For the last 40 years nationalised industries have had a bad press. In this post I argue that this is unfair, and the UK needs them, now more than ever.
Nationalisation, once the central dividing line between Labour and the Conservatives. The idea is now out of fashion, after Tony Blair’s campaign to modernise Labour in the 1990s. Under Thatcher, most government-owned firms, including gas, electricity, telecoms, coal, steel, airlines, and cars, were privatised and sold off.
The negative feeling towards the idea of nationalised industries appear to come from a misunderstanding of the core principle of how the nationalized industries worked: cross subsidy. Cross subsidy is the practice of charging higher prices to one group of consumers to subsidise lower prices for another group.
Take the Post Office as an example. Any company can deliver letters in a town or city and make a profit. But it is very expensive to deliver to small villages and outlying houses and farms. So the profitable deliveries subsidised the unprofitable ones. Before Thatcher, the Post Office also included telecommunications that were extremely profitable. These profits subsidised the service’s losses, but Thatcher sold the profitable part.
The same principle allowed profitable train and bus services to subsidise unprofitable ones. The unprofitable routes still provide a necessary service, albeit they don’t generate much money. Today, private companies only operate profitable routes. In times of prosperity the government recognised these social obligations. Then in some cases, it provided subsidies for such non-commercial operations. Unfortunately, the reality today is that the government expects councils to subsidise unprofitable bus services. But as central government cuts local council funding, services are cut. The upshot of this is that the poor that suffer.
Thatcherism still casts a dark cloud over politicians of all parties. Let’s hope that at some point the electorate will respond positively to the idea of nationalised industries. And finally start to bury Thatcher’s appalling legacy.
Photo on Foter.com