Socialism Today            Socialist Party magazine

New Labour and the market

Legalised corruption

Socialist nationalisation

New Labour is taking one ‘initiative’ after another to try and placate growing public anger at Britain’s decrepit public services. It would be tempting to think that Tony Blair is making it up as he goes along. Yet, as KEN SMITH explains, behind the spin lurks the government’s real, neo-liberal agenda.

HAS NEW LABOUR given up on its ideological love affair with the capitalist market? The superficial evidence is contradictory. On the one side, there is talk of running Railtrack as a ‘not-for-profit’ corporation and turning the National Health Service (NHS) into a public corporation along the lines of the BBC. New Labour cabinet ministers, like beleaguered transport secretary Stephen Byers, talk openly of the Third Way agenda becoming ‘a bit flaky’.

At the same time, the rush to bring private-sector managers into the NHS, the privatisation of London Underground’s infrastructure and the so-called ‘modernisation’ of public-sector organisations continues unabated. Former government adviser, David Clark, wrote: "For New Labour, closeness to business is an ideological imperative, not a financial expedient". (Guardian, 14 February) In fact, New Labour’s relationship with capitalism and big business is intensifying, albeit in a modified form. As Observer columnist, Andrew Rawnsley, commented, Blair will be conducting his private-sector love affair "a bit more discreetly in future". (27 January)

One reason for Labour’s new coyness about private-sector involvement is the public anger building up against privatisation in all its forms, along with indignation at the greedy, sleazy behaviour of big business from Marconi through to Enron. Recent polls have recorded only 11% support for privatisation, compared to the poll tax which at its height had 14% of public support. Sensing this mood change, trade union leaders have responded to pressure from below by giving increasingly bellicose warnings about privatisation becoming New Labour’s poll tax.

In turn, government leaders have hung themselves out on the line. Blair said in January: "If the NHS is not basically fixed by the next election, then I am quite happy to suffer the consequences. I am quite willing to be held to account by voters if we fail". (Guardian, 28 January)

The outrage against privatisation and its failings is reaching a pitch where a mass movement could shake the government to its foundations. But during the anti-poll tax battle twelve years’ ago, the union leaders made lots of noise but did not organise the revolt. It was the All-Britain Anti-Poll Tax Federation - led by Militant supporters (forerunners of the Socialist Party) - which organised 18 million non-payers to defeat Margaret Thatcher’s hated tax.

Even if the union leaders were forced by rank-and-file pressure to fight privatisation, the question would remain, what would they put in its place? Like New Labour in the 1990s, the union leaders have become ideologically wedded to capitalism and, though they fulminate against its worst excesses, offer no alternative to it. They neither argue for a return to ‘old-style’ nationalisation and public ownership nor for a genuine, democratic, socialist planned economy to benefit the working class.

Another reason why New Labour is spinning madly is to conceal its shift from one, more partial, form of private involvement to a more direct private-sector takeover of the state sector. Combined here is the final dismantling – started by Thatcher – of the last vestiges of the post-1945 welfare state. This will allow huge opportunities for private companies to cherry pick. Integral to this process is the attempt to end any effective trade union role in the public sector, where the density of union membership and the degree of organisation is an impediment to the fat cats making huge profits.

Partly, New Labour has no alternative way of running public services. While it tried to eradicate some of the worst failings of the Tories - such as the NHS internal market - it continued with other plans it had decried in opposition – such as privatised rail and the privatisation of air traffic control.

Also, with New Labour completely in hock to big business, the cash flowing into the party’s coffers has brought privileged access and contracts for private companies. As government minister, Larry (now Lord) Whitty, a former Labour general secretary, once said: "You don’t buy access to ministers. You buy access to the whole party... New Labour is the party of business... [which aims for] the most business friendly environment in the world". (George Monbiot, Captive State, pp4-5)

Legalised corruption

CONTINUING WITH THE Private Finance Initiative (PFI) and Public-Private Partnerships (PPP) has been rightly condemned by commentators including the former deputy leader of the Labour Party, Roy Hattersley, as legalised corruption.

PFI and PPP allow companies a ‘preferred bidder’ status, meaning they hugely inflate the price of a project once a contract is signed. Accountancy firms produce reports allegedly showing that these projects are good value. They gain hundreds of millions of pounds advising private companies and government on how to carry out the privatisation. Even with not-for-profit corporations the accountants and fat cats stand to make huge amounts.

A not-for-profit corporation is a very New Labour concept, using words which disguise an even more vicious form of privatisation. DWR Cymru/Welsh Water (formerly Hyder) is a recent example. Here there are no shareholders but managers are given bonuses of up to 80% of their salary (about £150,000 each) if they deliver ‘efficiency savings’. The company is tied into the big financial institutions and its own financial base is in the Cayman Islands, the well-known tax haven.

Certainly, there’s no reason to believe that private companies should behave any differently. One of the factors in the growing anti-capitalist, anti-globalisation movement has been the widespread and correct perception that capitalism’s market mechanisms are only good at delivering big profits for the corporate shareholders and big bonuses for fat cat directors. The public understands that it does not benefit.

