[A-List] UK corporate state: PPPs under attack

["Keaney Michael" <Michael.Keaney@xxxxxx>]

Clayton Hirst: So no one does it better than the private sector? Well
who does it worse?
The Independent on Sunday, 29 September 2002

Crowded hospitals. Crummy schools. Creaking trains. Costly fuel bills.
This is the doomsday picture that the Chancellor, Gordon Brown, could
paint tomorrow at the Labour Party conference of a world where the
Private Finance Initiative didn't exist. Coming days after the unions
called for a moratorium on PFI projects, the Government will stress the
benefits of having private companies running our public services.

Top of the list of reasons for using the PFI is efficiency. That
commercially run companies are more efficient than publicly run services
is a well-worn argument. Instead of having facilities operated by people
who sit around drinking tea and leave the office at 5pm on the dot, our
schools and hospitals are managed by real professionals. Managers who
are shaped by the rigours of capitalism. People whose performance is
judged by the City. Managers who eat babies for breakfast.

Come on, Mr Brown, who do you think you are kidding? Haven't you heard
of Railtrack? British Energy? National Air Traffic Services?

First, take Railtrack. We'll hear a lot about the track operator this
week. The Transport Secretary, Alistair Darling, is expected to announce
the company's exit from administration and its sale to the
Government-backed Network Rail. A private company being taken public
again? What about all those private-sector efficiencies? Surely the
railways can't be run by people who take regular tea breaks?

Obviously not reading from the script, the rail regulator, Tom Winsor,
last week pronounced that Railtrack was gripped by "overspending and
inefficiency". And not a British Rail sandwich in sight.

Then there's British Energy - an inherited privatisation from Tory days
but nonetheless a vital public resource run by the private sector.
Despite claims by the Trade and Industry Secretary, Patricia Hewitt,
that there would be "no blank cheque" to help the nuclear generator out
of its mire, the DTI last week lent it £240m on top of the earlier
£410m loan, while restructuring talks continue.

Then there's the part-privatised Nats. This is Labour's very own
creation, even though it once assured us that "our skies are not for
sale". The Government has already been forced to lend the company
£60m, and will in the next few days provide another £60m to prevent
its collapse.

So, what should we make of these private-sector cock-ups? The Government
says companies are more efficient, but the evidence points in the other
direction.

The real issue is risk - the common thread between Railtrack, British
Energy and Nats. Railtrack thought it could boost profits by
under-investing in its network. It failed; the risk was too great.
British Energy thought its investors would be delighted if it became a
"focused" company. It sold its distribution business and paid handsome
dividends. The high-risk strategy failed. Nats borrowed £750m from the
banks, betting air travel would continue to rise. It miscalculated the
risk.

Public servants running railways, power stations and air-traffic
services don't take big risks. They don't bet on the stock markets and
they don't have shareholders to please - only you, me, and their
political masters. For a partnership between the public and private
sector to work, there needs to be rigorous management of risk. This must
be done by the public sector if we are to avoid another Railtrack,
British Energy or Nats.