Old whines

Britain isn’t working. The rivers are full of shit, the NHS is falling apart at the seams and the trains seem barely to run, never mind on time. The government claims it is being undermined by a woke blob. The very structure of administration is found wanting.

So there’s an impulse on both left and right to try something different. As Brexit showed, however, different isn’t necessarily better. This time we should look before we leap.

Nationalise it?

Both the trains and the water system are held out as failures of privatisation. Many on the left would like to reverse both, taking them back into state ownership rather than leave them in private hands under state regulation.

Are they failures? The water industry has certainly taken a lot of money out as dividends. Contrary to received wisdom, however, it has also put a lot of money into improving the water infrastructure. Much of. the current impression of poor sewage management is the result of improved reporting rather than worsening performance. For all that, the current standards, whether or not they are objectively worse than in the past, are nothing like good enough. The government gives the impression of absurd complacency on the subject. The regulation of the privatised water industry does indeed look to have failed public expectations.

Use of the rail network has increased massively since privatisation. For all we like to grumble about cost (and British trains are expensive), the demand is there for their services even at these prices. Service failure appears to be a matter for individual operators, and the rail regulators and the government have been markedly slow to step in even with the most lamentable failures like Trans Pennine. As with water, the wider infrastructure has been underdeveloped. The demand seems to be there but government hasn’t forced the matter. Again, regulation of the railway industry looks to have failed public expectations.

It’s widely believed that the money taken out by shareholders in dividends inevitably represents a depletion of resources that otherwise would be spent on improving the infrastructure. I’m sceptical. The requirement to remain solvent is a discipline seen in the private sector that the public sector can and does fudge. The amount actually taken out in dividends in a properly-regulated privatised industry represents a small percentage of the turnover. Efficiency improvements could easily compensate for them. It’s not a slam dunk argument anyway.

You often hear it argued that it’s too costly to nationalise industries. That’s not a good objection. If the government is buying at a fair price, it’s getting an asset in return for its outlay, so the government’s net asset position remains unchanged (there are separate questions of debt management and cashflow, but those are in normal circumstances second order considerations). The question is whether the government will do better managing the nationalised system than private owners.

To answer that question, let’s look at what nationalisation means in practice. The theory is that the government will run the nationalised industry in accordance with priorities set for the public interest. The mechanism through which this happens, however, requires more scrutiny.

Let’s use the water industry as an example. If nationalised, the water industry would still need some form of corporate structure to manage and maintain the systems. This would still need management teams. These management teams would no longer report to shareholders but instead would be judged against objectives set by a supervising government department (OFWAT would presumably be subsumed within DEFRA). And how would those objectives be drawn up? To the extent they were not internally generated by the department, they would be signed off by government ministers.

Are government ministers capable of this? This is a twofold problem. First, it must be seriously doubted whether all or even most government ministers understand the implications of technicalities sufficiently to make informed decisions. There have been seven Secretaries of State for DEFRA since 2015. Perhaps some of them are brilliant enough to get in just over a year an in depth understanding of an industry that others spend their whole careers developing. I politely suggest that will not be the case for all of them. Bear in mind that many decisions will be taken by Secretaries of State early in their tenure, at a time when their lack of knowledge and understanding is most severe.

In reality, there is a high likelihood of producer capture, as longstanding managers of the water industry form longstanding relationships with those in the government department responsible for supervising them and between them set terms for industry management that give both a quiet life in the short term. Only the most dynamic ministers are going to be able to break through these.

But there is a second practical problem, one still more severe, which is that the idea that government policy is set with real public endorsement is a fiction. The public has a single way of endorsing a government programme: a vote in a general election every few years. Voters will cast that single vote according to what motivates them most. That may be the economy. That may be Brexit. That may be the use of pronouns in official emails. It is unlikely to be on the management of one nationalised utility. And it cannot, because it is only a single vote, be on the management of each utility. There is no real accountability for decisions made.

So decisions are made substantially unaccountably. Again, this leads to decisions that produce a quiet life in the short term. The long term languishes.

Almost all of those dynamics, of course, are present in the current system of privatisation and regulation. I’ve never been asked to vote to appoint someone to the board of OFWAT or seen a manifesto for a would-be board member. Senior executives of the water companies no doubt have established relationships with those regulating them, and certainly the regulators of both the railway and water industries seem to have been too accommodating of the concerns of those that they regulate and have given insufficient attention to the long term interests of the public. Ministers lack the experience to have meaningful impact. I’m not saying that nationalisation will automatically be worse than the current system. I am saying that in most cases it is unlikely to be better.

