Industry | 2008.12.26
Seumas Milne: After such fraud and failure, privatisation is just reckless
Reports of the rehabilitation of Peter Mandelson were, it turns out, premature. Since his return to government, Lord Mandelson has been a politician reborn. Gone were the days of courtly intrigue, exotic business liaisons and Blairite corporate cap-doffing. This was a man who had made his peace with Gordon Brown, established himself again as the real deputy prime minister and embraced the new spirit of government intervention demanded by global economic breakdown. His role was now, he declared, to "bring people together".
But all that seems to be coming to grief now the business secretary has unveiled sweeping plans to part-privatise Royal Mail, Britain\'s last surviving nationalised industry and a state monopoly since the days of Oliver Cromwell. Tens of thousands of postal workers\' jobs are at risk as a result while unemployment is mushrooming across the private sector. As Jim McGovern, who resigned in protest yesterday as parliamentary private secretary to Pat McFadden, Mandelson\'s deputy, put it, the decision beggars belief.
Just as the free market model which spawned a spate of failed and exorbitant privatisations is imploding all over the world, the British government has seized on the idea of handing over a slice of a socially vital national institution to a predatory private competitor. The prime candidate is the Dutch private monopoly, TNT, which has already been helping itself to the most profitable parts of Royal Mail\'s business under the current lopsided liberalisation rules - and whose lorries were famously used by Rupert Murdoch to break the print unions\' picket lines at Wapping.
In the process, Mandelson and Gordon Brown, who has thrown his weight behind the selloff in the teeth of Labour and trade union opposition, seem certain to trigger a large-scale backbench revolt just when Labour morale has been rising and public support growing. The decision has already divided the cabinet, with the health secretary Alan Johnson making clear his opposition, and will probably only make it through parliament with Tory support.
There\'s no question that action over Royal Mail is essential. After years of under-investment while its profits were pocketed by the Treasury, Royal Mail is now being hit hard by rigged competition rules. Those have allowed corporate privateers to grab 40% of the profitable bulk mail business, which previously subsidised universal service to the remotest areas. Mandelson made much of the argument in this week\'s Hooper report - which recommended part-privatisation - that privileged competitors had only cost Royal Mail £100m a year in profits, compared with five times as much lost because of the impact of email and the internet.
In fact, as the ideologically loaded report itself makes clear, that is the estimate of Royal Mail\'s management, which stands to benefit lavishly from privatisation. Others reckon it underestimates early effects of the downturn on the postal sector. But in any case, it is irrelevant to the case for privatisation. Royal Mail\'s profits, which could be used to modernise and diversify, are unquestionably being squeezed by featherbedded competition. Any private "partner" will only bring new capital - management expertise can be bought in - in the expectation of extracting profits.
Far better to use the £280m a year currently being spent on plugging Royal Mail\'s pensions deficit - which the government now plans to take over - for investment and mechanisation. If, on the other hand, the service is in fact being fattened for wholesale privatisation, as former cabinet minister Peter Hain suggests and the Murdoch press is urging, nationalisation of the pensions liabilities would end up as yet another public subsidy to corporate profiteering.
At the very least, the decision has all the hallmarks of a sop to the City, a message that for all the bank takeovers, Keynesian spending and tax increases on the rich, the government\'s old friends haven\'t been forgotten: it\'s business as usual. If so, it\'s throwback politics. The idea that, in the wake of the biggest failures and frauds in the banking and corporate sector for 70 years, handing over yet more public services and institutions to private firms is going to be a political winner is simply bizarre.
In Britain, privatisation has become a byword for cockup, collusion and extortionate costs - with IT and data-bungling a particular speciality. To take a handful of examples, TNT, favourite for a stake in Royal Mail on account of its supposed management expertise, last year managed to lose the child benefit records of eight million families, just as PA Consulting mislaid the personal details of 84,000 British prisoners. US-owned ETS, with a string of contract failures under its belt, has meanwhile triggered the breakdown of the national Sats school testing system with its delays and inability to mark scripts.
Then there is the woeful experience of the private finance initiative, the EDS computer fiasco at the child support agency, the collapse of the part-privatisation of the London tube, this week\'s exposure of the mishandling of pension payments by Xafinity, the disastrous experiment of the privatised rail system, the cost of independent health treatment centres and the profit-swollen oligopoly of the gas and electricity companies - now threatened with new legal controls by energy secretary Ed Miliband unless they pass on falling energy prices to the poorest consumers.
Privatisation has been tested to destruction in Britain, as elsewhere, and destruction is largely what we\'ve had. No significant privatisation has ever been supported by a majority of the public; all were driven through by business and political interests. But now, after the most graphic demonstration of the corruption and incompetence of those who have been in charge of the financial and corporate system - the Madoff hedge fund scam and those geniuses of finance who bought into it being only the latest example - the notion that the private sector should continue to be given the run of public services and institutions will just seem reckless.
The more the government has turned away from the privatising, deregulating dogma that brought us to this pass and acted to offset the impact of the crisis, the more it has attracted support. This week\'s Royal Mail demarche is a lurch backwards and risks a backlash. As recession bites deeper, having it both ways is a luxury ministers will increasingly be unable to afford.
For more information, please visit
http://www.guardian.co.uk/commentisfree/[...]l-mail-privatisation-mandelson
