Should major engineering-related industries in the UK be taken into public ownership?
The Labour Party’s manifesto for the upcoming general election includes pledges to take several industries into public ownership; which would represent the largest nationalisation programme since the 1970s. Although in past decades many industries, including car manufacturers, were state-owned, the current manifesto confines itself to service industries and utilities. Jeremy Corbyn’s party proposes nationalising the Royal Mail, rail-operating companies, energy supply networks and water and sewerage companies, plus the eye-catching pledge of creating a state-owned broadband Internet supplier with free full-fibre coverage for all by 2030 by nationalising BT Open Reach.
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Further reading
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All of these have something in common: a very large contribution by engineering and engineers. Vast numbers of engineers would effectively become civil servants, and a large part of the current recruitment shortfall would become a problem for the government rather than private industry. In the past, we have found that there is a degree of support among The Engineer readers for nationalisation of industries such as nuclear and rail, but we would like to know about opinions on these more ambitious plans.
Our options allow readers to register their support for the nationalisation programme, their opposition to all nationalisations, their support for some nationalisations (we would be interested to hear which ones are supported and which opposed), and an option for supporting the principle of nationalisation but doubting whether it would be practical or possible (again, we would welcome explanation of your doubts; some that have already been raised include the cost of the programme and the past troubles of nationalised industries in relation to management and trade unions). We would remind readers to familiarise themselves with our guidelines for content of comments, and remind all contributors that comments will be moderated for concision, grammar and sense. We will delete comments which are not confined to the subject of nationalisations and stray into other political arguments. We will publish the results of this poll on 10th December.
It’s important that the UK controls/owns it’s strategic industries and services. The alternative is that some rogue operator, like Trump and the US, can apply sanctions and deny us our services.
For the engineer state ownership would be a technological boon because we could develop and own our technologies rather than act as maintenance engineers for foreign technologies and, for example, have to ask foreign governments for permission to work on ‘our’ products (ITAR anyone), those who oppose state ownership have to consider the reality that a large number of our key technologies and industries are already state owned – just not by the UK state. And, with the UK tax payer already subsidising foreign owned franchises to the tune of tens of billions, UK state ownership could be more cost effective. Private ownership isn’t working but it is costing us more and more money and with no obvious benefits for us but plenty, financially, for the private owners.
https://fullfact.org/economy/who-owns-britains-trains-energy-postal/
What we must remember is that everything has an opportunity cost: You want to spend £10bn on X? Then that’s £10bn you can’t spend on Y.
As such, I am not averse to large government projects which remain in public ownership, but I would prefer a more considered approach to it than can ever be expected from political parties.
What would nationalising rail operating companies achieve? Better service? I doubt it. It seems to be nationalisation for natonalisation’s sake. Instead, let’s use the money to create an equivalent of ARPA, or expand national laboratories for fusion power, or beef up the various manufacturing centres which seem to be a remarkable success in recent years.
A strong case can be made for renationalising industries of importance to strategic national security, such as steel and defence, but not much else, in my opinion.
Well, fascinating, so if we start with “national pride” that is pride in our nation and what our nation produces, then what is wrong with nationalisation. The armed forces are “nationalised”, and therefore we have national pride in them, and they work. Some elements of the armed forces have been outsourced, but in the main the nation owns the armed forces in their entirety. We now know that privatisation simply doesn’t work in so many sectors, so what is wrong with a state subsidised (owned by the population)/nationalised set of systems? This need not smack so much of socialism as some will inevitably fear. After all, when the great race to privatise commenced in 1979 under Thatcher, the big myth/stupidity, was simply selling back to individuals/institutions, precisely what we already owned….how daft, how stupid, and look where we are 40 years later, £1.7trillion in debt and failing privatised industries abounding, so asking oneself a simple question, is this state of affairs good? Railways are failing, utilities are failing and are expensive, top management salaries and bonuses are way out of kilter with the ordinary man/woman on the dear old “Clapham omnibus”, shareholders are greedy, absurd vanity projects such as HS 2 and Heathrow expansion seem important to so few, so yes, maybe nationalisation which might seem a bitter pill to some, might just be the new found form of regulation that out nation needs, plus some form of consensus government for a few decades to come to stabilise our economy. This is without contemplating Brexit which can only be a downward spiral!
Nationalisation of these industries would be a disaster. Corbyn would not pay anything like the full value for this state grab. Pension funds would suffer severely.
It is a fact of life that people need competition to encourage them to work effectively. Nationalisation takes this away. Prices go through the roof as a result.
