In our previous post we made the simple point that many of today’s politicians don’t look like us. Another reason we feel so disconnected from our politicians is that they seem so detached themselves, and because they express little feeling or passion. The current political class is increasingly technocratic because politics is increasingly a profession rather than a calling. They’re in danger of becoming Stepford politicians, opening up a ‘passion gap’ that can be occupied by dogmatists who do demonstrate their passion but for their own dangerous ends.
If you haven’t already, check out Julia Gillard’s recent speech on sexism and misogyny in Australian politics. Gillard used the speech to brand her opponent, Tony Abbott, who is the Leader of the opposition Liberal Party, a sexist and misogynist. What stood out was her anger and passion. Gillard told Abbott that if he wanted to know what a misogynist in modern Australia looks like then he should look in a mirror. She called him out on a range of sexist views he has espoused during his long political career. It was authentic, passionate and unspun.
The video of Gillard’s speech on YouTube has gone viral with two million views, and the speech was a top ten trending item in Australia on Twitter as well as trending internationally. It made headline news in South Africa, India, Canada and here in the UK. Jezebel, the popular American website for women lauded Gillard as “one badass motherfucker” after what it called her “epic speech on sexism”. Gillard’s approval ratings have risen significantly in the first public opinion survey since her speech. Almost 42% of Australians now think her opponent is sexist and the poll also shows that Gillard is 10 points clear of Abbott as preferred Prime Minister.
Contrast this to President Obama’s performance in the first US Presidential debate. He lacked passion, was detached and professorial, whilst his opponent Mitt Romney demonstrated energy and passion. Romney left the debate with a momentum which has carried through into the polls, wiping out Obama’s advantage. Romney has also been accused of being technocratic and wooden – probably the only reason why the election is close at all. The debate also highlighted one of the weaknesses of Obama’s presidency – his failure to maintain the energy and passion that he engendered in his supporters in 2008. Romney highlighted this in his nomination acceptance speech at the Republican convention:
“Hope and Change had a powerful appeal. But tonight I’d ask a simple question: If you felt that excitement when you voted for Barack Obama, shouldn’t you feel that way now that he’s President Obama? You know there’s something wrong with the kind of job he’s done as president when the best feeling you had was the day you voted for him.”
It’s become a common complaint that today’s politicians lack passion and are too technocratic. Mayor Boris Johnson has been labelled by Tim Montgomerie of ConservativeHome as the “Heineken Tory” who can reach parts of the electorate that other Conservatives struggle to reach in part because of his energy and passion. The same could have been said about Tony Blair in his early days as leader of the Labour Party – he connected with middle England in a way that no other senior politician on the left was able to. Sarah Palin is yet another politician who cut through to energise her party’s base because of her energy and passion – although in her case the euphoria unravelled quickly because of her lack of experience.
Of course, Prime Minister’s Questions has an element of passion – but it’s largely fake, a yaboo politics that disaffects rather than engages. It’s not so much passion that we want as authenticity – the feeling that politicians actually care about something and will take political risks to advocate for it. This is why Gillard’s speech stood out – she really believed in what she was talking about, and her anger and passion were genuine.
Part of the problem can be traced back to the rise of a professional political class. Politicians increasingly see politics as a career rather than a calling. The way to get ahead in politics now is to start out as a researcher to an MP after university, become a Special Adviser to a Minister or Shadow Minister, and then seek selection to a winnable seat before becoming part of the government shortly after entering Parliament. This aspiring politician might have a small period of time working for a think tank, a charity, in PR or the media, but generally in a role connected to politics. We now have a whole class of politicians whose whole careers have been inside the Westminster bubble – they have not held a job outside of politics. David Cameron, George Osborne, Andrew Lansley, Ed Miliband, Ed Balls and Andy Burnham have all trodden this path. The careers of Nick Clegg, Ed Davey, David Willetts and Danny Alexander have all centred on Westminster as well. In fact a third of the cabinet worked for a politician or political party before they became an MP:
- David Cameron: Special Adviser to both Norman Lamont as Chancellor and Michael Howard as Home Secretary
- Nick Clegg: EU policy official and adviser to Sir Leon Brittain as EU Commissioner*
- George Osborne: Special Adviser to Douglas Hogg as Agriculture Minister, worked in No 10 when John Major was Prime Minister and worked in William Hague’s office when he was Leader of the Opposition
- Vince Cable: Special Adviser to John Smith when he was a Cabinet Minister in 1970s
- Ed Davey: Adviser to Sir Alan Beith
- Andrew Lansley: Adviser to Norman Tebbit MP* & Conservative Party (Director of the Conservative Research Department)
- Michael Moore: Researcher for Archy Kirkwood MP
- David Willetts: Researcher for Nigel Lawson as Chancellor, worked in the No 10 Policy Unit when Margaret Thatcher was Prime Minister and is the former head of the Centre for Policy Studies.
