‘Voters are sick of being ripped off. Public ownership must be Labour’s solution’

Last week, Angela Rayner compared renationalisation to Liz Truss’s disastrous mini-budget, saying it would be ideological and cost billions of pounds and that we should rely on regulation instead. In the current political context, it’s understandable that Rayner wanted to signal that buying back assets isn’t an option. But it’s a message that could come back to bite Labour.

For a start, it’s inconsistent. Clearly, Labour has already committed to a number of vote-winning policies that already recognise the value of public ownership and control. The decision to set up Great British Energy in public ownership, announced to great applause by Keir Starmer at conference last year. The decision by mayor Andy Burnham to bring Greater Manchester’s buses into public control after 40 years of chaotic deregulation, starting this weekend. The commitment to bring all rail franchises into public hands on purpose and for the benefit of passengers (instead of by accident like the current government). The brilliant commitment made by Angela Rayner herself to oversee “the biggest wave of insourcing for a generation”.

These sensible, popular policies implicitly recognise the value of ownership. As everyone in the UK knows, owning a house is better than renting one. You can paint the walls whatever colour you like. Even though you have to pay back your mortgage, it gives you control. 

Regulation can’t achieve the same outcomes as public ownership

Control is exactly what we don’t have over our most vital utilities in the UK. If we did have public ownership, simply stated, we could make plans and deliver on them. We could directly influence important policy goals, save money on shareholder dividends and reinvest it for the future, increase accountability, cut out the risk of regulatory capture and get the best value from government investments.

For example, if Labour took Anglian Water into public ownership, it could row back on the 12% increase in bills working people are facing while still delivering on infrastructure and giving stakeholders a voice – sewage campaigners, river groups and so on. The money shareholders have received in the last two years covers more than half the cost of its new pipeline.

Regulation, however stringent, can’t achieve these kinds of outcomes. Labour should be drawing a distinction between areas like employment law and packaging waste, where it wants to support private companies to do better, versus the hopeless regulation of the failed 40-year privatisation experiment. Regulation is an appropriate response for some aspects of economic life, but it’s thoroughly weak when it comes to our family silver.

Of course, as Rayner said last week, the priority is for public services to be run ‘effectively’. That’s why the Labour Party should be looking at Scottish Water, which is run in public ownership and is far more effective than the privatised English companies. It spends 35% more on investment. If England had invested at that rate, an extra £28bn would have gone into the infrastructure to stop sewage and cut leaks. £72bn has already been wasted on shareholder dividends since privatisation. We are wasting time.

Concerns raised about cost and spooking investors are unfounded

The reality is that the only real argument remaining against public ownership is cost – and the possibility of spooking investors. But these are both red herrings. In the case of contracts in the NHS, rail, local government and so on, they can simply be brought in house when they expire.

In the case of buying back vital privatised industries, like water, the energy grid and Royal Mail, there would be no upfront cost to the government and there should be no net cost to taxpayers. That’s because shareholder compensation is paid in the form of government bonds, not cash. The government pays interest on the bonds, but it also receives the profits of the privatised companies, now in public ownership. It is effectively a bond-for-shares swap.

That’s how nationalisation has always been paid for by British governments. As a result, the government would own an asset with regular revenue from customers’ bills. The interest on the bonds handed to shareholders could easily be covered by the ongoing income from publicly-owned utilities. There would be no question of shareholder compensation diverting public spending priorities like health or education. 

The public would no longer be ripped off by excessive shareholder dividends and overpriced debt. And this transfer of assets would create new levers to deliver public benefit and accountability. Keir Starmer has promised that Labour will only borrow to invest to meet the challenges of the future. Investing in taking back key national infrastructure for an immediate return is doing just that.

It is deeply pragmatic to have a mixed economy

The final argument is that the markets would be spooked by policies that are portrayed as supposedly rampantly ideological. This isn’t plausible. Any government committing to buy back a limited number of British assets should work transparently with the Treasury and the Bank of England to make sure they’re clear on the plan, the rationale and its limits so they can support these policies. Investors could be given clarity and stability. 

As other European countries show us again and again, it is deeply pragmatic to have a mixed economy. Decent transport, well-functioning utilities and an NHS that is able to look after people are the bedrock of a strong economy. This isn’t about nationalising everything, it’s about the essentials of life.

Besides, the Conservative government is already undertaking this process! Appropriate compensation is currently being arranged for taking a part of the National Grid into public ownership to create the new Future System Operator to help plan for net zero. So clearly it can be done.

Labour has the opportunity to start crafting a new narrative. One that clearly resonates with working people up and down the country. That people are sick of being ripped off. That they recognise privatised monopolies are the worst of all worlds. That they want public services to work for people not profit, to deliver clean, affordable energy and stop sewage flowing in our rivers and seas. None of this is a hard sell. How much longer are we going to rent instead of buying?