A culture of corruption has seeped far into governmentWhy do ministers still cling to discredited privatisation? Part of the answer must lie in the lure of the corporate embrace
Seumas Milne guardian.co.uk, Wednesday 1 July 2009 21.00 BST Article historyThere is no end, it seems, to the fiasco of rail privatisation. For the second time in three years, the holder of the coveted east coast franchise has walked away from a contract it can no longer afford. Not only that, but it turns out that National Express – whose chief executive, Richard Bowker, has decamped to the Gulf in a hurry – has protected itself from the vast bulk of the £1.4bn it owes the government by insulating its subsidiary, Fred Goodwin style, as a “special purpose vehicle”.
But far from slinking off into the corporate undergrowth, National Express is now threatening to sue the government if it also takes over the company’s two other profitable franchises. Once again, we are in the world of the Metronet consortium, whose collapse finally discredited Gordon Brown’s disastrous public-private partnership for the London underground: where instead of transferring risk to the private sector, the government ends up subsidising private profit and picking up the bill when the music stops.
For all its rise in passenger numbers, Britain’s rail system remains hobbled by the folly of privatisation: overcrowded, unreliable, fragmented and exorbitantly expensive. But far from putting it out of its misery to create a reintegrated publicly owned railway at zero cost, the transport secretary, Lord Adonis, was yesterday insisting the east coast line would be up for tender again as soon as he could manage it.
It’s the same with nationalised Northern Rock. Instead of using it as an engine of public credit, ministers are itching to unload it – maybe on to Tesco. And even as evidence emerged this week that private prisons are performing worse than publicly owned ones, the government is pressing ahead with building yet more.
In England’s health service creeping privatisation is turning into a full-frontal assault as the government strains every nerve to give health corporations a bigger slice of the action: not only in buildings and maintenance, but diagnostics, elective surgery, GPs’ surgeries, district nursing, health visiting and trust commissioning – regardless of the views of staff and patients; the evidence on cost, inefficiency and lack of accountability; and the corrosive impact on the NHS ethos.
When Gordon Brown announced his new entitlement for cancer patients to be seen by a specialist within two weeks, he insisted on an entirely unnecessary extra pledge of private treatment if the NHS was unable to deliver. And when a string of private finance initiative projects – whose costs are now estimated to be double what they would be in the public sector – were on the point of collapse earlier this year, the government bailed them out rather than take them over.
What exactly is going on? At least with PFI, a major motivation continues to be to keep public investment off debt totals. But the passion for all things private goes far beyond that. Partly it’s an ideological conviction that still grips all the main party leaderships, regardless of multiple failures or alternative models.
But the ideology is driven by powerful vested interests. The market for privatised public services is getting on for £50bn and companies are hungry for more. Decades of lobbying politicians, the civil service, corporate-funded thinktanks and the media have created a received wisdom about markets and the private sector, resistant both to facts or the views of ordinary voters.
But corporate capture goes much further than lobbying. The revolving door that propels civil servants into the arms of companies for whom they previously set rules and signed off contracts was well established before New Labour came to power. But the process that saw Tony Blair’s former health adviser Simon Stevens effortlessly transmute into European president of the US company UnitedHealth, or his foreign policy adviser David Manning collect a clutch of directorships, from Lloyds TSB to Lockheed Martin, has now become the norm.
What’s new for Labour is the stampede of ministers for the revolving door. Since 2006, 37 former members of the government have been given permission to take private sector jobs within two years of leaving office. As with their Tory predecessors, many of these jobs involve working for companies directly bidding for government contracts and privatised services. They include Blair himself, of course, whose £12m annual income now includes multimillion contracts with banking groups JP Morgan Chase and Zurich Financial Services, in a sector lovingly protected during his time in office.
But there are plenty of others. The ex-transport minister Stephen Ladyman took a job with the traffic information company Itis, pitching for Whitehall business. The former defence minister Adam Ingram signed up as a consultant for EDS, whose major clients include the Ministry of Defence. One-time home secretary John Reid works for G4S security services, which also does business with his old department.
Interestingly, former health ministers have done particularly well. The ex-health secretary Patricia Hewitt earns more than £100,000 as a consultant for Alliance Boots and Cinven, a private equity group that bought 25 private hospitals from Bupa. After leaving the department, her predecessor, Alan Milburn, worked for Bridgepoint Capital, which successfully bid for NHS contracts, and now boasts a striking portfolio of jobs with private health companies.
When I rang Milburn yesterday to ask whether he saw any conflict of interest in his directorships, he swore and hung up, but later emailed to say he had “always followed the proper processes laid down for former ministers”. Which is perfectly true. None of these politicians has broken any rules, let alone the law. Their appointments were all signed off by the Advisory Committee on Business Appointments, which insists “it is in the public interest” that ex-ministers “should be able to move into business”.
So it’s the rules that need drastic revision. This is a scandal that dwarfs the House of Commons expenses saga or the wider focus on MPs’ second jobs. It beggars belief that the prospect of lavish future consultancies doesn’t influence or shape the decisions of ministers when they’re dealing with corporate regulation and private contracts. A culture of corruption pervades the links between government and business, fuelled by and fuelling privatisation. These relationships are – as Adam Smith put it – a conspiracy against the public interest.