- David Laws: Economic Adviser and Director of Policy and Research for the Liberal Democrats
- Danny Alexander: Press Officer for the Liberal Democrats.
*paid as civil servants
The current approach to using interns in think tanks and charities reinforces this closed shop approach to the professional political class. In many ways, policy is the new ‘international development’ – to get a paid job you need to undertake an unpaid internship. This means that policy is increasingly only open to people whose families can support them financially.
This new professional political class lacks the backstory that politicians like Vice-President Joe Biden, Alan Johnson, Paddy Ashdown or David Davis bring to the job because of their experience outside of politics. Joe Biden is a single parent, Paddy Ashdown served in the Royal Marines, David Davis grew up on a south London council estate, whilst Alan Johnson started his career as a postman. Much play was made at the party conferences about the lives of the main party leaders before they became politicians, but no matter how these speeches were portrayed by the spinners, our current party leaders don’t have the wealth of experience outside of politics that the likes of Johnson, Ashdown etc do. They pale in comparison.
What matters here is the content – the policies that politicians advocate for and their real world consequences. Rich Yeselson argues that it isn’t the ‘truth’ of people’s personalities that matters but rather the factors involved in the reality of politics, such as the size of the majority in the legislature that influences policy. However, politicians’ backstories also matter. As Nadine Dorries, the backbench Conservative MP, has argued in relation to Osborne and Cameron:
“I think that not only are Cameron and Osborne two posh boys who don’t know the price of milk, but they are two arrogant posh boys who show no remorse, no contrition, and no passion to want to understand the lives of others – and that is their real crime.”
Politicians can’t be passionate if their real passion is the inside game of politics rather than standing for something that matters to the rest of us. The real danger is that this passion gap creates the space for dangerous dogmatists who do demonstrate their passion – the far right politicians such as Pim Fortyun and Geert Wilders in the Netherlands or the wholly self-interested politicians such as Silvio Berlusconi in Italy. If we want to avoid being subject to someone else’s passion, we will have to find our own – our political class is not providing it.
Christopher Hitchens used to evaluate the credibility of any person or organisation by their willingness to cite ‘evidence against interests’, that is, to acknowledge facts that are contrary to their own position. It’s a good test – and one that many policymakers, commentators and think tanks would fail regularly. With this in mind, we should challenge our own view that social policy would be better if it was informed by the people who use and provide public services – after all, doesn’t the Hillsborough cover-up show that we can’t trust bodies such as the police not to put their own interests before the public interest?
We’ve argued previously against the view, promoted in particular by right-wing think tanks and commentators but implicitly taken up by much of thinktankland, that public sector workers and ‘user groups’ need to be largely ignored in policy development because they are inevitably self-interested and self-serving. Our view is that social policy would be better if it was informed by the expertise, experience and insight from the frontline.
In the case of Hillsborough, as the publication last week of the report of the Independent Panel confirmed, the police engaged in an extensive and coordinated cover-up of the truth. This went all the way to the top of the South Yorkshire Police. Chief Constable Peter Wright authorised the alteration of police statements to delete words like ‘chaos’, ‘fear’, and ‘confusion’ in criticism of the police operation, in order to enable the police and others to blame Liverpool supporters for the disaster. 164 police statements were altered in the wake of the disaster, and 116 of these received substantial changes to remove comments “unhelpful to the force’s case.”