There are exceptions. Sometimes service providers fail so badly that they need to be taken into public ownership partly to restore public confidence and partly pour encourager les autres. We have seen several examples of this in the rail industry in recent years. For the same reasons that I wouldn’t be racing to nationalise companies, I wouldn’t be racing to privatise these either. The problem is less with the formal legal system and more with the human dynamics.

How could things be improved? The idealist in me dreams of regulator boards being elected. But the realist in me looks at the derisory turnout in the elections for Police Commissioners and sadly concludes that the public just doesn’t care enough. At best, the board would have no real mandate. At worst, the board would get hijacked by organised groups with fringe agendas.

There are smaller steps that can be taken. Ministers could formalise and enforce much more distance between regulators and those they regulate. Consultations could be carried out much more meaningfully by both regulators and government departments – at present they are usually time-wasting window-dressing for decisions already made. And ministers could be left in their posts for much longer. There are examples of this: there were only four pensions ministers between 2010 and 2022, two of whom each serving more than five years in that office, and the pensions industry benefited from having ministers who at least understood what they were making decisions about.

Most simply of all, government could encourage the public to take an active interest in these subjects. It would mean much less of a quiet life for them but if more of us actually paid attention to decisions being made, we might get better decisions.

Politicise the civil service?

The current government is watching its policy initiatives wither. It can’t get the civil service to produce the results it wants. It and its media outriders loudly blame the woke blob for this failure. The exact definition of the woke blob varies but it seems to comprise, in their minds, a vast left wing conspiracy of tofu-munching, WFHing, asylum-seeker-hugging, Remoaning bureaucrats who work night and day to thwart the common sense agenda of a hardworking government.

It’s easy to mock. And even though it’s easy, we should mock. We should also be seriously worried. This kind of paranoid conspiracist mentality is disastrous for the country. I wrote about this last year. Things have only got worse since then.

Pretty obviously, the main reason the government is unable to get its policy initiatives through is because too many of them are half-baked populist claptrap that would not achieve their purported objectives. Civil servants are not being disloyal if they point out insuperable internal contradictions or catastrophic side effects of government policies. They’re just doing their job. “Better I be bold than you be stumped”, as Bernard told Jim Hacker.

Nevertheless, some government supporters have suggested explicitly politicising the civil service to combat this. They should be very careful what they suggest. It’s a crummy idea, but it’s a crummy idea Labour could make work and the Tories couldn’t.

Why couldn’t the Tories make the idea work? Simple. There aren’t enough sufficiently competent Tories of working age to staff the upper reaches of the civil service.

I’m entirely serious. It’s one thing to campaign in slogans. Turning slogans into working policy and implementing that policy is an entirely different thing requiring entirely different skills. And such a politicisation of the civil service would need at least a few dozen people with both the political outlook and the relevant experience. I just don’t believe there are anything like that many Conservatives who fit the bill. The outcomes for them would be far worse than at present.

I mean, look at the prominent working age Conservatives who aren’t in Parliament or government. There are a few journalists, a few thinktank wonks and a few gormless gurners on the likes of GB News. None of them have anything like the high level administrative or project management experience to step into such roles. Most of them couldn’t run a bath.

Behind the scenes, of course, there are SPADs, most of whom are young, filled with self-importance but not remotely ready to lead rather than stick their oars in. Maybe they could draw on local authority experience, although that seems very doubtful. Where are the battalions of competent Conservative-supporting administrators?

This is one of the many side-effects of the Conservatives effectively becoming a party for the retired. By ceding voters of working age to Labour, they find themselves surrounded by working professionals who, no matter how good at their job they may be, lack sympathy with their worldview. Just because they’re paranoid doesn’t mean there isn’t a germ of a point in their paranoia.

And while it was disgraceful, for example, that Kemi Badenoch should allow civil servants to be blamed for the inevitable failure of the government’s approach to repealing retained EU laws, there have been recent signs that normal civil service professionalism is fraying. It was idiotic for Suella Braverman to seek to co-opt civil service help to arrange a private speeding awareness course, but it’s hardly Watergate and it’s the sort of ministerial idiocy that should have remained within the civil service. More concerningly, the government’s legal advice about the release of WhatsApp messages to the Covid inquiry was leaked. Whether or not you agree with the government’s approach (I don’t), the leaking of such government legal advice should be a never event for the civil service. You might regard this fraying of professionalism as the government’s fault. Whoever is to blame, we all suffer.

If Labour come to power next year, Sir Keir Starmer will need to consider how to restore the internal discipline that seems to have corroded in the civil service. It is a task he is well-suited to. Stuffing it full of Labour loyalists at the highest levels, however, would break another of the shrinking number of bonds that tie us together as a nation. Hopefully this idea will end up in the dustbin.