Private Ownership

Lord Stevenson of Balmacara Excerpts

Thursday 22nd October 2015 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I would like to thank the noble Lord, Lord Howell, for securing this debate. Like a number of other speakers, when I saw the title I felt slightly at a disadvantage, as I was not quite sure where he was going to come from. Your Lordships will not need me to remind them that I am in a slightly trickier situation in responding to this debate since, to take a cricketing metaphor, the pitch is rather sticky and I am not entirely sure that I have got all the messages that are coming out from the other end in the right order, but I will certainly try to do justice to where the party that he criticised so strongly in his comments believes it stands on the matters that he raised.

I would also like to congratulate the pedalling Peer on his maiden speech. I think everybody who heard that and those who will read about it will recognise that we have a rare talent joining us here. He is steeped in the traditions of Parliament and has quickly understood the way in which we operate, so he will fit in very well. I am sure I am more of a battery rather than free-range person myself, but if he is going to find the Achilles heel in Ministerial Statements, well done—I like this; this is going to be fun. I look forward to many of those occasions.

In preparing for this debate, I looked at the interesting brief prepared by the Library which was good to have, although somewhat gnomic, possibly because the Library was also not quite clear where we were going to go on this topic, which meant that you had to read quite a lot of stuff in order to understand where one might go with it. I am going to take one or two points from that, because my response here is going to be partly theoretical and partly practical. I am not going to be quite as pragmatic as one of our earlier speakers but I am hoping to see where the intellectual case lies and then perhaps articulate what that means in terms of policy. I will also be drawing on a speech given by the then Chancellor of the Exchequer, Gordon Brown, in 2003 to the Social Market Foundation which dealt extensively with what a modern, progressive democratic party should do in relation to ownership questions about strategic industries.

My first point is a slight criticism of where the noble Lord, Lord Howell, came from on his journey. I thought his reflections on his experiences were interesting but there was an underlying teleological approach that there is a march of progress and it is inevitable that anything that starts off in state ownership will eventually end up in private ownership and that, really, those who call for nationalisation are misguided bigots—all would be perfect if Mrs Thatcher’s founding themes were taken forward and allowed to flourish, because then the state could withdraw from most things and everything would be right as roses. I am not sure about that. I think the problem with this argument is that it is mainly based around cost issues and ignores value. The issues are much wider than that. Government will always have a role in every aspect of human endeavour and must not lose that role because it is an expression of the will of the people, and it needs to be in all aspects of our society.

After all, this starts with Adam Smith. I am a bit surprised that nobody has quoted the great thinker, but every modern generation since Adam Smith put the question about the relationship between the invisible hand of the market and the helping hand of government has had to think about how to interpret that tension for their times. What are the respective spheres of individuals, markets and communities in achieving opportunity and security for their citizens? If you address the problem from that perspective, you cannot ignore the role of the state. It is true that direct state involvement in industry was pretty much a rarity in the 18th and 19th centuries following Adam Smith, but the experiences that we have been talking about today are not the only ones that one can draw on. We ignore at our peril the New Deal of the 1930s in America and the way in which that combination of state intervention, state borrowing and state investment enabled the world to come out of a recession which could otherwise have been much, much worse.

There are obvious resonances with the situation in 2006 to 2008, brought on by the behaviour of the banks. At that time, public ownership was one tool used by the UK Government, nationalising three of the UK’s largest high street banks: Northern Rock, HBOS and the Royal Bank of Scotland and Lloyds. At the height of that crisis, a sum of what I understand to be £1.162 trillion of public money had been committed to provide loans, share purchases and guarantees to the banking sector. At that stage, I think that all sides in Parliament were on the same page: we were all saying that that had to happen in order to secure the economic future of our country. We did not say, “Oh no, we don’t invest in private assets”. We took those steps because they were the right thing to do, although it is fair to say that the then Chancellor of the Exchequer, Alistair Darling, said at the time:

“It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain. … The long-term ownership of this bank must lie in the private sector”.

So my first point is to recognise that, although there is a long and complex story involving ownership of assets which are now in private hands, there are occasions when this will still be an issue, and the fundamental questions behind that, raised originally by Adam Smith, still need to be addressed. There must be a debate about whether an economy can be left in private vested interests, except when it is necessary to instigate a short-term palliative for market failure of that type.

Let us not forget that three decades of privatisation and marketisation in the UK have not only increased social inequality but resulted in economic decision-making being captured and concentrated in far fewer hands. The opening up of very large parts of the public sector to private capital has created a situation in which the UK is shifting towards a rentier economy, dominated by financial interests and shareholder values, as was mentioned by the noble Lord, Lord Stoneham. There is obviously a good and a bad side to that, but the assumption one makes is that the economy, although it is working for private vested interests, might also have a conception of public good, and I think that that is a bit of a stretch at times. Although it is true that the private sector has brought in investment, we are still an economy dogged by bad productivity. Although there are hot spots and the economy is beginning to grow again, it is still not the balanced, wider-ranging economy that I think that all sides want. My point here is that, if possible, we should avoid a simplistic approach to questions of who owns the assets that we are talking about.

