A Genuinely Mixed Economy

Seumas Milne writes:

Any doubts about who really controls Britain should have now been dispelled. Any thought that the financial crisis might have broken the neoliberal spell, rebalanced the economy or chastened the deregulators and privatisers can be safely dismissed. October has been the month when the monopolies, City hedge funds and foreign-owned cartels put the record straight. It's they who are calling the shots.

In the past week, a Swiss-based tax exile announced the closure of the Grangemouth petrochemicals plant, a crucial slice of industrial Scotland, after provoking a dispute with his workforce. Threatened with the loss of 800 jobs, they signed up for cuts in real pay and pensions.

Naturally, the employer claimed to be losing money (despite having made £1.7bn last year), while the media blamed the union. In fact it was a textbook lockout and display of corporate power by Britain's largest private company – a strategic and once publicly owned complex supplying 85% of Scotland's petrol, left to be run on the whim of a billionaire.

But that is mere bagatelle compared with the defiance of the energy privateers. Ever since Ed Miliband forced electricity and gas profiteering into political focus by pledging a price freeze, the monopolists have outdone themselves. Squealing that such interference threatened power cuts, one after another has taken the opportunity to jack up prices still further.

Four of the "big six" cartel, which controls 98% of electricity supply, have now increased prices by over 9% – blaming green levies and global costs – while wholesale prices have risen 1.7% in the past year and profit per "customer" has doubled.

Thousands of old people will certainly die this winter as a result of the corporate stitch-up that is called a regulated market – designed in large part by the same John Major who last week called for the introduction of a windfall tax on energy profits.

Meanwhile, David Cameron's coalition has signed a private finance initiative-style deal with one of the cartel, EDF, and two Chinese companies – all three state-owned, but by other states – to build a new nuclear reactor which will guarantee electricity prices at almost double their current level for the next 35 years.

As if all that wasn't grotesque enough, most of profitable Royal Mail has now been privatised by the supposedly dissident Vince Cable. The current loss to the "taxpayer" from selling shares below their market value is upwards of £1.3bn – more than the government's entire planned savings from benefit cuts in 2013-14. And its biggest shareholder is now the hedge fund TCI.

Within days, the Co-operative Bank had also fallen prey to US hedge funds, as Conservative ministers put out to tender the country's most successful rail service, the publicly owned east coast mainline. Never mind its reliability, value-for-money, popularity and the £208m dividend payment to the public purse. Privatisation dogma is undisturbed by evidence.

But then privatised water companies are planning to increase prices by 40% by 2020; Simon Stevens, an executive for the US private health firm UnitedHealth, now bidding for NHS contracts, has been put in charge of the NHS in England; and the security firms, G4S and Serco, are allowed to bid for a share of the probation service despite fraud investigations into existing deals.

It should be obvious that powerful interests are driving what is by any objective measure a failed 30-year experiment – but which transfers income and wealth from workforce, public and state to the corporate sector. In the case of privatised utilities, that is the extraction of shareholder value on a vast scale from a captive public.

What's needed from utilities are security of supply, operation in the public interest, long-term planning and cost effectiveness without profiteering. The existing privatised utilities have failed on all counts.

The case for public ownership of basic utilities and services – including electricity, gas, water and communications infrastructure – is overwhelming. It's also supported by a large majority of the country's voters. But it's taboo in the political mainstream.

Given the unhinged media response even to Miliband's call for an energy price freeze, perhaps that's not surprising. His party is arguing for tougher regulation of the energy market. That's welcome, but it's not going to solve the problems created by allowing private companies to profit from natural monopolies.

You can't control what you don't own. Regulators become the prisoners of the regulated. And as the liberal Joseph Chamberlain demonstrated in 19th century Birmingham, publicly owned utilities can be a valuable source of non-tax public income too.

Labour's refusal to commit so far even to bring back rail franchises into public ownership as they come up for renewal – which would cost nothing – shows the problem is political, not practical. Why, you might wonder, is it acceptable to hand basic services to state-owned companies, so long as they're owned by foreign states?

The answer is because it's a commercial relationship, not one of democratic accountability. There are any number of models of social ownership, including local and mutual, that could bring Britain's utilities back into the public realm. In energy, for example, it could start with a single firm or power generation alone.

However, the costs of privatisation have created a powerful counter-momentum in Europe (and even more so in Latin America) to bring services, resources and utilities back into the public sector: water in France, power in Germany, and transport in Britain (Newcastle is currently attempting to take back bus routes). In September, the people of Hamburg voted to bring back the power supply into municipal ownership. Berlin is set to follow suit this coming Sunday.

Privatisation is a failed and corrosive model. In Britain, it has combined with a determination to put up any asset up for sale to hollow out the country's industrial base to disastrous effect. If Britain is to have a sustained recovery, it needs a genuinely mixed economy. The political and corporate elite have run out of excuses.