Andy Burnham’s case for public control starts with bills. On the steps of Number 10 he promised to ‘put life’s essentials back under stronger public control to make them affordable to you again’.
Justifying state intervention in this way is a mistake. Public control is a popular, progressive cause that can make services better. But greater control of essential services won’t necessarily reduce their price. Other arguments for intervention are stronger.
It is true that linking public control and living costs is good politics for now. Prices are rising again and more and more people are struggling to pay for essentials. The public sees a link between cost and control because many associate high prices with private profiteering. They are not always wrong. Energy firms and banks are making more money now, thanks to high oil prices and interest rates.
But people do not realise that many essentials are provided by businesses with low profit margins. Supermarkets are squeezed by intense competition; rail companies overpromised on their franchises; nurseries, school caterers and adult care providers accept fees that barely cover costs.
There have been examples of unacceptable commercial practices in regulated and outsourced markets. The story of Thames Water is egregious. But generally, regulators and commissioners keep a steely eye on costs both for customers and taxpayers. Their job is to ensure that well-run private and non-profit providers can make just enough money to be able to deliver well and invest in future capacity. It is a balancing act. Set the price too high, and corporates can profit while serving people poorly. Set it too low, and stability, standards and investment take a hit. Look at sewage treatment, homecare or the BBC.
The only certain way to cut prices is to transfer costs from customers to taxpayers. This is a legitimate democratic choice. In recent decades politicians from all parties have turned early years education into a largely publicly funded service. Keir Starmer moved most green energy subsidies from bills to taxes, and Andy Burnham is capping bus fares and suspending VAT on electricity bills.
But the fiscal position is already so stretched that we can’t expect major movement on this front. Without it, a big wave of nationalisation and insourcing will not generate huge savings for consumers. Eradicating profit alone would not deliver enough, which means Labour is setting itself up to disappoint.
The argument for public control needs to stand on firmer footing. PF Global polling shows that three-quarters of voters want water and electricity in public ownership. This is especially true for the people Labour needs to win over, whether they are tempted by Reform UK or the Greens. Sentiments are similar when it comes to outsourcing, and in a debate that is often too technocratic, public preference should count.
The government should make its case for public control on the basis of democratic accountability, strategic direction and coordination. A role for mayors in steering water companies makes sense so that they can align all the inputs needed to deliver new developments. The case for insourcing social care is more compelling when the goal is to integrate support with local NHS provision.
Public provision is also a way to increase capacity, when the private sector can’t or won’t. Labour is introducing Great British Energy and now Great British Grid to speed up delivery of the green transition. Similarly, its case for greatly expanding social housebuilding relates to overall developer capacity, not just social need. Public control is part of a wider agenda of state activism – that includes slashing planning burdens – where government gets stuff done.
This is good Labour territory. Coordination and capacity lay behind the original 1940s case for public ownership. The result was the consolidation of strategic industries in national hands and the creation of the NHS.
In the 1980s and 1990s, Conservative governments made the case for less state control in terms of performance, efficiency and investment. Economy, innovation and long-term financial strategy were seen as incompatible with ministerial control and Treasury accounting. In some cases, there were savings and improvements, although the costs were often only revealed in time.
But business does not have a monopoly on innovation and these days good, cost-effective services can be found in the public, private and non-profit sectors. Transport for London is a world-beating public service, which uses private contractors, but definitely runs the show.
There is only so far that Andy Burnham can go, however. He is backing public control, not public ownership, because he is constrained by the cost of assets and the availability of investment finance.
Taking over asset-heavy companies, from water companies to care home operators, would require borrowing on a scale that would be hard to stomach, when debt and interest payments are already very high. But even more importantly, once the government owned the assets, it would need to borrow again to make future investments to the extent the country needs.
The UK has increased public capital expenditure a lot in recent years but much more is required. The government is constrained while the private sector has room to borrow and invest. We need private, not just state, investment in essential services and ministers know they must find business models that can combine the two.
Andy Burnham is right to want to expand public control, for the sake of accountability, coordination and capacity. But the decisions should be made case by case without hyperbole. That requires politicians to separate debates on public control and the cost of living.