Here’s how to stop the next Carillion – 7 steps to public ownership

The collapse of Carillion could be a watershed moment. Let's seize it to end economically disastrous outsourcing schemes. By Cat Hobbs.

January 17, 2018
7 min read

Corbyn is right – this is a ‘watershed moment’ for the ideology of privatisation that has plagued our public services for over 30 years.

Here are seven steps we can take to address the root causes of the Carillion crisis – and build up a robust public sector that won’t be vulnerable to this kind of disaster.

Let’s futureproof our public services by bringing them into public ownership. Here’s how.

1) Stop outsourcing

Of course the government should bring all of Carillion’s public service contracts in house, permanently, where they should be – across schools, hospitals, prisons and railways. It should also stop outsourcing altogether.

We’ve been arguing against outsourcing since our launch in 2013. Our #PrivatisationFails resource shows that these profit-driven companies have failed us again and again. G4S at the Olympics. Atos failing disabled people. Richard Branson suing the NHS.

This is not a coincidence. Public services are mostly about caring for people. Private companies are driven by profit. This means corners are cut so that shareholders get their share.

The Institute for Economic Affairs says government can’t run things. It’s time to put that tired old mantra to bed. Research shows that councils can save money, improve quality and increase flexibility by bringing services in house.

Private companies are good at doing many things. Running public services isn’t one of them.

2) Bring PFI deals in house

As People vs PFI have powerfully shown, Private Finance Initiatives are institutionalised systems for the theft of public money meant for public services. The collapse of Carillion gives us a chance to end this discredited policy. It’s fantastic that Labour has taken a brave new position and is now committing to doing just that.

Helen Mercer has laid out how we can take public control over PFI deals, both by nationalising Carillion’s shares in PFI and by cancelling the contracts where they were supposed to deliver.

3) Build up public sector capacity

After many years of austerity and privatisation, we need to build up the capacity of the public sector to deliver services. Local authorities need money, know-how and infrastructure to be able to step in and provide the services people need. This means building confidence in the public sector and what it can do, both locally and nationally.

Government should set up a national public sector company which can build local capacity across the country. This organisation can also step in to run services when local authorities can’t.

4) Don’t privatise new chunks of our NHS and railways

We must stop creating new ‘too big to fail’ scenarios. Even as we analyse the fallout of Carillion, the government is planning to privatise more huge chunks of our NHS and railways.

Accountable Care Organisations (accountable is a misnomer) are the government’s new plan for the NHS. These bodies would make decisions about delivering care across a whole region – and they could be public or private. NHS campaigners are currently taking Jeremy Hunt to court to stop these from happening.

Defenders of ACOs argue that integration is key, and it is – but not if the whole thing is managed by a private company that is motivated by profit and too big to fail.

The government is taking a similar approach on the railways. Chris Grayling wants to introduce new private partnerships where railway companies manage track as well as trains. This is a disaster waiting to happen.

Private companies like Carillion can behave recklessly, knowing that the public will step in to pick up the risk. The government has allowed Virgin and Stagecoach to opt out of their obligations on the East Coast line. Can you imagine the chaos if a privately run ACO went under and jeopardised the delivery of NHS services across a whole region?

5) Bring private monopolies like water and energy into public ownership

Where private monopolies that are too big to fail already exist, we need to bring them into public ownership. Water and energy, for example. There are clear parallels between the water companies and Carillion.

The water companies have purposefully complex ownership structures and huge levels of debt. Many are involved in tax dodging and their main focus is to make money from money, rather than to provide water and sewerage services. They’re happy to pay fines when they repeatedly pollute our rivers. They’re very lightly regulated and they take £1.8 billion out of the sector in dividends every year.

Yet if a water company ever got into trouble, there is no way the government could avoid stepping in. Even if this weren’t a risk, there are many other benefits to public ownership – including lower water bills, public accountability and a cleaner environment.

Similar arguments can be made for bringing the National Grid into public ownership, and a report commissioned by the government itself put this suggestion on the table.

6) Put the public at the heart of public services

Artificial ‘competition’ with a handful of unscrupulous multinationals bidding for government contracts doesn’t provide the accountability we need. What would? How about a real voice for the public that enables transparency, accountability and scrutiny?

Martin Wolf argues that the old nationalised industries ‘treated users with indifference’ and were driven by the needs of civil servants and workers. To the extent that this is true, let’s learn the lessons. Andrew Cumbers suggests that the 1970s were a lost opportunity in terms of democratising public services. We can take that opportunity now.

There’s too much trite talk about the ‘bad old days’ (John Humphrys, we’re looking at you). Let’s stop harking back and talk about the future of 21st century public ownership. Instead of patronising Blairite ideas about ‘whatever works’ being decided behind closed doors, let’s make public services as genuinely democratic as we can. We’re all grown up enough to have a say over the public services we pay for and use.

7) Create a new debate about the role of the state

Nationalising Carillion itself doesn’t make sense in this context. But the idea of local and central government running their own construction companies – is that so crazy? Forty years ago when we were still building public housing, hundreds of local councils were using their own departments to build and maintain it.  

More economic democracy in general could help us stop the culture of money-grabbing and corruption.

Let’s start talking about what a mixed economy should look like. Economists like Ha Joon Chang and Mariana Mazzucato point out the crucial role of government in picking winners and innovation.  Our theories and assumptions affect people’s lives in the real world, and we need a new debate on the old paradigm of ‘private best’.

As Carillion has shown, it’s not lefty idealism to think that profit-driven companies shouldn’t have their fingers in every pie. It’s economic reality.

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