The coroner also took blood alcohol levels from all of the deceased, including children, to try to draw a link between the late arrival of fans and heavy drinking. Perhaps most sickeningly of all, police officers carried out computer checks on those who had died in an attempt to impugn their reputations. As one comment on the Liverpool Echo‘s website asked last week: “How could such a cover up have happened? So many different authorities getting away with lies. And to get away with it for so long is simply astonishing. They must know the hurt and the pain that they have caused for so long. And still they continued to hide behind the lies, carrying on with their own lives and careers.”
This type of behaviour is not confined to the police of course. NHS staff have abused and neglected patients, and hospitals have tried to cover it up and threaten whistle blowers. Charities have mistreated and ignored the vulnerable adults and children they claim to care for. Public sector trade unions have bullied their own members and failed to represent their real views and interests; they have also stopped managers from dealing with poorly performing employees or from improving services for the public. Given this, why should we listen to the people who provide services? Won’t they always represent their own interests first?
The problem is institutions, not individuals. There will always be some people who act badly and harm others, including inevitably in public services. But only badly led and managed organisations can effectively legitimize such behaviour and try to silence those who challenge it. When we argue that the people who provide public services should have a greater role in policy, we don’t mean a stronger role for those organisations such as large charities or trade unions that can already promote their views to policymakers, rather we’re talking about the individuals on the frontline who are ignored not only by policymakers but also sometimes by the organisations that claim to represent them.
Could the Hillsborough cover-up ever happen again? Some columnists have suggested that the ‘forensic transparency’ now offered by mobile phones and Twitter would make it much more difficult and that there is a danger of over-reacting to scandals such as the Hillsborough cover-up by not trusting any public institutions. But the best mainstream media article of the week for me was by Philip Johnston in the Daily Telegraph, who recognised the broader implications:
“Over the years, the police have been one British institution that has proudly stood comparison with the very best in the world: unarmed (though less so than they used to be), impartial, independent and largely incorruptible. Perhaps that was always a naive caricature; but it was a view so deeply ingrained in our national psyche that we were unwilling to give credence to powerful evidence that suggested otherwise. However, it was not only the police who let down the Hillsborough families: the very institutions that most of us trust to get to the bottom of things – the courts, the media and Parliament – were all culpable.”
This is perhaps a rather middle class view – many working class communities have always had a less trusting view of the police – but it’s a strange week when the Guardian tells us to ‘go easy’ on the establishment and the Telegraph reminds us to be ever-watchful of those in power.
Surely the Hillsborough cover-up demonstrates that policy can’t be left to the establishment – that arrogance and remoteness breeds bad policy and leads to tragedy (as Daniel Taylor argued in the Observer yesterday). It reinforces the importance of the individuals who provide public services having a much greater voice in policy, so that they can speak freely and honestly outside of institutional interests and constraints.
Perhaps what’s most frightening about institutional power is not its ability to make evil decisions but its collective capacity for ignorance regarding of the effects of those decisions. The answer to the question from the commentator on the Liverpool Echo site is that such ignorance comes most easily to those remain safely distant from the consequences – another reason why we should listen more closely to those at the frontline, both service users and providers, rather than the policy establishment. As C. S. Lewis wrote:
“I live in the Managerial Age, in a world of Admin. The greatest evil is not now done in those sordid dens of crime that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see the final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed, and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voice. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the offices of a thoroughly nasty business concern.”
We have a new secretary of state for health – but not apparently a new policy for health, or a change in the way that health policy is made. The way to improve the NHS is apparently the same as it was before Andrew Lansley was sacked – more outsourcing and competition. Jeremy Hunt has been appointed to implement this policy by being a ‘better communicator.’ But the Government’s reforms are unpopular not because of how they have been presented, but because of how the policy was developed – including the fact that no-one voted for them.
Under Any Qualified Provider, private health providers are likely to profit because, in contrast to existing NHS services, they can offer worse terms and conditions for staff, they will not be subject to the same regulations of transparency and accountability as NHS providers or bound by the same financial regime. AQP is a not about establishing a ‘level playing field’, or even about extending proper choice (since patients will not be told who owns providers including whether they are profit-making). Rather, it’s a programme to turn the NHS into a ‘trojan brand’ for private health provision, paid for by the public, while NHS providers lose income and some will have to close – so making the NHS as a whole less sustainable.
