Democratically-run, Free Public Services, Why Not?

The Labour Party is committed to taking energy supply, rail, water and the post back into ‘public ownership’. However, it no longer uses the word ‘nationalisation’. Interviewed on BBC Radio 4 on 10 February before a Labour Party conference on ‘Alternative Models of Ownership’ later that day, the Shadow Chancellor, John McDonnell, said that the ‘Morrisonian top-down public corporation model’ was not what they had in mind.

Herbert Morrison was a prominent Labour politician in the 30s and 40s. As Minister of Transport in the disastrous 1929-31 Labour government he introduced a Bill to reorganise public transport in London as a ‘public corporation’ run by an appointed Board. After the War, when Morrison was the Deputy Prime Minister, the same model was followed when coal, rail, electricity, gas, water and other industries were taken over by the state. The workers remained with no say in how the industry was run; in fact they were still compelled to organise in trade unions and go on strike to protect their interests as wage workers as they had been when the industry was in private hands. It was state capitalism.

Elected Boards

So, what is the McDonnellian alternative to this? In his speech to the conference he declared:

‘The next Labour government will put democratically owned and managed public services irreversibly  in the hands of workers, and of those who rely on their work … We aren’t going to take back control of these industries in order to put them into the hands of a remote bureaucracy, but to put them into the hands of all of you – so that they can never again be taken away.’

This seems to be suggesting that the members of the Boards running the public services in question would be elected some by those working in them and some by those using the service, rather than by being appointed from above by the government. That would be an innovation compared with the nationalisations of the past but the details of who is to represent the workers and who the consumers and exactly how they are to be chosen remain to be seen.

In any event, an elected Board would have to take the same sort of decisions – about investment, surpluses, prices and wage levels – as an appointed one, as these services would continue to be operating in the context of capitalism. Given capitalism, what matters is not who takes the decisions or how they are chosen; it is the decisions themselves, which will be dictated by the way capitalism works.


In his BBC interview McDonnell conceded that the public services would still have to balance the books and more – make a surplus of income over expenditure, aka a profit. Answering the criticism that his scheme would mean the government having to spend more money than now because the current owners would have to be bought out, McDonnell said it wouldn’t because ‘government bonds can be swapped for shares in a revenue-producing company.’ Making it clear that he was talking about producing a surplus of revenue over expenditure, he added:

‘It would be cost-free. You borrow to buy an asset and when that asset is producing profits like the water industry does, that will cover your borrowing cost.’

In other words the publicly-owned – in this case – Water Board would still have to aim to make a profit, out of which the former shareholders, now bond-holders, would receive interest instead of dividends. This would eject them from any further say in the way the industry was run but would still leave them in receipt of an unearned income. In this respect, the McDonnell model is the same as the Morrison one.

Also, while the Board might be chosen differently, they would still, like Morrison’s, have to aim at making a surplus, not just to continue paying a tribute to the former owners but also to build up capital to re-invest in technological changes. This will bring them into conflict with the workforce who will be wanting a larger proportion of the revenue to be devoted to improving their wages and working conditions. The Board members representing consumers can be expected to press for prices to be kept down rather than for wages to increase. So the class struggle would continue, with the workers hampered by having ‘representatives’ on the Board.

Free at point of use

Jeremy Corbyn also spoke at the conference. In his peroration he got a bit carried away:

‘By taking our public services back into public hands, we will not only put a stop to rip-off monopoly pricing, we will put our shared values and collective goals at the heart of how those public services are run.  Whether that’s an energy system that doesn’t jeopardise the future of our planet, a joined up transport system that helps us, rather than hinders us, from moving away from reliance on fossil fuels, a postal service that delivers for everyone across the UK and which invests for technological change rather than managing decline, a water system which puts an end to wasteful leakage and environmental degradation, a society which puts its most valuable resources, the creations of our collective endeavour, in the hands of everyone who is part of that society, extending the principle of universalism, right across our basic services, free at the point of use to all who use them. That’s real, everyday, practical socialism.’

This would seem to commit the Labour Party to introducing not just free education and free health care, but free public transport, free gas, electricity and water, and free letter delivery too; which would rather conflict with McDonnell’s statement that these other services would have to be ‘revenue-producing’.

Not that there’s anything wrong with democratically-run and free public services. Far from it. That’s what socialism will involve. It’s just that this won’t work out as intended under capitalism; which is what Corbyn and McDonnell envisage.

Profits first

The Labour Party used to talk of the need to control the ‘commanding heights’ of the economy so as to be in a position to try to make things better for those they now call ‘the many’. Corbyn and McDonnell may still believe this but this is not what they are proposing here. They are talking only about public services with the rest of production remaining in private hands.

In his speech Corbyn called for a ‘genuinely mixed economy’, in effect only for the ‘public’ element in the mix to be increased and acknowledging that a large, in fact predominant, private sector would continue. So, the initiative for production is to continue to be in the hands of profit-seeking private enterprises. In which case, the next Labour government will be in a position described by a former Labour cabinet minister, Harold Lever, fifty years ago:

‘Labour’s economic plans are not in any way geared to nationalisation; they are directed towards increased production on the basis of the continued existence of a large private sector. Within the terms of a profit system it is not possible, in the long run, to achieve sustained increases in output without an adequate flow of profit to promote and finance them. The Labour leadership knows as well as any businessman that an engine which runs on profit cannot be made to move faster without extra fuel. So, though profits may be squeezed temporarily by taxation and Government price policy, they must and will, over a longer period, increase significantly even if not proportionately to increased production’ (Observer, 3 April 1966).

In other words, a future Labour government, even under Corbyn and McDonnell, will be compelled to put profit-making first, before anything else including funding for public services.

Democratic control and management of free public services can only be meaningful – and irreversible – where all the means of production are commonly owned, enabling all goods and services to be produced solely and directly to provide for people’s needs. Then, the boards – or committees or whatever you want to call them – running public services won’t be restricted in the choices they can make by the coercive economic laws of the profit-driven market system.


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