I take it, and will argue, that a sound macroeconomic framework is a necessary but not sufficient condition to achieve for Britain a society dominated by opportunity and security for all, but I shall mention three areas of this debate where there are questions to which we will want to return. The first, the health service, which, since it was first introduced after the Second World War, has always been in public ownership, is dogged by expense, new technology and rising expectations. The question has to be whether patients will benefit through a public healthcare system or whether, by bringing the market in, you could get a better route to advancing the public interest. Higher education is another example. Universities are very much operating in the global marketplace, with their excellence depending on drawing in a wide pool of talent. The question, again, is whether universities should really become sellers setting a price for their services and prospective graduates becoming buyers of higher education at the going rate. What does that mean in practice for the economy and how growth will be supported? Then there is industrial policy. When global competition is challenging every industry, the state has options to replace market forces when they fail—the example of the steel industry was mentioned today—but is it right always to have an ideological assumption that the state will refuse to intervene at any stage? Those are complicated questions. They are really about whether or not the public interest is best served by a particular model or approach to that thinking.

The noble Lord, Lord Howell, in introducing his remarks, tried to pitch himself as a one-nation Tory—I think that that would be an appropriate way of explaining it; certainly not, he says. He certainly had some very harsh words to say about those with views on the matter on the very far right of his party. I think that he would accept that there has been a divide over the years about whether the market solution or a public ownership solution was the right one, and I do not dissent from him. Within that divide, there has also been an agreement that there are certain areas of public activity and the economy in particular where we have accepted, without going into it in any great detail, that things like family, faith and civic society are not transactions that could be marketised.

In his book The Dignity of Difference, the former Chief Rabbi, the noble Lord, Lord Sacks, says that he accepts—as I do, too—that there are areas where the market is legitimate and there are areas where to impose market transactions in human relations is to go beyond the bounds of what is acceptable and corrodes the very virtues that markets rely upon for success. He says that markets may be the best way of constructing exchanges and providing many goods and services efficiently, but they are not good ways of structuring human relationships. This point was picked up by Michael Sandel in his Reith lectures a few years ago, when he talked about something he called “the moral limits of markets”.

Therefore, we need to be a bit nuanced about how we talk about the economy in terms of markets. The debate about left and right need no longer be a debate about whether there should be a market-based economy, because it is absolutely right to say that markets work very well for the distribution of services, and for most of the time we want to make sure that they continue. I do not accept that the public interest requires us to regulate the impact and scope of the market by having greater public ownership, regulation or state intervention. On the other hand, I hope that those who are on the right of this argument would agree that it is not always the case that the markets are going to provide that combination of liberty, equality, efficiency and prosperity that every state would wish to look for.

Given those points about the areas where the market is not appropriate, we can only agree that, on some occasions, the market is the right approach, and on some occasions there are areas where it is not. We need to get beyond the constant debate about that. I recognise that progressive democratic governments seeking strong economies should not only support, but possibly enhance, markets and make sure that they are working effectively and efficiently. We accept, however, that there are limits to the markets, and that there are some areas—particularly in moral matters—where there should not be markets, but we should always have a concern for productivity and efficiency in these areas.

That is the theory behind my views, but I would like to make a couple of points about how it might apply in practice. First, we need to look much wider than we have in this debate so far about what the Government are responsible for and what they can contribute. The economy is supposed to be British based; it is supposed to create jobs, invest, innovate and export. It should have high productivity, and be highly skilled and should have innovation. These are all points made by various speakers. We need a balanced, resilient economy, succeeding in the world, creating good jobs and opportunities, and offering people a ladder up and the chance to make the most of their potential. In that, there are things we need to accept would be done better by, or initiated by, the state.

The first of these would be to make sure that we can, as a Government and as a country, liberate the talents of all. We cannot hope to succeed as a nation if we are not giving everyone in every part of Britain a platform to succeed as individuals. The economy has to be built on the contribution of all, and we must extend opportunity and remove barriers to success. This is about good primary and secondary schooling; training and higher educational opportunities on a lifelong basis; fixing broken markets, intensifying competition and reducing barriers to market entry for new businesses, and supporting entrepreneurship. That is the area where the Government have a legitimate and important role and most people involved in industry would accept that, in partnership with what their interests are.

The second pillar to consider is innovation. We have to recognise that, in a previous period, there was a lot of blue-sky research funded and operated through the Government and the nationalised industries. The noble Lord, Lord Stoneham, might remember that. Even the Post Office or GPO had its research branch areas as well. That has all gone in the wake of privatisation, which is to be regretted, but we have other ways that that could be taken forward. In particular, the role of the research council system, which is under threat because of possible further cuts to public spending, must be looked at. The science budget, which was given a 10-year focus under the last Labour Government and was supported during the coalition Government, needs to be protected as we go forward.

An active Government should invest in the long term; the short-termism has already been mentioned. What does that mean in practice? It means issues like infrastructure on a long-term, consistent basis. We look forward to the emerging thinking of the present Government on what I take to be an extension of Sir John Armitt’s recommendation of a National Infrastructure Commission under the noble Lord, Lord Adonis. We also need an industry strategy: not in the sense of direction, but making sure that all the facilities that are available in many other countries for their successful winners get the chance to come forward.

Thirdly, the Government have a role to secure an open approach to the world, and we should not be isolated, either as an economy or as a country. This means international engagement and an open, outward-looking approach to the world. It also involves, of course, the big question before us that will be coming up in the next year or so: the question of whether we stay in Europe. In my view—and I am sure it is shared widely around this House—it would be disastrous if Britain were to leave the EU. Shutting ourselves off would pose a huge threat to our future prosperity.

I have tried to give a theoretical basis as to why the party that I represent regards the sort of market economy that we now have as the one that is appropriate for us. I worry about the concerns that I have expressed in regard to whether the market will go far enough to ensure a proper public-interest concern for people and their aspirations. I think there are practical implications that this Government should take ahead.