This has not been a good week for the private sector generally and the role of privatisation in particular. Carillion was apparently a disaster waiting to happen. Its collapse has left a range of public services and smaller company suppliers under threat. Then the Secretary of State for Transport has rescued train operators from East Coast rail franchise terms they willingly signed up to. The political fallout provides further support to the depressing narrative from Corbyn and his team that only state control of public services works.
Can you really imagine the inept Labour frontbench grabbing power over a range of privatised companies and running services better? The collapse of Carillion at least goes to show that civil servants and ministers simply don’t have the skills to oversee complex companies let alone run their services from scratch.
There is a further, long-term narrative from all this however. How far is the private sector and free markets as they stand, serving the wider interests of society? Theresa May once had ambitions to make the governance of companies work better for all stakeholders. Damn Brexit burning up band-width and a barely workable majority put paid to this. A real shame as it could have been her legacy initiative.
Asset managers in alliance with asset owners are at least putting their shoulder to the wheel on companies they invest in, in relation to Environmental, Social and Governance (‘ESG’) issues but is it time to be more radical? Should there be greater, even compulsory, intervention in executive pay deals that are grotesque in size and short-term in nature? Remuneration must be aligned to the long term interests of all stakeholders. Should there be more scrutiny of excessive dividend payments which detract from long term investment? This is often a downside of quoted companies. What is wrong with having employee representation on company boards? It works fine in Germany. Is it time for the Government to wield its influence with golden shares in companies that provide key public services? That’s how many privatisations started.
There is a comprehensive debate to be had. But, in the meantime, what is clear is that there should be at least more business and procurement skills within the civil service. Markets and the way they allocate capital must also work better for all stakeholders (including the tax payer) and shorter term greed and rewarded incompetence must not be allowed to outweigh the manifest benefits of private sector competition. If that takes bolder corporate governance legislation from a Conservative administration then so be it.
If the Conservatives don’t act, Corbyn will, and the results will be very messy indeed for all concerned, not least the consumers of public services.
Inside Right Politics 