Public Ownership and Privatisation

The eighteen years of Conservative rule were one of the most distinctive and controversial periods in post-war politics. Whether one agrees or disagrees with the accompanying policy changes, or the notion of ‘Thatcherism’ as a coherent and rational ideology, what is significant is the ways in which Thatcherism challenged the post-war consensus. The uninterrupted period of Conservative government since 1979, coupled with an opposition that was often divided and weak, provided a political environment within which their policies developed and matured.

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Despite some historical antecedents, privatisationrepresented a significant departure from this consensus, especially in relation to the role of the state and the idea of a mixed economy. This lecture examines the development of public ownership and privatisation policies, the underlying rationale and their consequences. In this respect, particular attention is devoted to the sale of state assets, but other forms of privatisation are considered whenever appropriate. In contrast, the lecture concludes with an assessment of New Labour’s approach to privatisation. ‘I have changed everything’, Margaret Thatcher, 1975.

‘The Conservative party has never believed that the business of Government is the government of Business’ (Nigel Lawson, House of Commons, 1981). ‘Our policy is to set industry free to create wealth for all our citizens, to remove regulation and controls; to reward success and enterprise by cutting taxes; to privatise state industries; to promote competition and to open up markets abroad by enthusiastically supporting the European Single Market and GATT Free Trade Talks. That is our industrial policy and it works’ (Peter Lilley, Conservative Party conference, October 1990).

‘(Thatcherism was) influenced by different and often contradictory creeds ranging from monetarism via moral authoritarianism to an anglicised view of Gaullism’ (Peter Riddell). ‘… the goals of privatisation evolved gradually and the emphasis given to each of these goals has been different for each privatisation’ (Veljanovski, 1987). 1. Public Ownership 1. 1 Refers to the compulsory acquisition by the state of companies or assets owned by private individuals or shareholders.

In the UK, it represents the most prominent mode of government involvement in industry, which has always involved the payment of compensation to owners of private firms. However, there are a few cases, such as the Post Office, where ownership has always been vested in the public sector. 1. 2 Public ownership didn’t suddenly appear in 1945, though the Labour government created a much larger publicly owned sector. Before 1939, there had been ad hoc development of the principle. Examples included the docks (the Port of London Authority, 1908), electricity transmission (the Central Electricity Generating Board, 1926), broadcasting (the British Broadcasting

Corporation, 1926), London’s Transport (the London Passenger Transport Board, 1933) and airways (the British Overseas Airways Corporation, 1939). Liberal or Conservative governments created these bodies; motivated by a desire to increase both central planning and the control of monopoly practices. 1. 3 Post-war Labour governments also emphasised the importance of indicative planning and the dangers associated with monopoly practices. What then was the distinctive socialist contribution to Public Ownership? Did the Labour governments’ nationalisation programme, 1945-51 reflect these ideas?.

Following Marx a key feature of capitalism was exploitation, resulting in the need to ensure that workers received the full benefits of their labour. Nevertheless, planning arguments were much more widely canvassed in the British Labour Movement – planning was seen as an important means of controlling the whole economy. This did not necessarily imply that private capital should be abolished, but it did mean that key industries should be under public control. And it often meant that industries should be state owned. A second argument within the Labour movement related to the need to alter the authority relationships within a Capitalist economy via workers’ control.

In the event, the two most important influences on Labour’s programme were non-socialist, which related to the condition of particular industries and the commitment of some trade unions to the removal of private ownership in their industries. 1. 5 In the case of gas, electricity and coal, major reports had already emphasised a need for reorganisation and in some substantial public involvement already existed (60 per cent of electricity supply and 37 per cent of gas were publicly owned). Even in the most

controversial case, the nationalisation of iron and steel, state involvement had already been established with the creation of the Iron and Steel Board in 1934. 1. 6 Trade Union pressure, through both the TUC and the Labour Party, was of considerable importance in the case of and railways and, to a lesser extent, the iron and steel industry. A number of arguments were deployed by the trade unions.

In the case of the miners workers’ control was important, but more important were sectional considerations concerning security of employment, working conditions and pay – all of which, it was felt, would be improved under public ownership.

Performance: it was suggested that nationalised industries should cover their costs, but it remained unclear what their economic objectives ought to be and this has resulted in considerable debate concerning how their performance should be evaluated. Should they be evaluated on the basis of commercial rates of return associated with the private sector? Should the major consideration be ‘social’ in that they meet peoples’ needs regardless of market considerations?

Or should they attempt to achieve a balance between these two objectives? Prior to the introduction of privatisation, much of the debate focused on these considerations and, in particular, whether an appropriate balance could be achieved. 2. 2 Accountability and Control: a second ‘problem’ was related to the accountability and control of nationalised industries. Herbert Morrison (former leader of the London County Council and grandfather of Peter Mandelson) persuaded the Labour Party that the public corporation was the most appropriate organisational form for a state-owned industry.

It combined commercial flexibility with political accountability, though he accepted that the precise nature of public accountability would need to be worked out in the light of experience. Yet, he did not want these industries to be directly controlled by the relevant government departments, as was the case with the Post Office, or employees. In practice, however, the relevant Minister played a significant role in the operations of these industries, often leading to criticism that their role was political rather than economic. 3. Privatisation: The Thatcher Effect? 3. 1 The crisis of social democracy and the end of consensus politics.