This is, of course, exactly how rail franchising is supposed to work. Services are put out to tender, and are run by private companies, but if one of them comes a cropper, the government steps in until another provider can be found. The only trouble is that the government has been stepping in rather a lot lately. Not because the private sector is inherently flaky, but for a couple of other reasons. First, the government screwed the operators down too hard on price. Many of them already had made considerable investment in the rail industry and were not prepared simply to write it off. So they paid over the odds. Then boom turned to bust (thanks, Gordon) and their figures started to look a bit sick. Second, the government drew up its franchise agreement so ineptly that when the chips are down, it is far cheaper for an operator to fold than continue operating a service. Step forward, the taxpayer. Frankly, it's no way to run a railroad.
The thing is that the "privatisation" of the railways is, in effect, simply one of the private finance initiative (PFI) and public-private partnerships (PPP) idea that both the Tory and Labour governments latched onto in the nineties.
The idea, very broadly, was that the private sector—in return for the potential to make large profits from monopolies—would pile huge amounts of capital into these public services. The quid pro quo was that they would run them in a way that the state dictated.
The private companies make massive, easy profits off a captive customer base, and the government get to look good by improving services (or at least modernising them) but—and this is absolutely crucial—it also keeps the capital expenditure off the government books.
I believe, however, that both the Tory and Labour governments had an even more subtle agenda: the privatisation of public services by the back door.
No, bear with me here! Although, I'll admit that the following is purely speculation...
As I intimated in a comment on my Friendly Societies piece, many people in the apparatus of the state (although Brown is possibly not one of them) have started to realise that current levels of government spending are utterly unsustainable. Not only that, but the huge increases in cash simply haven't produced the rise in service quality that was hoped for.
What to do? The government is already spending billions more than it is getting in tax revenue—nearly £200 billion more this year alone. Yes, this year is particularly bad for the public finances, but even in the good years the government has borrowed ten of billions.
This simply isn't sustainable: even the British government will reach a point at which they can no longer get credit (although they are likely to reach a point where it is simply too expensive for them to borrow more). That point obviously hasn't been reached yet, but should the state stick to the projected spending rises, it won't be too many years before they do.
Think about it: not only is the government not paying down its debt, it is actively increasing it—by about 40% of total spending—every single year. This is not prudence, that's for sure.
At the same time, having splurged on public sector appointments and then increased salaries (and, in far too many cases, having to up the pension payments), the government now finds itself in a bind: if it starts sacking thousands of public servants, not only will the unemployment figures rocket upwards but they will also have lost a good number of voters. Besides, the politicos know as well as we do that "efficiency savings" simply don't happen, c.f. the Gershon Report savings, which have been largely illusory.
Not only that, but the NuLabour government is further hamstrung by the fact that the Party is now almost entirely funded by the unions—the bulk of whose members are in the public sector. And the unions are already starting to cut up rough.
Government-sponsored cuts are going to be hard enough for the Tories: they are impossible for Labour.
So, it's time to turn to the private sector—those evil companies sack people all the time, right? And the unions don't have nearly such a strong hold there either. And the government can deny all responsibility as far as job losses go, too.
But the British love their public services—the NHS is the wonder of the world, our education system churns out A grade after A grade, and the oldies are thrilled with the state pension.
So how to make this transition? Now, were I in this situation (and not so damn impatient), I would carry out the exercise in three parts.
- The first part would be the transfer of the assets to the private sector, whilst maintaining government control.
- The second part would be the transfer of the administration to private entities, whilst maintaining some control through full or partial government funding.
- The third part would be the handing over of complete control of the service to the private entity and, crucially, the privatisation of the funding.
The first part has, in many cases, come to pass; many of the schools and hospitals built under PFI remain within the control of the private company even at the end of the contract. The company often runs some of the repair and maintenance services, or other facilities, throughout the life of the contract too.
The second part is also coming to pass. Think about the Tories' plans to make some schools effectively independent along the Swedish "free school" model—not to mention NuLabour's Academies.
In the NHS, more hospitals are applying for—and being granted—Foundation Status, giving them far more control over the administration and budgets (and they are no longer run directly by the Strategic Health Authority but by an "independent regulator" called Monitor).
The Primary Care Trusts, too, are being split—separating their commissioning and providing arms into what are, nominally at least, entities independent of each other. Moves like this suggest to me that the so-called internal market is being set up to become a proper market of competing companies.
For the moment, the third part—the independent funding—has not yet been implemented, although there have been rumblings and rumours of the NHS being a paid-for service, as well as compulsory medical insurance to cover your old age care. The government has most certainly suggested that everyone should be forced to contribute to a private pension.
Now, as I freely admitted, the above is all total speculation on my part—but I'm willing to take a long bet that I am not totally wide of the mark. Even if the privatisation of public services is not on the current government's agenda, all of the foundations for doing so are in place—it just needs someone to start pulling the levers...