With opinion polls showing a huge majority in favour of renationalising Railtrack, the fact that Labour has comprehensively rejected such a move seems the height of absurdity. But transport minister Lord Macdonald described the proposal as too expensive; John Prescott claimed it would cost £7.5bn and take three years for legislation to get through Parliament. Industry observers say it would take one year, whilst the current stock valuation of Railtrack is now £3bn – a fraction of the £22bn raised by the sale of mobile bandwidth last year. Robert Clough analyses why the Labour government is wedded to the privatisation of public utilities.
So why won’t Labour re-nationalise? Why does it pursue the apparently equally mad Public-Private Partnership financing of the London underground when the London electorate showed overwhelming opposition by electing Ken Livingstone as mayor last year? Or the part privatisation of the national air traffic control system? The answer is that, as the political vehicle for the interests of the City of London, Labour is completely committed to the privatisation of all public services. It is irrelevant that it would cost a mere £3bn to bring Railtrack back into public ownership. At stake is nothing less than a global auction of public sector services, whose value to the City and British imperialism is of far greater consequence. Labour’s view is that the public sector is by its nature inefficient and bureaucratic, and that only the market can make services responsive. It is, however, the absence of working class control that makes public services so often appalling for the workers who need them, and the facts show that privatisation merely makes them worse.
The rail crisis
The inquiry into the Hatfield crash on 17 October 2000 confirmed what a fiasco the privatised railway system has become. Problems with the track were reported in 1998, but the company to which Railtrack had sub-contracted maintenance, Balfour Beatty, failed to act. Because Balfour Beatty would not pay for a look-out, the inspector who periodically reviewed the lines had to use a ditch by the railway; as a result he could not see how quickly the rails were deteriorating. Three-monthly ultrasonic tests which would have revealed this were not acted on. There was a shortage of experienced engineers at every level within the company. It has now admitted that it should have ordered a 20mph speed limit at Hatfield well before the crash. The express was travelling at 115mph when it came off the crumbling rails, killing four passengers.
Yet for all the disruption post-Hatfield, we should remember how bad the railway system was beforehand. In 1999, an independent report by Booz Allen Hamilton had shown that:
• Railtrack was renewing 1.3% of track per annum — far less than the continental average of 2-3% and the 2.2% quoted in its 1995 annual business plan;
• More than 2,000 miles of track did not meet satisfactory standards of safety;
• There were 287 temporary speed restrictions in force because of poor track quality.
‘It is likely that there has been a decline in underlying quality of the network assets as a whole’, the report concluded (see FRFI 152). The same year, the Health and Safety Executive (HSE) reported a 21% rise in the number of broken rails over 1998. 22 out of 25 franchises were less punctual between May and August 2000 than they were in the same period in 1999. In the first two years after privatisation, the train operators purchased just 20 new coaches!
Like any private company, Railtrack’s obligation is to maximise profits for its shareholders. By selling off much of its real estate whilst neglecting maintenance, its share price had soared — from £3.90 to £17.68 in 1998. The number of engineers employed on the railways fell from 31,000 to 15-19,000. The shortage did not just mean that maintenance suffered: it also stopped any accurate costing of its major projects. Hence the estimated cost of the West Coast line upgrade has risen four-fold from £1.5bn in 1998 to £6.3bn today.
Since Hatfield, Railtrack has had to spend some £500m on emergency repairs, and paid about £400m compensation to the train operating companies. By cutting into its profits, this makes Railtrack less attractive to investors. ‘If they don’t raise it [an interim pay-out], shareholders will just walk away’ said one analyst. Labour’s response was to bail the company out with £1.5bn at the beginning of May – half the cost of re-nationalisation. Train operating companies are now threatening court action because Railtrack won’t use any of this to pay extra compensation. A falling out of brothers indeed.
Overall, employment in the railway industry fell from 159,000 in 1992 to 92,000 in 1997. Train operating companies sacked hundreds of drivers. Employees were forced to work harder and longer hours. The confidential reporting and analysis system Ciras, introduced after the Paddington rail crash in October 1999, has shown that:
• One signaller worked 30 consecutive days;
• Of 95 serious incidents reported in the first six months of the system, a quarter were due to fatigue;
• Over a third of notified incidents involved rule violations by the companies; a major complaint was the failure to provide look-outs on maintenance work due to staff shortages;
• GNER and Virgin Trains are singled out for allowing drivers to work more than their 12-hour shifts; Virgin drivers sometimes work more than 50 hours a week.
Privatisation and safety are diametrically opposed.
The case of gas: Transco — the new Railtrack
As if on cue, a report at the beginning of May showed that the de-regulation of the gas industry is having exactly the same consequences as rail privatisation. De-regulation required British Gas to be split into three companies in 1997. British Gas plc handles exploration; Centrica handles accounts and billing, while Transco runs the pipe network. And what is Transco short of? Surprise, surprise, qualified engineers – 950 of them. And what are the consequences? The number of leaks and time taken to repair them has gone up. Outstanding escapes in London and Scotland have doubled in the last two years. In all Transco’s 12 regions, staff are working such long hours that the company is breaking the law on the maximum 48-hour week. Internal documents warn that the HSE could bring enforcement actions against the company. Transco has also sub-contracted a lot of work; the same report questions the competence of these contractors.