Whether you think these are the right reforms or not, they are not a popular because the public has never voted for them and haven’t been involved in developing them. These policies are not completely new of course – many of these ideas are shared across the main political parties, and this particular policy has already been applied in elective care. But this only reinforces the point. AQP is a classic example of the ‘Whitehall consensus’ – the shared view about the obvious rightness of outsourcing held by the policy establishment in the political parties, most Westminster-centric commentators and think tanks – that ignores what the majority of people who use and provide public services including the NHS actually think and want.
Andrew Lansley’s real problem was that he epitomized this approach to policy-making. The issue wasn’t his personal style or language, more that as a member of the Whitehall consensus he assumed that outsourcing is obviously better than ‘monopoly provision.’ It’s this that explains one of his most famous quotes, to nurses at a Royal College of Nursing conference, that: “I am sorry if what I’m setting out to do hasn’t communicated itself.” He thought the case for outsourcing was so obvious that he didn’t really understand why it had to be made at all.
As befits a former senior civil servant and head of the Conservative Research Department, Lansley’s approach reflected the way that policy wonks often approach public services. They seem to assume that institutions such as the NHS can be re-engineered according to blueprints, rather than respecting them as collective institutions with complex cultural as well as organisational histories. Hiring the like-minded (and self-interested) from management consultants such as McKinsey to sketch out massive structural changes reinforces this blinkered thinking, at the expense of any real world, practical engagement with improving how the health service operates, how patients are treated, and how resources are spent and saved.
In the name of greater efficiency, Lansley’s reforms have already wasted hundreds of millions of pounds and distracted health staff from the day-to-day business of improving services. But the point of hiring McKinsey is that they ‘get it’ – they share the view that the (lack of) evidence for outsourcing doesn’t need to be put before the people because they too assume that private provision must be better than public. This outsourcing of policy to the like-minded, even though they are likely to benefit from the policies they help to develop, is the same reason that parts of public health policy under Lansley were effectively outsourced to fast food companies.
This closed and cosy approach will continue as long as the political class is largely drawn from the same old PPE-think tank-commentator axis which pays the greatest respect to an elegant argument and a nicely designed slide deck, but which lacks any real experience of public services, or indeed any broader experience of life outside the Whitehall consensus. The lack of public engagement, and public mandate, for the Government’s health reforms further erodes public confidence and trust in policy-making. The greatest irony of all is that the reforms were supposed to be about devolving power and enabling shared decision-making between GPs and patients. At the heart of these policies, however, is a fundamental lack of accountability – at the level of some (privately-provided) individual services but also for the reforms as a whole.
What’s worrying about the appointment of Jeremy Hunt is not his lack of knowledge of health services – after all, Andrew Lansley held the health brief for many years, and look what happened. It’s that in his time at the Department for Culture, Media and Sport he adopted a similar behind-the-scenes, and way-too-close, relationship with corporate interests against a loved and largely respected but inevitably imperfect public institution (in this case, the BBC). The NHS is still – just about – a public institution. Its future should be deliberated, developed and determined publicly.
In posts over the past few weeks we’ve looked at the Government’s ‘open public services’ agenda, in particular the outsourcing of public services, and how this threatens to undermine another Government initiative, for ‘open policy making.’ Open policy also involves outsourcing policy – but this risks repeating some of the problems with outsourcing public services, especially reducing accountability.
We like open policy. We think that policy development has been too closed, to a too narrow set of participants, for too long. We agree with the Government that Whitehall hasn’t got a monopoly on policy expertise, and we support its recent announcement of a “presumption in favour of open policy making, with policy developed on the basis of the widest possible engagement with external experts and those who will have the task of delivering the policy.” In earlier posts we’ve suggested ways in which Government can make open policy a reality.
However, we’re less sure about that part of the plan to “Pilot contestable policy making by establishing a centrally-held match fund which can be used by Ministers to commission external policy development (for example, by academics and think tanks).” If this marks a significant change in how policy is developed (which we have to presume it does), then like outsourcing in public services it raises important issues of transparency, accountability and trust. Just as outsourcing has in some instances undermined the publicness of public services (for example, their accountability to the public), so it could threaten the publicness of public policy by undermining the extent to which it is made in the public interest.