The Tories saw privatisation as a way of undermining the power of the organised working class. But it also gained ground as a material idea in the 1980s. Firstly, it was sold on the basis that opening up ‘state monoliths’ to competition would provide cheaper, more efficient services because the old public sector had failed miserably and was a bastion of bureaucratic incompetence and overstaffing. Secondly, the notion was created that there were rich pickings for the public as shares in the newly privatised utility companies were floated.

Twenty years later, it is abundantly clear that private ownership has led to a more expensive and less efficient provision of public services. Indeed, some of the first companies to be privatised, like BT and British Airways, are now suffering severe crises.

Also, the anticipated army of small shareholders was soon swallowed up by big corporate shareholders, who push for ever greater profits and returns on their shares. The original privatisations had little to do with establishing ‘competition’. The industries were sold at knockdown prices and reorganised as big-business cartels, with a near monopoly stranglehold on the provision of services.

Labour’s recent plans, however, are as much about bringing in money for the state, as handing out prize pickings for its corporate friends.

A return to old-style nationalisation, however, would not be the best way to provide and run public services. They were not run on socialist principles. Indeed, the way they were established in the first place was designed to provide cheaper, subsidised services for big business and management roles for the former owners. Nonetheless, the economies of scale and a certain belief that they were genuine public services, especially among staff, meant that these services were better than the private companies they replaced. In most cases they were more effective than the services which now stand in their stead. In the old-style NHS, for example, administration costs accounted for 5% of total running costs, compared to 12% currently.

Public British Rail provided a more reliable, cheaper service with greater investment and less subsidy than the privatised leeches presently do. A report in Modern Railways calculates that each pound of new investment in privatised rail yields only a third of the improvement it did in nationalised British Rail.

The recently announced plan to spend £67 billion extra on rail depends on £34 billion of private money. This is unlikely to be forthcoming after the Railtrack debacle and when the train operating companies claim to be facing losses of £120 million. This means that the need for government subsidy is likely to increase rather than decrease. The Rail Passengers Council says that 80% of that £67 billion will be earmarked for current spending plans rather than improving the network. Little wonder, therefore, that Times columnist and former editor, Simon Jenkins, moaned: "Oh hell, why not just bring back British Rail and the NHS?" (The Times, 16 January)

Socialist nationalisation

SOCIALISTS ALWAYS ARGUED against the idea that everything was for the best in the best of all possible worlds in the old nationalised industries. Their obvious failings were the ideological yeast for Thatcher’s plans to privatise them.

In contrast to the top-down management of the nationalised industries, which often led to inefficient and unresponsive services - despite the best efforts of the workers themselves - they needed to be run under workers’ control and management, where ideas and initiatives came from the bottom up in response to public demand. Additionally, we proposed that the workers’ management meet to co-ordinate a national economic plan in the interests of the working class, rather than allow those industries to become subsidised milch cows, a source of easy profit for big business.

Those running the public sector should be elected from the workplaces, from other industries through elected union representation and include people elected to represent the users and society as whole. That is the only way that public services could be genuinely democratic and responsive to public need.

Instead, New Labour’s plans, in whatever guise, will put private greed before public need. The current fiasco over the semi-privatised National Air Traffic Services (Nats) shows that, ultimately, it is the financial institutions that call the shots.

The not-for-profit corporations will not be accountable to the public but will respond to the wild-eyed strategies of government departments and the private-sector managers brought in to run them. Inevitably, the tendency towards a two-tier health service and education system will be reinforced.

Those sectors which ‘respond’ best will reap the rewards and those which ‘fail’ will be left to charities or asset-stripping private corporations to run. None of these bodies will operate in a vacuum. Railtrack, for instance, will still have to deal with the privatised train operating companies and is hugely dependent on private funding.

Amidst growing disenchantment with public services, there are clear signs that sections of the middle class and even the working class are opting increasingly for private healthcare and education. The proposed break-up of the postal service will also produce a many-tiered provision where the best service comes at the highest price. In all of this it is working-class people who lose out.

Will privatisation become New Labour’s poll tax? The potential exists for the government to hit the rocks on this issue, given the growing anger. But that anger could turn to hardened disenchantment if no lead is given, especially from the trade unions. Certainly, it is the trade unions that Blair’s cabinet has in its sights as it prepares to take privatisation further than Thatcher’s governments ever dared.

As with the poll tax, however, it is more likely that the lead will come from below. That is why the setting up of an anti-privatisation liaison committee of trade union Broad Left groups last December could prove extremely significant. The committee - initiated by Socialist Party members and other union left-wingers - has the support of activists from the UNISON, NUT, CWU, PCS, and Natfhe union Broad Lefts, as well as the support of many trade union branches.

Even a limited opposition, coupled with the growing failure of privatisation to deliver, could force New Labour to change track. Although it will not revert to old-style Labour nationalisation, the government could seek a ‘pragmatic’ compromise, further camouflaging big-business involvement and buying it time to assuage growing public anger. David Clark commented: "New Labour is incapable of providing a governing philosophy for the long term. It has no fixed points of reference except to define itself by what it is not – old Labour". (Guardian, 14 February)

For working-class people the historical experience summed up in the phrase that ‘you can’t control what you don’t own’ has been reinforced in the last 20 years. Workers can see that the capitalist private-sector market will not deliver in our interests. Only a genuine socialist economic plan, taking over the major companies and running them under workers’ control and management, will prove capable of delivering cheaper, high quality and efficient public services.


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