In 1995, before deregulation, Transco profits were £780m; a year afterwards they rose to £1.22bn. But this is at the expense of huge under-investment; now Transco wants higher prices to compensate. HSE is pressing Transco to replace 62,000 miles of iron pipes in 10 rather than 40 years, and to replace all of them within 30 metres of any building by the end of 2002, since they corrode unpredictably. A failure of one such pipe led to an explosion in December 1999 in Lanarkshire which killed four people. Transco had no proper records for the network in the area and may face prosecution for corporate manslaughter. The company is at present trying to separate its assets from its operations, and then maintenance from emergency work which will be further sub-divided into 20 units. This is a prelude to breaking it up and introducing a Railtrack-type regime where no-one is responsible for anything.
And now for Nats and the tube…
The operation of the national air traffic control system (Nats) will be taken over by a consortium of seven airlines later this year despite widespread opposition to the move. There has been equal opposition to the so-called ‘Public-Private Partnership’ arrangements for running the London underground. On 2 May, the government announced two consortia as ‘preferred bidders’ for running track, signalling and stations on the deep lines. Tube Lines, which consists of Amey, Bechtel-Harrow and Jarvis, will run the Jubilee, Northern and Piccadilly lines. Jarvis was responsible for track renewal on the east coast line which included Hatfield. Metronet, with Balfour Beatty, WS Atkins, Thames Water, Seeboard and Adtranz, will run Bakerloo, Central, Victoria and Waterloo and City lines. Balfour Beatty needs no further introduction; WS Atkins has recently taken over the running of Southwark’s education support services, and has a PFI contract to build and run schools in the southwest.
The privatisation of British Rail was estimated to have cost £3-400m in lawyers’ and accountants’ fees in drawing up the labyrinthine contractual arrangements for the new system. So far, Labour has spent £100m in similar consultant fees for a system which it will continue to subsidise with £1bn per annum. London Transport commissioner Bob Kiley argues that even with the government’s own model, there is no case for supposing that any of the four bids received to date would out-perform the current under-funded, unreformed service. In an effort to shut him up, Labour has given him sole responsibility for negotiating the final deal with the bidders; however he has as yet refused to withdraw a High Court action challenging the whole scheme.
Privatisation and Gats
Labour’s privatisation ambitions do not end with Nats or the tube. Between April 1997 and October 2000, the value of PFI contracts soared from £6.9 to £25.1bn, with a further £12bn in the pipeline. There are PFI schemes for 67 hospitals.
Now Labour is going further by enabling the privatisation of clinical services through its Health and Social Care Bill. This would allow the sale of individual hospital services, the employment of doctors and nurses by private companies, and would permit health services to charge for personal care. So determined was Labour to get this on the statute book before the general election it dropped controversial proposals the bill contained to abolish Community Health Councils.
The think-tank IPPR, which is close to Blair, recommends the use of private companies to manage health authorities, primary care trusts, schools and swathes of local government.
We should not be surprised by Labour’s apparent perversity. It is acting as the executive agent of the City and British monopolies which are seeking to force the sale of public utilities and services throughout the world in an attempt to find new sources of profits. Hence Labour is pushing for the final agreement on Gats, the General Agreement on Trade in Services. Gats requires the privatisation of all public services, excludes only those government services which are ‘not in competition with (private) service suppliers’.
But of course, thanks to Labour, nearly every public service in Britain now competes with private services. The World Trade Organisation regards ‘government monopolies’ and subsidies as barriers to free trade, and says it is unrealistic to argue ‘that no competitive relationship exists between the two groups of suppliers’, and member governments should ‘reconsider the breadth and depth of their commitments on health and social services’. Gats includes a so-called Necessity Test, which considers how to punish nations which violate ‘a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments.’
The final arbiter in such conflicts will be the Gats Disputes Panel, which, meeting in private, will decide whether a government regulation is ‘more burdensome than necessary’. Trade ministers have already agreed covertly that a Gats tribunal would not accept a defence of ‘safeguarding the public interest’.
Trade Minister Dick Caborn has made Labour’s position clear: ‘Gats is important as the volume of services in world trade is growing. The UK is the world’s second largest exporter of services, totalling £65bn in 1999. It is important that world markets remain open and free from over-burdensome regulation.’ Whatever qualification he offers about retaining national sovereignty, international banking capital and the imperialist service monopolies are forcing the pace on a new round of privatising public services – health and education as much as the old utilities like water and power.
Privatising these services in Britain is the first step, and that is why Labour will not give in to pressures over Nats, the underground or renationalising Railtrack.
FRFI 161 June / July 2001