Given our recent focus here on outsourcing, consider this: policy on public services could now be outsourced to organisations that favour more outsourcing of public services. This is more than likely given that so many think tanks are part of the ‘Whitehall consensus‘ in favour of outsourcing. Will think tanks that consistently argue for more outsourcing be commissioned to develop policy that leads to more outsourcing – or will they be automatically disqualified from conducting such work? How about think tanks whose sources of funding are less than transparent – wouldn’t it undermine trust in policy if they were commissioned by government without the public knowing what other interests might influence their research? How would this increase the accountability and transparency of policy-making, at a time when the public’s faith in political institutions is in such marked decline?
We noted in the previous post how some think tanks have argued that lobbies that benefit from increases in government spending should be ignored because of their (self-) interest. The same think tanks have also argued that government should stop funding charities to lobby it for more public spending on their ‘pet issues.’ Logically, the same should hold true for open policy – that government should avoid the risk of underwriting the mutually beneficial relationship between outsourcing companies and those think tanks that take sponsorship from them.
In apparent recognition of these issues, the Government’s plan includes the commitment to “clear contracts – setting out criteria to ensure that the policy being developed is done so in the best public interest, and that it does not favour any bias of the provider.” This appears to accept that some providers will be biased, but that a contract will ensure that this bias doesn’t inform their work – something which is either surely naive or disingenuous. If government wants to ‘build on evidence of what works’ in social policy (another of the themes in its reform plan), wouldn’t it better to commission researchers who don’t have such a tendency to bias, and who instead have a track record of neutral, evidence-based analysis?
Moreover, how does commissioning Westminster and Whitehall-centric think tanks – which are by definition already insiders – help to bring more ‘external expertise’ to policy? If government wants to hear ideas from think tanks, then it already can, and without spending a single additional penny of public money (an efficiency of which Francis Maude would surely approve). For the moment however, this part of the open policy agenda risks policy being developed by the same old insiders, only with less transparency and accountability than it is at present.
It is perhaps indicative then that the first commission under open policy risks further politicising policy development, and that it is being conducted in the traditional closed way. The Cabinet Office is commissioning research into changing the balance between the permanent (and in principle, neutral) civil service and introducing a larger politically appointed element, as in France and the US. Likely candidates for the research have been reported to include usual suspects such as Reform and the Institute for Government, but both have now apparently turned down the chance to bid for the work due to a desire to maintain their “independence.” To some, this might demonstrate that the system is self-correcting – that think tanks recognise the need to maintain their integrity as well – but it also suggests that the concerns expressed here are real ones.
The problem isn’t so much that government has a “virtual monopoly on policy development” (to quote from the Government’s civil service reform plan) – in one sense that’s the definition of government, and anyway it isn’t true. Think tanks, academics, charities and campaigners all develop and propose new policy, and in this sense there’s more than enough ‘contestability’ in policymaking already. The problem is conscious or unconscious collusion among insiders about contentious aspects of public policy without the public also being allowed to participate.
What’s really missing, to quote from the Government’s own proposals, is how to “enable policy to reflect the real-world experiences of citizens and harness public engagement with the policy making process.” That’s not something you’re going to get from Reform or the Institute for Government, or in all likelihood whatever organisation does get commissioned by the Government. It requires a different way of thinking about policy, who can participate in it, and how – something we’re considering in our ‘manifesto’ project, and we’d welcome your thoughts.
In posts over the past few weeks, we’ve looked at the issues of accountability, transparency and reliability raised by the Government’s ‘open public services’ agenda, in particular its plans to outsource more public services. We’ve focused especially on how outsourcing threatens to undermine another recently announced Government initiative, that for ‘open policy making.’ In the absence of reliable and rigorous evidence for the benefits of outsourcing, why have so many think tanks continued to push outsourcing?
Some of the loudest cheerleaders for outsourcing have been in think tanks. In addition to conservative parts of the media, many think tanks have played an important role in promoting the ‘Whitehall consensus’ in favour of outsourcing – whatever the reality of outsourcing at the frontline for the people who use public services and the people who provide them.
The explanation for some think tanks ignoring the public and public service workers is that often think tanks consider them to be part of the problem. Starting in the 1970s, a group of commentators began to characterise organised frontline workers and service users as the underlying cause of the country’s problems. These commentators were often found in, or heavily informed, by right-wing think tanks such as the Institute of Economic Affairs and the Centre for Policy Studies.
