and spend plans. Any changes will rely on economic growth.

You don’t have to be an economic guru to know that this is unlikely to produce the money necessary to protect public services. Sharon Graham of Unite is clearly struggling in the same way the unions struggled in the past with Blair. She prefaces her concerns by saying ‘we want a Labour government’, but points out that to fix Britain ‘Labour needs to be bold’.  She is a lone voice even with this mild admonishment.

Just watch this space. Anyone daring to raise concerns prior to the election is jumped on with a fury that suggests any opposition means support for Sunak and Farage. This will continue into the honeymoon period of the Labour government until the reality starts to dawn, by which time it will be too late for our public services. What goes around comes around.


Leave a Reply

Your email address will not be published. Required fields are marked *