The current UK government with its fanatical commitment to neoliberalism is determined to take us to dark, scary places that even the Iron Lady shied away from
The coalition government’s privatisation programme has been more comprehensive and more brutal than even Margaret Thatcher’s. From the NHS to the police, the private sector has been granted unprecedented access to public services that were previously thought untouchable. And the worst may be yet to come. With the recent privatisation of the Royal Mail, a profitable company, the government has shown that it intends to be even more audacious in the run-up to the next general election.
Although the Royal Mail sell-off may be a sign of privatisations to come, it was unusual in the degree of publicity it attracted. For the most part, the government’s privatisation programme has taken place quietly behind closed doors. Contracts have been issued to gigantic corporations and profit-making companies have been carved out of public services with little public debate. It has therefore been easy to overlook its scale. But it is huge and affects almost every public service in the country. What follows is an overview of the great British sell-off so far.
The Royal Mail
Even at the height of the privatisation frenzy of the 1980s Thatcher said she was not prepared to see the Queen’s head privatised. Cameron’s government was willing to slaughter her sacred cow for a mere £3.3 billion – a little less than twice the annual earnings of a top hedge fund manager.
The government was surprisingly candid about who the beneficiaries of the sell-off would be. Early on in the process, faced with the threat of strikes from the CWU, business and enterprise minister Michael Fallon threatened to simply hand over the Royal Mail to overseas sovereign wealth funds. In the sale itself, the government earmarked 70% of the shares for the big banks and sovereign wealth funds. Smaller institutions able to raise less money than a hedge fund scrambled for the remaining 30%, with even some British pension funds complaining that they were cut out. Ordinary buyers were left fighting over the crumbs; Thatcher’s share-owning democracy was nowhere to be seen.
It is now clear that the floatation price was wildly undervalued. Already share values are nearly twice the sale price, and they continue to rise. There are now calls for Vince Cable to resign for his incompetent handling of the sale, but there is another side to the story. As Cable explained to parliament, the shares were valued on the advice of Goldman Sachs and UBS, who had been running the sale since May, and who claimed that the threat of industrial action by the CWU would put off investors. In reality, the shares were oversubscribed within hours of the sale.
From the outset the sale was run by and for the big banks, which have already made billions out of the sale. The losers are the Royal Mail workers, who face job uncertainty, and the public, who face increased postal prices and worse service in remote areas, and were cheated out of billions.
The privatisation of the NHS has been a subtler affair. There has been no high-profile sale of shares, nor will “for sale” signs be appearing outside hospitals. The Health and Social Care Act, which opened the doors to the sell-off, contained no explicit reference to privatisation, and government ministers have repeatedly claimed that managing clinicians “will be under no legal obligation to create new markets”.
But regulations passed in April will now require virtually all services to be put out to tender in a competitive market, and it will be open to any qualified provider to bid for the contracts and run the services under the NHS logo. Private providers will be able cherry-pick the services they take over from the NHS, leaving in public hands those unlikely to turn a profit. As a result, the remaining publicly run services are likely to be starved of cross-subsidies, which will leave them underfunded and vulnerable.
Service by service, from community health in Suffolk to adult mental health in Bristol, the NHS is being broken up and sold off. Last year, £4.5 billion of contracts were put out to market, and the numbers are rising. In the largest sell-off to date, Cambridgeshire and Peterborough CCG is privatising services for older people and social care. Among the bidders for the £1 billion contract are Virgin Care, Interserve and Serco.
Like wasp larvae silently devouring a caterpillar from the inside, the private sector will hollow out the NHS until nothing remains but the logo. Senior government advisers have in the past expressed a desire for the NHS to become a state insurance provider, not a state deliverer of care; the Health and Social Care Act is a great stride towards that nightmare.
Prisons, probation and the police
The UK has been leading the way in prison privatisation since 1992, when John Major’s government opened the first private prison in Europe. The programme was expanded under the governments of Blair, Brown and Cameron, and today 14 of the 134 prisons in England and Wales are under the management of G4S, Serco and Sodexo. 15% of the total prison population in England and Wales is now held in private prisons – a proportion unmatched by even the US.
The latest idea from the Department of Justice is to sell off the probation service. The plan to privatise 70% of the service, which looks after the 235,000 people on probation or parole, has attracted wide criticism. Even senior MoJ officials have said that it is likely to endanger public safety. Despite being under investigation for fraud for allegedly overcharging the government for an electronic tagging scheme, G4S and Serco will be bidding for the contract.