When British rail operated the cross channel ferries the company operating the Channel air bridge as it was known, flew cars across the Channel, and were prevented from under cutting the ferries with there air service, it seems incredible that they could have done so. It is also incredible that this was allowed to happen, but this is typical of the type of situation that a monopoly creates.
I am in favour of nationalisation of strategic industries (e.g. nuclear, steel), but any renationalised industry must not be allowed to become a bloated and inefficient monster. Have we forgotten what the 70s were like?
The trouble with that argument is that while I don’t disagree on principle, they nationalised the commanding heights of industry in the late 1940s, and never invested. Certainly, Labour never did. As for buying and developing British, while I agree with you, in spheres like defence and aviation our rulers favoured American, cancelling brilliant home made projects like the TSR-2 and Vickers V1000.
I am in favour of nationalisation of our essential services, it is time we took control back from the foreigners who now hold our water, electricity and gas. We need to take these back in house, I’d be more to pay a penny in the pound for them, look at it a risk you take dealing with governments.
“We now know that privatisation simply doesn’t work in so many sectors, so what is wrong with a state subsidised (owned by the population)/nationalised set of systems?”
Absolutely correct on all points. Good man.
Certain industries do need to be state owned but not state run for political reasons. That way the people would own the industry and the profits, after keeping some for improvements and investment, used for the benefit of the country as a whole.
The myth that a state is like a household is just that – a myth. In a household there are generally 1 or 2 adult workers possibly with dependents who find it difficult to increase their income or decrease their expenditure and there is little slack capacity to earn more or pay for training to (hopefully) get a better job. A state of 65 million people not only has a substantial number of unemployed but also a much larger number working at low productivity because employers find it cheaper to hire for today than invest for tomorrow. It is entirely different and debt:GDP reduction is much better done by increasing the denominator than by decreasing the numerator.
We have seen over the past 40 years that trickle down economics does not work – those with will always salt their fortune away and not spend it at least not on work or investment within the country. The occasional home extension or charitable donation is no replacement for state directing (if not actually controlling) investement. The actual work can be carried out by private contractors but we need national control.
An example is the sorry state of our power generation, which has depended on a wing and a prayer that no natural disaster occurs. Solar, wind, tidal and nuclear are large investments which the private sector is not willing to gamble on without massive public subsidy and guarantees – £93.5/MW at Hinkley C for example – while profits and dividends disappear out of the economy to tax havens and other states. Meanwhile France has a 100 year plan, not perfect but a plan. We have nothing other than ‘leave it to the market’ which responds – by putting the price up. Yes that does reduce consumption but it is not a plan and many households and businesses get crucified.
If we do return these industries to state ownership then it must not be ‘owned’ by the government but by the people directly with non-negotiable shares issued at 18 and cancelled on death. That way, like the NHS, the publicly owned (and paid for) infrastructure, health, education etc could not be hived off again without effectively a referendum by the shareholders (ie everyone).
Only if there is an actual competition. If I don’t like my local rail company, I can’t choose to use a different railway.
I am always intrigued as to why it is seen as such a bad thing for the Treasury to be the primary or sole shareholder of a company.
Those that are providing basic services. particularly ones where there in no alternative such as water, should still make a profit but if the need to pay a dividend is removed, this can be used to ensure that the service is as effective as is possible.
There are also industries such as pharmaceuticals where the development of vital but low if negative profit margins exist such as the development and production of antibiotics where it would be an excellent place for a no-profit making or subsidised nationally owned company.
Obviously the bloat inefficiencies need to be dealt with but this is far from a nationalised industry issue.
Well, expropriation is a non-starter – the level of retribution we’d face under WTO rules, freezing of any future inward investment and downgrading of the UK credit rating to junk status pushing interest rates up on our existing debt unaffordable and stymying any borrowing plans makes the consequences of Brexit pale into insignificance.
Nationalisation at fair value begs the question: why? What do we gain by paying all that money for a change of the ownership structure – since you’d hardly sack the entire middle and upper management of these organisations? Are shareholders profiteering – you can judge for yourself right here https://investing.thisismoney.co.uk/performance/financial-ratios/index/UKX (“dividend yield., second column”)
And as already pointed out you are (most likely) either directly or through a pension scheme shareholders too. If pension funds are forced or scared into pulling out of utilities and into low interest cash deposits, they are no longer supporting infrastructure projects, just sitting in a bank vault. Who benefits from that?