Their argument was that public sector workers and ‘interest groups’ (including people who benefit from services) in effect hold politicians to ransom until governments pay them off by spending more on services. This only serves to make these interests stronger and so turns the “collectivist ratchet” inexorably away from a free society and towards the big state. As a result, not listening to frontline workers (and ‘self-interested’ service users) became a matter of political principle – the only route to genuine reform in the public interest.
Another implication of this argument was that if the state couldn’t be slashed overnight (because interests in favour of the state were too strong), then private companies should at least be given a much greater role in delivering public services. This would produce more efficient and effective services. It would also reduce the power of public sector unions – and possibly pave the way for privatisation.
A related argument often made by some think tanks has been that public services are over-regulated – over-inspected, over-measured, and over-directed. Combined with outsourcing, in practice this means that private companies taking over the running of public services should expect less close inspection than used to be the case with the public bodies that previously ran services (although the same commentators are largely quiet when it comes to addressing failures of ‘light-touch inspection’ such as Winterbourne View).
It’s not surprising that right-wing think tanks pushed this argument – it’s their job to promote their particular ideology and they do it unashamedly. What’s more surprising is that supposedly progressive left-of-centre organisations have also promoted the Whitehall consensus in favour of outsourcing and less regulation – or as they prefer to put it, for more ‘diversified provision’ and greater ‘innovation’. The question is why – and why they have often seemed so uninterested in asking the more fundamental question as to whether outsourcing improves the quality or efficiency of public services, especially from the point of view of the people who use and pay for these services.
Think tanks often present themselves as fiercely independent – as ‘intellectual outriders’ that are prepared to ‘think the unthinkable’. In reality, think tanks also need to pay the bills, and outsourcing interests often have deep pockets. This is the time of year when think tanks promote their party conference events. Sponsors of think tank events at last year’s party conferences with a direct interest in outsourcing included PwC, Vertex, Pearson, Careers Development Group, the Association of Employment and Learning Providers, Sodexo, Avanta, Manpower, Working Links, Deloitte, KPMG, and G4S.
Most of the time, government feigns ignorance regarding the potential influence of these interests. Last week however, the Department of Health dismissed a paper written by Conservative MP John Redwood for the Centre for Policy Studies as “misleading and inaccurate” in part because of “influence” (unspecified) by Partnership Assurance – “an insurance provider known to be critical of a cap on care costs” (in his paper, Redwood had called on the Government to abandon proposals by the economist Andrew Dilnot to cap the costs of elderly social care).
It’s ironic of course that the Government dismissed the Centre for Policy Studies’ argument for the same reason that the CPS has consistently used for dismissing the views of public sector workers and service users – that of narrow ‘self-interest’ at the expense of genuine public interest. Applying the same logic would mean that government should ignore the arguments made by many think tanks when it comes to outsourcing public services. Should it – and will it?
Rail privatisation offers a warning from history for the Government’s ‘open public services’ agenda to outsource more public services. In our previous post we suggested that rail privatisation has never been wholly accepted because the Major Government overlooked the essential ‘publicness’ of the railways. In this post we identify five specific damaging consequences of rail privatisation that should cause the current Government to consider much more carefully how it approaches outsourcing or risk repeating the same mistakes in other public services.
1. Expectations of greater efficiency from privatisation have not been realized
One of the principal expectations from privatisation was that the railways could be delivered more efficiently in the private sector because of the motive to generate profits. British Rail was already pretty lean following a cost cutting exercise in the 1980s, and in fact the opposite has occurred. The unit cost of the privatised rail industry is significantly higher than that of British Rail because economies of scale have been lost and the complexity of the industry has thrown up new costs. The public subsidy to the industry is considerably higher than it ever was for British Rail.
Chris Grayling when he was Shadow Transport Minister admitted that the way privatisation was organised “…helped push up the cost of running the railways – and hence fares – and is now slowing decisions about capacity improvements. Too many people and organisations are now involved in getting things done – so nothing happens. As a result, the industry lacks clarity about who is in charge and accountable for decisions.”
