Tuesday, 20 March 2012

Ministers take pains to avoid the p-word


Softcapitalist | March 20 9:36am | Permalink
I think it is distasteful and disrespectful to the tens of millions of workers in the public sector to portray them as inefficient and lazy and the salvation can only come from the private sector. I fail to see how a sector where market efficiency is not possible (think BAA's competition at Heathrow) can save money only because it is run by private companies. Cannot compare easily garbage collection with motorway building and management.

Infrastructure projects yield a return that can be captured by public or private sector if the project is run well. I see no conceptual issue with the government raising money to get a return from running roads. The government aim seems to be take out of the books any expenditure to allow for tax cuts, even if this is based on highly uncertain projections, i.e. the taxes are cut in the hope things will turn out well as the "problem" is passed into private hands. 

Private companies are not exempt from being poorly managed. Governments can incur losses and users of goods or services supplied by private companies can be unhappy. I recall the 4 inches of snow that blocked Heathrow because a private company would not invest in equipment as it makes more P&L sense to keep travellers stranded for a few days than to keep machines parked in mild winters. 

Bailing out the efficient private sector is not a great idea as we all recently learned. And that was the pride of London, one of the most incentivized, dynamic, innovative, deregulated, globalized and competitive sectors one could think of... Shame it failed. What if a privately built bridge, with a £8 toll each way collapses just as the Northern Rock? Cynically - the Hammersmith flyover doesn't really look like the ultimate engineering challenge, so I am not too trustful in post Victorian concrete structures.

Now talking about leases, I suggest the home ownership in Britain be measured by number of freehold households, surely the number is less flattering than the current 60-65%. Leasehold is not full ownership in the same way road leases are not privatisations.

Why not outsource the PM job by the way?



Ministers take pains to avoid the p-word

royal mail
Even Margaret Thatcher did not dare hand over the roads or the Royal Mail to the private sector, but suddenly David Cameron’s government appearsgripped by a privatisation zeal. Stories abound about the private sector’s involvement in running courts, policing, hospitals and work programmes.
Sharp-suited NM Rothschild bankers have been seen at the Treasury, offering advice to a Tory chancellor on the transfer of public assets to the private realm, reminiscent of the role the bank played in advising on the Thatcherite sell-offs in the 1980s.





But is the coalition government really going back to the future? And if so, why do ministers seem so wary about using the word “privatisation” to describe what they are doing? On Monday, the Treasury was at pains to say Mr Cameron’s plan to hand roads to private companies on long leasesdid not amount to the “p” word.
The prime minister’s allies say that use of the private sector to run public services was not driven by dogma, rather that it is driven by need to find alternative sources of funding when the government has simply run out of money.
Matthew Hancock, a Tory MP close to the leadership, said: “This isn’t ideological, it’s not public sector bad, private sector good. We haven’t got any money, and you have to look all the possible options.”
Downing Street admits that the privatisation concept has a “negative” image; for Nick Clegg, the Liberal Democrat leader, the idea is toxic.
When he returned from his long sojourn in Brussels as a Eurocrat, Mr Clegg admitted he had no idea of the extent to which Margaret Thatcher and her privatisation legacy were electoral poison anywhere north of Leighton Buzzard.
For months the Lib Dem leader has been busy trying to limit the role of the private sector in the NHS, amending the government’s health bill to reassure his party there would be no “backdoor privatisation” of the health service.
Of course the private sector has long been involved in the NHS – Labour embraced the trend – as well as in providing a range of services to the police, courts and helping people find jobs. But the public have never been sold on the idea.
The recent scandals involving A4E, the welfare-to-work provider, and controversy around the role of private security firms supporting the police have made politicians wary of drawing attention to the increasing role of private operators.
In practice the Tories and many Liberal Democrats are ideologically open to privatisation. Vince Cable, business secretary, has presided over the planned sale of the Royal Mail – albeit with a mutualisation element – and in 2009 he hailed an NM Rothschild plan to sell the motorway network as “an attractive, positive idea”.
Cash-strapped government departments, local authorities and police forces have all looked to “outsource” services – another dirty word with the public – while Mr Cameron’s newly-announced plan to hand over roads on long leases is intended to attract investment from sovereign wealth funds.
Even Labour has attempted to walk a tightrope on privatisation, simultaneously deploring the government cuts which they say have pushed the public sector to seek savings, while holding back from criticising outsourcing itself, which they laid much of the groundwork for whilst in government.
But Tim Farron, Lib Dem party president, reflected the public mood of scepticism: “The shareholder society turned out to be a load of rubbish,” he said. “Millions of people bought shares and then sold them: that’s why our water companies are owned by the French.”
Signalling Lib Dem doubts over the roads plan, he added. “The Conservatives are trying to say things that make it look like their agenda is holding sway. There are no firm proposals here, it is just being talked about. We are not ushering in a new era of privatisation.”

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