The perils of privatisation – and a first step out of the mess

History has shown us what happens when public services fall under the control of greedy corporations - let's not let it happen again


On Saturday 7 February, a large crowd of Slovenian citizens gathered in the Slovenian capital of Ljubljana to protest against the planned privatisation of Telekom Slovenia. The telecoms company, which is owned by the Slovenian state, is at risk of being taken over by a foreign telecoms company (Deutsche Telecom or Mobile TeleSystems) or by a foreign investment firm (Cinven, Providence, Apax, and Bain Capital are all bidders).

There was also an outbreak of civil unrest in Bosnia & Herzegovina, and in nearby Serbia the process of privatisation has been identified with corruption. Before jumping to any conclusions about these countries it’s worth taking a second look at Britain.

In 2009 Andrew Lansley, a leading proponent of NHS privatisation, received a sizeable donation from the chairman of a private healthcare contractor. Mr. Lansley’s wife also runs a consultancy firm which offers lobbying advice and could be seen as a conflict of interest.

Those public sector officials in positions of influence are not immune to greed, and each contract out to tender is an opportunity to cash in on the services they operate. That’s why accountability is so important when services are outsourced. The public sector isn’t perfect but organisations under public ownership are subject to public scrutiny, and there are control systems to identify where transgressions occur.

All of us can submit Freedom of Information requests to access details about our public services when they are in public hands. In the case of government bodies, we have various channels open to voice our concerns, with the ultimate power to vote politicians out of office at the next election. Private companies are not required to comply with these transparency and accountability mechanisms.

As well as failing in terms of accountability, privatisation is failing in terms of cost. British Rail for example was privatised in 1993, and in the two decades from 1995 to 2015 the busiest train routes have seen fares treble. Meanwhile in 2014, the government spent £5.3 billion to support the railways, most of which went to pay for infrastructure. Passengers are losing out, and the taxpayer is still footing the bill for maintenance. The only winners in this situation are the large companies operating profitable franchises.

Another recent example of failed privatisation is Hinchingbrooke hospital, which was the first NHS hospital to be run under a fully private trust. Last month the company running the trust (Circle) declared its intention to drop the contract. At the same time a report was released by the Care Quality Commission which rated the hospital as ‘inadequate’.

Even non-profit businesses have to break even, so when they take over inherently loss-making services like healthcare they often have to go about cutting costs. Again, one of Circle’s first moves in Hinchingbrooke was to remove 46 nursing posts.

It doesn’t apply in the Hinchingbrooke case, but under some outsourcing contracts the staff are taken out of ‘normal’ working conditions and given new terms of employment more favourable to the contractor. Typically this means lower pay, more working hours, fewer breaks, less job security, and anything else the contractor can do to reduce expenditure and maximise revenue. The effects of this deregulation get passed on to the end user – us, the public – in the form of demoralised staff and a general decline in the quality of the service.

Perhaps the worst aspect of privatisation is its tendency to become irreversible. The most high profile case in recent years has been Royal Mail, which was floated on the stock market in October 2013. Delivery services have a comparatively easy job in urban areas, but Royal Mail has a distribution network which extends to far-flung villages where delivering parcels is not a profitable enterprise. This network is a collective asset, something built up by successive generations of postal workers.

It’s also something which many people in Britain still rely on, despite the decline in personal letters. So it’s worrying when the Royal Mail CEO complains of competition making the Universal Service Obligation ‘unfinanceable and uneconomic’. Their point only underlines how a public business, run for the benefit of all of us, is being lost. This loss should be taken as a warning for other public services. Every sell-off means taking infrastructure out of public hands, and once they’re gone it’s almost impossible to restore them.

We Own It is putting forward a new vision for user-focused public services as a way out of this mess. The Public Service Users Bill is piece of legislation which has been put forward in parliament as a Private Members Bill and supported by 92 MPs in Early Day Motion 438. This Bill would mean we get a say over sell-offs (like the Royal Mail) and it would open outsourcing contracts to public consultation. Once a contract was agreed upon the organisation would then have to consider internal bids, in case the task could be done better by an in-house team.

Then, once a contract was agreed upon, the details of and data behind the contract would be made available to the public and the contractor would have to answer Freedom of Information requests

These transparency requirements could also be applied to utilities and services that have already been sold off completely. Finally, if a contractor provides unsatisfactory services and enough people complain, then the provider could be recalled. If the Bill makes it to law it would be a great win for all of us, setting down strong foundations for the public services of the future.

Privatisation might not cause riots in this country but it’s deeply unpopular, while the measures in the Bill are all supported by the British public. Want to see public services run for people not profit? Sign up here.

Pierre Marshall is on the Campaigns team at We Own It

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