2. The rail industry has coalesced around a small group of large private sector providers who are (almost) too big to fail
The rail industry after privatisation was highly fragmented. This fragmentation has now been reduced but has resulted in a small group of private sector companies who now dominate the market. The complexity and scale of these contracts has skewed the market in favour of these large private providers who have the scale and deep coffers to absorb the risks associated with running a franchise.
Nonetheless, the narrowing of the market around this small group of providers is a risk. On three occasions, the state has had to step in and pick up the pieces because a company has pulled out of a franchise. The exit of Virgin Trains from the rail industry has further reduced the options available to government. Two of the recent new entrants to the rail market have been the national train operators of the Netherlands and Germany who have been accused of profiteering to subsidize their domestic operations. Where will the new train operators come from if another company fails or is judged to offer a poor quality service?
3. The private sector has profiteered from parts of the rail industry
To many people, private profit shouldn’t have a place in an industry that receives a £4 billion subsidy from the public every year and where consumer choice is highly limited. But there’s profit and then there’s profiteering. One of the publicly neglected aspects of rail privatisation is that running a Rolling Stock Leasing Company (or ROSCO) is a very lucrative business. Three were created as part of the break-up of British Rail and all are now owned by a combination of banks and private equity. ROSCOs have found older rolling stock to be especially commercially attractive as they can continue to generate revenue for stock even after the construction costs would have been written off by British Rail. This has also helped to inflate the fares paid by customers.
The privatization of ROSCOs is another example of the public sector selling assets at below their fair market value. The National Audit Office in a 1998 report stated that the UK Government had not realised fair market value for the sale of these assets. Eversholts Leasing later HSBC Rail was sold for £518 million in February 1996 but a year later the business was sold on for £726 million, a gain of some 40 per cent over the sale price by the Department for Transport.
More generally, train operating companies own virtually nothing, hiring most of the assets required from Railtrack and ROSCOs whilst also contracting out areas such as onboard catering and cleaning services. For this reason, Baroness Vadera, when she was a special adviser to Gordon Brown as Chancellor of the Exchequer, described the privatized passenger train operating companies as ‘thinly-capitalised equity profiteers of the worst kind’.
4. Privatisation led to a loss of skills and flexibility
The Hatfield disaster in October 2000 – caused by a broken rail as a result of faulty maintenance procedures – illustrated the loss of skills and flexibility from the rail industry as a result of privatisation. Railtrack, which had responsibility for rail infrastructure, had outsourced almost all of the maintenance and renewal of track. Outsourcing maintenance and renewal both removed flexibility (unless it was already included in a contract) and led to a drain of skills and knowhow from Railtrack. In the aftermath of the disaster, thousands of speed restrictions were imposed unnecessarily across the network because Railtrack did not have the expertise to know whether other parts of the track were also at risk of an immediate tragic failure. Railtrack was a disaster waiting to happen according to Christian Wolmar in his book On the Wrong Line: how ideology and incompetence wrecked Britain’s railways; the system it operated in was brittle and not designed to cope with sudden challenges. Hatfield sealed its demise and replacement by Network Rail, which has taken a different approach to maintenance by bringing some of this in-house again.
5. The views of users and frontline staff were sidelined
British Rail argued that if it was to be privatised then the rail network should be privatised as one entity. Instead the Treasury, under the influence of the Adam Smith Institute, advocated for the creation of 25 passenger railways franchises as a way of maximizing revenue. The effect of this was to create a complicated system with over 100 different companies delivering bits of the rail system, which made it difficult for the views of users and practitioners to be heard. Passengers were unclear on who was responsible for what or who to direct their questions or complaints to. Public accountability suffered as a result.
The views of passengers have also been neglected in franchise decisions. Passenger satisfaction targets in franchise agreements don’t carry sufficient clout. According to Passenger Focus, only 42 per cent of rail passengers are satisfied with value for money, yet increases in rail fares have continued this year despite the concerns raised by passengers. Given the amount of public money invested in the rail industry last year, as well as the cost of fares, surely the views of passengers should be at the forefront of rail policy?
The nationally-owned British Rail was far from perfect, but most people think that rail privatisation has been a relative disaster for the reasons discussed here. Rail privatisation represents a warning from history for a Government that seems intent on outsourcing more of our public services – will it learn the lessons?