All those of us that remember the 50s & 60s when we had nationalised industries will I’m sure look back with fond memories of the strikes, the blackouts, the shipbuilders that went to the wall because as a ship was almost finished the unions called Strike! & unless the bosses gave in the delivery would be late and the penalties would be colossal, but that doesn’t happen any more, we don’t have a shipbuilding industry anymore, the same with mining, we lost a lot of our car manufacturing through nationalisation, Politicians cannot run big businesses their too busy playing school kids arguing and producing nothing, The railways now there is a joke we were building steam engines when everyone else was building electric or diesel, we’re still plagued with strike actions from rail unions saying it’s for public safety but give us enough money & it’s OK, everywhere there is a nationalised company there are unions who think it’s a money pit for their benefit & to hell with the Country,
Good old Jeremy and his Liverpool Leninists reliving the 1970s again. It was a decade where the Union barons tried to determine the economy by strikes and secondary picketing, and other nations pitied us for our ‘English disease’. And nationalisation isn’t necessary to get the benefits that the Comrades desire. Simple enough: take the Japanese ‘Top Runner’ scheme (forerunner of the EU Ecodesign Directive), and bend it to use in these industries. Consider this applied to railways; determine the most efficient/effective/customer-friendly (whatever is most important) company, establish its performance as a benchmark, and then tell the others in that sector the they have 5 years or so to beat this benchmark or they will be fined/closed down/whatever. Costs the taxpayer nothing, and forces the companies to perform beyond what they had probably planned. Bosses would have to earn their pay, too. OK, implementation is more complex than the description above, but there would be a lot of transparency introduced as well.
I wish a polling organisation would carry out a survey to enquire how much compensation people thought they should be paid if they were deprived of gas, water + sewerage, electricity, phone, broadband etc. for 24 hours. Then ask to see the utility bills and work how much is actually paid per day. Divide the first figure by the second and you have a metric for the value placed on these services … I’d guess minimum 10x, maybe even 30x or more …
The concept of nationalising if it involves Government interference and micro management is wrong. However, those that are critical strategic infrastructure on which the whole of society depends then leaving these up to ‘market forces’ and profit taking as the prime function for shareholders is even more wrong. Having multiple suppliers is fine in economic theory terms, but this must involve massive duplication of effort, each one having its own service, delivery, admin, finance, hr, and so on setups. Each must have a national service capability as well. And we then need an army of civil servants to act as ombudsman and overseers. Unions, contrary to Barry Fullbrook’s comment actually have their member’s (ie the majority of the staff in each company) and wider society’s interests at heart, which is after all what an infrastructure business is actually about. Private business is driven by shareholder’s interests who also view it is a magic money tree for their own selfish ends. It is in neither’s interests to destroy or hamper the industry and the key problem is that management historically has taken the stance that only they know what to do and how to do it without listening to anyne else. These are all joint enterprises existing primarily if not solely to provide critical infrastructure to society, not as private money trees. Interference by Government generally follows society’s interests, and with
suitable structures can work effectively if allowed. Now that most infrastructure industries have matured in the private sector the flaws in that are now clear to see. It is time to go back to a proper halfway solution where they are managed on behalf of society instead of trying to live off society.
Nationalising these industries would mostly be a waste of effort and money. There are grounds for having natural monopolies like national grid state owned, but would it help? Where would it help?
– Railways? Private companies have more than doubled usage since privatisation. The franchise model may be flawed, but going back to BR won’t help.
– Electricity Generation: It’s a competitive market and with auctions the Government can decide the generation mix anyway.
– Electricity supply: Now that companies like Ecotricity are offering innovation and choice, why? Up till now, there’s been too little competition; having one monopoly supplier won’t help that,
– BT Openreach: Might give a short term benefit, but not sure how it will help competition. There’s already a requirement for arms length management.
– Water: Maybe that should be owned by local cooperatives.
I cannot think of anything which is currently run by any UK government or civil service that works, nationalising anything only creates inefficiency, institutionalisation and complacency.
This is nonsense with respect.
Both Silver City Airways operating Bristol Freighters, and Channel Airbridge operating ATL Carvairs could only carry a maximum of 4/5 cars per aircraft movement, and this therefore was an option available only to the more wealthy, so it is disingenous to make a comparison with a system available for the few, against one available for the many, as in one system was for very few vehicles to cross the channel, and the other was for many more, at a far more viable rate, hence both Silver City and ATL eventually going out of business. Contrast this of course with ro-ro services eventually operated by Townsend Thoresen in the 1960s.
The UK steel industry, publically owned, was profitable when It was sold for a fraction of it’s true value. (about 25%)
Since being in private hands, it has been virtually shredded, bits sold off, asset stripped, and run into the ground, with little investment in improving quality.
The Directors have made £millions in the process.
As it now stands, it is not financially stable, and needs huge investment to compete on price and quality. This will never be done under private ownership.
The raw materials, all imported, simply cost too much, and the finished product prices are too low, so the operating companies are squeezed at both ends.
