New Labour hits the buffers

It was yet another New Labour panacea. Bringing in private finance would make public spending go further and transfer the risk from the taxpayer to companies. Who cared whether it was public or private sector that financed and/or delivered services and projects – what mattered, we were assured, was “what worked”.

Well, it has turned out to be yet another New Labour con-trick. The collapse of the National Express rail franchise and the failure to find to a buyer for part of Royal Mail, are sure indications that the entire policy is in ruins – and that taxpayers and workers will be made to pay the price if the government gets half a chance.

The whole approach was, in any case, founded on the serious illusion that global capitalism had an infinite appetite for “public-private partnership” (PPP), and that the world had entered a new period of endless, stable economic growth. There was enough spare capital to replace what the state used to do.

So the state’s role was simply to facilitate the corporate-driven globalisation process. A key departure, started under the previous Tory regime, was to privatise state assets, including rail. New Labour took this further and before long the state was a “commissioner”, inviting the corporate sector to get involved on a grand scale.

And it did. Under Brown as chancellor and Blair as prime minister, the value of contracts for public services held by the private sector grew to over £80 billion. A third of all services are, in one form or another, contracted out to companies and charities, a higher proportion than any other major economy.

We are talking about school building, school services, schools themselves in the form of Academies, hospital projects, health services, air traffic control, employment services, welfare provision, London Underground, sections of the legal and justice system, prison building, large parts of council housing, defence technology – in fact, you name it and it is almost certainly been given the PPP treatment.

Now both outright privatisation and PPP is floundering as the economic meltdown gathers pace. Metronet pulled out of the London Underground project and left passengers to pick up the tab in higher fares. Many college and school building projects are in difficulties.

National Express – or should that be National Excess because their fares are eye-wateringly high – have reacted to falling passenger numbers on the East Coast route by simply walking away from the contract struck with the government in 2007. The company is simply not going to pay the £1.4bn due to the government by 2015.

The transport secretary, one unelected Lord Adonis (whatever happened to the Commons?), plans to take the franchise into state ownership later this year – and then retender it in 2010. But no one expects bidders (if there are any out there) to offer what National Express paid. One of the factors behind the franchise’s demise is that the government itself got greedy and encouraged bids that were in practice dependent on impossible increases in passenger numbers.

So we are left with the situation where neither the capitalist state nor capitalist corporations are in a position to deliver on contracts or services that are essential in a modern society.

The state, as we know, is essentially broke after giving the banks vast sums in a futile bid to prop up the financial system, while the corporate sector is slashing jobs and shutting down operations in every sector. What will happen to the pensions of Royal Mail workers, for example, now that capitalist firms have failed to come to the government’s aid?

This is an unacceptable position. Britain is not a poor country. Its workforce creates vast amounts of added value when it has the opportunity. The economy has just been hijacked and then wrecked by the political class and its corporate friends. There can be no stronger case for removing their power to do any further damage.

Paul Feldman
Communications editor