Why nationalisation is a bad idea

John Redwood sets out why Jeremy Corbyn’s proposed wave of renationalisation is a bad idea.

I was asked to explain why I do not favour nationalising the railways, the Post Office, the water industry and the energy utilities yesterday on the radio. It was a trip down Memory Lane to the arguments of the last century, when Labour made the case for continued or more nationalisation despite all the evidence of the damage their policies did.

Nationalisation was the best way to lose more employees their jobs, to charge customers more, and to sting the taxpayer to pay the losses. The coal industry lost most of its workers when nationalised. The workforce of 704,000 of the newly nationalised industry in the late 1940s had fallen to as few as 235,000 by the time of the election of the Margaret Thatcher government. Despite all the closures of mines and sackings, the losses mounted to be paid by taxpayers.

The railways under public ownership experienced continuous decline. In 1950 they employed 606,000 staff and had 19,471 miles of operating track. By 1976 then under a Labour government staff numbers had more than halved to 244,000 and route miles had fallen to 11,189. The market share of the railways halved, and the number of stations fell by two thirds. The nationalised steel industry too, under Labour and Conservative governments, spent most of its time discussing how to curb the losses by cutting back on capacity and jobs.

Labour say they wish to renationalise the railways. The truth is the main cost and the main assets of the railway are already nationalised. The tracks, signals and stations are owned by Network Rail, itself wholly owned by taxpayers and financed by the Treasury. Many of the delays which affect rail services are the result of signalling failures or other Network Rail caused events. It is Network Rail’s job to expand capacity by improving signalling so more trains per hour can run on the railway.

I was asked why we did not buy shares in water companies whilst keeping in place current private sector management so we participate in the profits. I replied that we have other more important priorities for public sending. In the past government ownership of industries has not brought dividends and profits overall, but losses and the need for more subsidised capital.

The main way to improve service quality and bring down prices of utilities is to increase competition. That is what we need to do in some cases, as there is clearly room for improvement. What we do not want to do is to go back to a world where customers, employees and taxpayers all get a bad deal, which was the typical experience of our nationalised industries.

Labour’s big nationalisation programme has not been costed and is unaffordable. From past experience, it would lead to worse service and huge bills for taxpayers.

4.64 avg. rating (92% score) - 14 votes
John Redwood MP
John Redwood MP

John Redwood is the Member of Parliament for Wokingham in Berkshire. He was formerly Secretary of State for Wales in Prime Minister John Major’s Cabinet. He is currently Co-Chairman of the Conservative Party’s Policy Review Group on Economic Competitiveness.

  • Andrew Musson

    So the shrinkage of employment in the mining industry over the decades and the loss of market share by rail to road transport in the 50’s and 60’s was due to state ownership? Are people paid money to write these articles? Time more competition was introduced because this one is absolute rubbish. And I’m against nationalisation. What an idiot!

  • Billy-Bob & Yasmin

    It seems rather far-fetched to talk about competition in the utilities industries. If we take electricity: the product is the same, as is its delivery. The production can never be freely competative as it needs to be controlled for all sorts of reasons (enviroment, safety etc.), Your only choice is who to pay. We ended up with the equivalence of a supermarket that is jointly owned by Tesco, Morrisons et al, sharing the shelves, but each with their own deliveries and checkouts, where they ‘compete’ by trying not to get caught ripping off the less internet savvy (mainly pensioners).
    It rather negated the idea of letting the market rule when a completely artificial concept was created by government for reasons of political dogma and fashion.
    B-B

  • bobsworth

    Deadwood is right – nationalised utility providers can never work.

    After all, it’s not like companies owned by the taxpayers of France, Germany, Netherlands and Hong Kong are running half of our passenger rail franchises. Or that the German taxpayer is running 70% of our freight trains and the Royal Train.

    It’s not like a company owned by the French taxpayer runs increasing numbers of London’s buses, and those in other major cities.

    It’s not like the French state owns a company which is one of our Big Six energy suppliers. And is the contractor to build and run our next new nuclear power station.

    Oh hang on……….

  • Andrew Briggs

    “The main way to improve service quality and bring down prices of utilities is to increase competition” – sounds simple but can you explain how ? It’s the same ‘product’ – water, gas, electricity – from the same sources via the same infrastructure. So the only way to ‘compete’ i.e. charge less – is to reduce the costs of administration. These savings are (a) relatively small and (b) largely achieved by cutting staff. Less staff means less – and crap – service. What were you trying to achieve ?

  • Stuart Fairney

    Of course you are quite right, but I find it crushingly depressing that having lived through the 70’s nightmare of nationalized industries, we actually have to discuss this concept again.

  • Calvin Graham

    What’s with the image of the US monopoly board at the top of the article? Bring back the London version! Or it could have been illustrated with the cartoon I did on this a few weeks ago
    https://www.youtube.com/watch?v=7x0X8tflsoE

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