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

Rail network heads for meltdown

The Faustian bargain between New Labour, the state and capitalist corporations is collapsing around the government’s ears and nowhere more so than in the rail industry. Led by the debt-ridden National Express, many companies that hold the rail franchises sold to them by the government are close to pulling out of their contracts because they can’t make enough profit to pay their way.

Although the railways were privatised by the Tories, New Labour quickly embraced the notion of public-private partnerships with even greater enthusiasm than its predecessors. An astonishing one-third of all “public services” are now in the hands of the private and voluntary sectors, with total contracts valued at more than £80 billion a year.

Determined to eliminate state subsidies year by year, New Labour has sought the highest bids for rail franchises. In August 2007, National Express agreed to pay £1.4 billion over seven years and four months for the East Coast franchise. GNER had been unable to keep up payments, despite offering much less. Only 18 months into the new franchise, National Express is looking for a get-out clause – or more money from the state.

The East Coast line, which links London with Edinburgh via York and Leeds, carries 17 million passengers a year and employs 3,100 staff. But passenger numbers are falling because of the recession (combined with the ludicrously rail fares). The transport group has £1.2 billion in debts. It has already made 700 workers redundant in the last six months.

Other companies are in similar difficulties, says the rail union RMT, which has warned of a meltdown on the rail network. If the National Express franchise collapses the firm could also be stripped of its East Anglia and c2c franchises. There are also question marks over Stagecoach’s South West Trains franchise and Arriva is facing heavy losses on its Cross Country line.

The rail debacle comes the wake of the fiasco on the London Underground, where Metronet, one of the companies contracted to modernise the system, pulled out last year. Private funding of the project was insisted on by Gordon Brown when chancellor. It has virtually bankrupted the network and led to soaring fares. There are similar stories to be told in areas like school and college building.


Now the government is trying to repeat the policy with the part-privatisation of Royal Mail. It wants a global corporation like TNT to take a share in the business to provide the investment to “modernise” the postal service, with all that would mean in terms of job losses and rising charges.

Bob Crow, the RMT general secretary, is right when he says: “What we have now is sub-prime companies running essential public services and that’s the consequence of rail privatisation. Rather than reading ransom notes from these companies RMT will be stepping up the political and public campaign to get shot of them.”

Crow wants the government “to step in now and begin the process of renationalisation” and warns that it would be “political suicide” to bail out National Express. New Labour is, however, committed in blood to the pact with the devil of global capital that it made long before it even came to power in 1997. This deal says that the government will deploy the state, using taxpayer resources, to further the ambitions and profits of the corporations, both economic and financial.

The global crisis of capitalism has exposed all sides of the once cosy arrangement that drove forward the globalisation of the economy. Banks are broke, corporations can’t make profits and the state itself is staring bankruptcy in the face. Capitalism isn’t working, from whichever angle you look at it from, and the development of alternative economic AND political models, in theory and practice, is the priority.

Paul Feldman
AWTW communications editor