1980s >> 1983 >> no-942-february-1983

Going Private

There is a simple belief among electors that the Labour Party is for nationalisation and the Tories are against it. While it is true that there are elements holding such views in the two Parties the reality is much more complicated. There are several different reasons why governments nationalise; because, as conditions change, governments may reverse their policies and because the outlook of the electors has to be taken into account.

The Tories, the Liberals and the Labour Party have all changed their attitude from time to time. In the 19th century Liberal and Tory governments looked on nationalisation as an acceptable way of dealing with private monopolies, and at first the newly formed Labour Party shared that view. It was a Tory government which established the Central Electricity Board in 1926, the BBC in 1927 and BOAC in 1939; a Liberal government which set up the Port of London Authority in 1908. In 1943 Churchill, as Prime Minister, said in a broadcast “There is a broadening field for state ownership and enterprise especially in relation to monopolies”.

In the meantime the Labour Party, under its constitution and in line with conference resolutions, became committed to more or less universal nationalisation, and put a large instalment into operation in the sweeping nationalisation Acts of the Labour Government 1945-1951.

Then a reaction set in. The Labour Party leaders, notably Gaitskell, began to resist demands in their own ranks for further nationalisation, and the Tories and Liberals took up a positive opposition to nationalisation except in special circumstances (like the Tory nationalisation of part of Rolls-Royce in 1971 when the firm went bankrupt). The Tories actually denationalised Iron and Steel, which a later Labour government renationalised.

The present Tory policy is identical with that stated by the Liberal Party in their election Programme 1950.

Nationalisation for the sake of nationalisation is nonsense. The Liberals’ attitude is clear. Monopoly where it is not inevitable is objectionable and should be broken up. If it cannot be broken up it should, if possible, be controlled in the public interest without a change of ownership; only when neither the restoration of competition nor control is possible, should nationalisation be considered.

Among the reasons for nationalisation are military considerations, as in the Liberal government Act of 1871 which gave the government power to take over the railways in war-time or other emergencies. It was also military considerations which led a Tory government in 1928 to denationalise some Post Office cables and the Post Office Beam Wireless Telegraph Service and hand them over to a merger of the cable companies. The Post Office wireless service was undercutting the cables and driving them into bankruptcy, which the government wished to prevent, largely for military reasons.

Governments have also introduced nationalisation to secure the integration and modernisation of an industry when it appears to be impractical for private owners to secure the necessary capital for the purpose, as in the case of coal. State control had been unanimously recommended by a Coal Commission in 1919 on the ground that fragmentation into 4,000 separate owners meant waste and inefficiency, which only nationalisation could remedy. It is noticeable that the Tories have so far not seriously considered denationalisation of coal.

But the one continuing issue in relation to nationalisation has been the question of private monopolies and how to deal with them. The first Act giving the government power to buy out the railways was in 1844. Gladstone, who was President of the Board of Trade in a Tory government (it was only later that he joined the Liberals) got the Act through because the railways were exploiting their transport monopoly to fix charges regarded by business men and the government as excessive. During the debate in Parliament an MP who was Chairman of the Great Western Railway opposed the Bill and pleaded that the public should “trust in competition”. Gladstone replied that the supposedly competing railways were getting together to kill competition. The Act was never put into operation but it served its purpose as a warning to the companies.

When, eventually, the railways were nationalised by the Labour government in 1947, far from being a monopoly they were being driven towards bankruptcy by road transport competition. In 1844 it was only the railways which were regarded as a dangerous private monopoly; but in the Great Depression at the end of the 19th century there was a growing movement in all industries for companies to seek salvation by amalgamating, so that the Committee on Trade in 1919 could report:

Trade associates and combines arc rapidly increasing in this country and may within no distant period exercise a paramount influence over all important branches of the British trade.

Subsequent Labour and Tory governments have passed Acts to deal with monopolies, but while the Labour Party has continued to seek a remedy in nationalisation, the Tories have now taken a strongly opposite view. At the 1979 General Election the Tory Programme dealt both with anti-monopoly laws and with denationalisation as a means of restoring competition. On the first it said:

In order to secure effective competition and fair pricing policy, we will review the working of the Monopolies Commission, the Office of Fair Trading, the Price Commission, with the legislation which governs their activities.

On the second, the Programme promised to denationalise the aerospace and shipbuilding industries, to sell shares in the National Freight Corporation and to relax the Traffic Commission’s licensing regulations to enable new bus and other services to develop.

In fact they have gone beyond this. Shares have been sold in British Petroleum and Britoil; the British Transport Docks Board is being partly “privatised” as Associated British Ports; British Rail’s hotels and ferries have been sold, and there is a proposal to sell British Rail’s thirteen engineering workshops. It is intended to sell shares in British Airways but the airline’s £l,000m outstanding debt makes it unattractive to investors unless the government first accepts responsibility for some or all of the debt.

Parliament has been dealing with the Bill to “privatise” British Telecommunications but because it was not mentioned in the Tory Election Programme the actual sale of shares will not take place until after the next election. At the Second Reading of the Bill on 9 November, the Minister of State for Industry, Patrick Jenkin, said that the public will be allowed to buy half the shares and “British Telecom would no longer be a nationalised industry but would become a private sector company”.

His case for the Bill was that it was only by being freed from Treasury control and allowed to raise its own capital in the market that it could “become a major force in the world communications market”. The company will not have a monopoly.

One of the purposes of denationalisation is to raise money for the government to help towards its planned, but so far not operated, reduction of taxation; but the main purpose of the whole policy is to restore competitiveness to British industry which has been the theme of reiterated speeches by Thatcher and other ministers. It will, she says, promote greater efficiency and lower prices, to enable British firms to meet the competition of foreign companies in the British market and exporters to invade world markets more effectively.

E. Hardy

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