Meanwhile, the government is pushing police forces to outsource their services. In 2012 the West Midlands and Surrey police forces invited G4S and Serco to bid for a seven-year, £1.5 billion contract to run everything short of actual arrests – including street patrols and investigations. Although that plan was put on hold in the face of stiff opposition, G4S has predicted a full-scale privatisation of the UK’s police forces within five years. Lincolnshire police force has already transferred its 550 back office staff to G4S, and Cleveland has privatised its support functions, including 999 calls.
Britain still leads the world in innovative ways of hawking off chunks of the state to the private sector. The Ministry of Defence is to be the test case for a new means of outsourcing government administration on a gigantic scale – a government owned, contractor operated service, or GOCO for short. Proposals are currently being debated in parliament for granting to the private sector the task of buying all the UK’s defence equipment. Two gigantic consortia made up of multinational companies – including, you guessed it, Serco – are currently bidding for the nine-year contract.
To understand the depth of this new incursion of the private sector into government’s functions, it is worth reflecting that the US government has already decided that defence procurement is too fundamental a responsibility to be outsourced, and has scrapped its own similar plans. However, many other countries are watching the UK’s experiment carefully.
Despite warnings from PCS that the proposals would give the private sector the unprecedented ability to hold the UK to ransom, the government is intent on pursuing this course. Defence procurement has an annual budget of £15 billion, so the MoD will be gambling big money. If the GOCO fails, it will be the UK taxpayer who picks up the bill. If it is seen to be a success, who knows which government department will be next in line for a GOCO of its own?
The student fee hike was just the tip of the iceberg. The government intends nothing less than a wholesale marketisation of the higher education sector. The scale of the plan is easy to miss because there has been no headline legislation and little public debate, but it amounts to privatisation on a large scale.
The hike in student fees was not motivated by a desire to reduce government spending. In fact, net debt is projected to increase by £20 billion to fund the larger loans, and the scheme looks likely to lose money in the long term if graduates are unable to pay back their loans in full. Nor was it intended to help universities’ finances, which are in better shape than they have been for years. The real motivation was to replace direct government funding of courses with a market mechanism so student fees will determine how funding is distributed. Direct funding for the arts and humanities has already been cut completely, and other subjects are set to follow.
This is simply one step in a larger plan that will ultimately see the current higher education system, which the government regards as a state monopoly, broken up. In the future universities will be expected to act more like commercial providers, attracting private finance and competing with one another to lure in students’ cash. The latest stage in the privatisation of higher education is the government’s plan to sell off £10 billion of its £40 billion portfolio of student loans by 2015. Incredibly, the government is considering raising the interest rates on all student loans issued before 2012 to commercial levels as a sweetener for potential buyers.
The civil service
As if to show that privatisation begins at home, the government has been assiduously selling off vast swathes of the civil service. This week PCS members have been striking in opposition to a plan to outsource back office services in the Department for Work and Pensions and the Department for the Environment, Food and Rural Affairs, including human resources and finance. The work will be taken over by the French company Steria, and it is likely that many of the jobs will be lost.
But far larger plans are in motion. The Cabinet Office is currently turning large chunks of the civil service into ‘mutuals’ – private, profit-making companies in which the government holds shares. The guinea pig for this model of “privatisation by stealth”, as Dave Prentis has called it, is the Behavioural Insights Team – more commonly known as the nudge unit – which was mutualised in May. Francis Maude has said that this will pave the way for “dozens more spin-outs”, with the Land Registry and the Office for National Statistics among those in line for mutualisation. An estimated 75,000 civil service staff could be turned over into the private sector in this way.
Everything must go
This is not an exhaustive list. To it could be added the government’s manic desperation to dump its shares in RBS and Lloyds, even at a massive loss, Michael Gove’s plans to sell off academies outright, and the privatisation of legal aid. But the scale of the great British sell-off is clear: everything must go. Under the guise of a deficit reduction programme the government has been creating facts on the ground – privatisations that cannot be reversed when the economic forecast looks more temperate. By this means it intends to tie the hands of future governments.
It is clear who the real beneficiaries of the sell-off are. Most of the shares of the newly privatised services will end up in the hands of big banks and hedge funds. Even more worryingly, G4S, Serco and other companies are increasingly stepping in to take on functions formerly performed by the state. These companies now penetrate British life to such a degree that they are beginning to look like a pseudo-state apparatus. But they are unaccountable to the public and are run only for the benefit of their shareholders. Morsel by morsel, they are picking the country’s bones clean. If they are allowed to continue unchecked, the future will look bleak indeed.