Partial Nationalisation looks to be the way forward I would say. Take the French Government part ownership in one our largest energy supplier, EDF, as an example.
I did note the following comment
“It is a fact of life that people need competition to encourage them to work effectively” which is the most untrue statement and used to justify capitalism in its extreme form. I got into Engineering, because I have a thirst for knowledge in something I am interested in, not as some form of competition with someone else. It is the company that you work for which competes against others for market shares and this can be said for all companies that are not state owned. State ownership makes sure the basic needs of its populace are catered for at prices that can be controlled. A free market just makes the top 10% richer and the low 30% poorer.
Hear, Hear!
Can you explain where you have competition is in choosing a water supplier for your house or business?
Can you explain where you have competition with Open Reach infrastructure? As your speed will not be dictated by the provider but more the infrastructure in place.
Can you explain where the competition is in only being able to use one operator on a rail route?
The only competition there is, is in energy supply and even with this prices have still gone up as it is a necessity good and consumers don’t have a choice of not buying it.
Just for the record, railways in the UK are mostly already owned by the state. NR is a government body and owns almost all the infrastructure, and train operating companies are simply short term (7 – 10 years) francises awarded by the government. One of the major problems that the current ‘arrangement’ suffers is the micro-management of the system by DfT civil servants and polititians who know nothing about railway operations. Recent history is a catalogue of political meddling which has led to gross overcrowding, poorly specified and very expensive new trains, and vanity projects such as HS2, when there are many ‘small’ schemes involving re-opening of closed lines that could be completed quickly and economically and will reduce pressure on our road network. What is needed is management by career railwaymen who know their industry. Back in the ‘old’ pre-privatisation days, government let the railway management get on with their job.
1. No need to nationalise (because we already own most of it).
2. Stop government management. Let the railway managers do their job.
You do not need 100% of the shares to stop a greedy asset stripping board. A 1% golden share would do that. Far cheaper than taking the whole company into state ownership.
I would like to see a UK Sovereign wealth fund that could own significant stakes on UK industry/companies. That should be owned by UK pensioners rather than being a government plaything to sell off when the gov is in a financial crisis.
On rail, I think it crazy that foreign state owned firms can bid for UK rail franchises, but a UK state rail firm cannot. I think the UK should have a state owned rail firm that bids for UK rail franchises on a fair & equal basis. That means more transparency for all bidders.
LOL What wealth? Join a club exclusive to countries with cash in the bank? Applicants with £1.8 trillion debt need not apply …
Dudes…do any of you not remember the 70’s Red Ken stopping the car industry, rubbish piled on the streets, power cuts, Scargill knackering the mines, candles for lights on 2 evenings per week…
Or, ask yourself this, why did Russia collapse……yes we need capitalism with a soul, but we don not want a load of socialist nuters running anything – trust me, i’m an old git, I was there…….just sayin…
Youngsters especially have no clue. no clue…..but it aint good…..
I think you might mean Red Robbo in the car industry…
I agree, we are up to our ears in long term debt, we may have hit our own self imposed yearly budget figures, but we are sinking in debt…
look at some industrial news from the late 1970’s you may think different….
Every sovereign wealth fund had to start somewhere. Any UK fund would be small to start, but build up over time.
Norway did not get a huge sovereign fund overnight. It took decades to grow.
If Lloyd George had started a small UK sovereign wealth fund in 1911 when he brought in the old age pension, that fund would be huge by now.
The rail sector has thrived in terms of passenger numbers since privatization. Freight is still a poor neglected relation. The worry is that even under “privatization” there is still meddling by government ministries, agencies and other fellow travelers which can and do interfere with running the industry efficiently and effectively. Network Rail is effectively state controlled and subject to the whims of the Treasury. The real problem is that those interfering with the sector are not routinely having to market and sell services.
There is certainly a major case for reform of current structures and systems. Where is the Williams review? The HS2 review seems to have gone off like a damp squib.
So the pendulum swings. I too lived through the 3 day week (queried recently on social media as ‘did it really happen‘?) Thats the problem. The younger generation have not experienced the pain of nationalised industries and the way they dragged the entire country down. I worked abroad in the 70’s. We (UK) were considered the sick man of Europe and even further afield. Privatising the old non profitable and/or inefficient industries of those days was a sensible approach and now we have a modern industry that has moved on hugely from the old days. Incidentally, privatising the water industry was the only way we, as a nation, could afford the massive infrastructure costs to bring our water quality up to European standards. If the Government had paid we would have been bankrupted.
The young will have to experience the pain of nationalised industries for themselves as I am sure they will not listen to us ‘old uns’. Good luck and lets wait for the pendulum to swing again.