Privatisation is also bad for the private sector

At this week's Scotsman conference on the economics of independence David Watt of the Institute of Directors was yet again wheeled out to assert the primacy of the private sector and how it should take over the delivery of public services. "Moving the public sector to the status of a facilitator rather than the more expensive deliverer, this will see a real change in our economic landscape". 

Of course no evidence was offered on how this was going to miraculously change our economic landscape. In fact the only evidence he quoted was the failure of the private sector in this field of activity. Banks, care homes and PFI were accepted as failures, but apparently "we must learn from these lessons". Well, actually we have learned from these mightily expensive "lessons", and the conclusion is that the commercial realm should keep out of the public realm. The privatisers often invoke the Third Sector in this argument, knowing full well that this is simply a trojan horse to open up services to procurement challenge under EU rules.

Now the arguments against privatisation have been well rehearsed including an even longer list of failures that David Watt admitted to. The evidence shows that once services are run for private profit, the quality of care and service is reduced, the workforce are adversely affected and local economies suffer. If you want more, one of many UNISON guides and case studies can be found here.

The Jimmy Reid Foundation has also offered us a wider context this week with their scrutiny piece on the subject, "Reality is soo 2009". As Robin McAlpine puts it, "All public money is now being tested not for how well it can serve the public but for what scope there is to convert it into private profit. The private sector is unable and unwilling to grow the economy so it seeks to grow its profits by other means – by converting public asset to private profit".

I am going to offer another argument against privatisation. It's actually very bad for the private sector as well. Instead of investing in their industry, private companies are being encouraged to cream off low risk tax revenues. In doing this they learn that it is easier to make profit from public commodities that we all need like health and education. No need to innovate new products for the consumer in an uncertain market. So not only does the taxpayer have to pay the profit premium, but privatisation undermines private sector innovation and investment in products that might usefully meet our needs.

As others (Lansley, Murphy) have highlighted, companies have been gambling their cash rather than investing in manufacturing. As that strategy ran into trouble with the banking collapse, they need a new safe bet in the public sector.

Scotland needs a vibrant, wealth producing private sector, investing in real goods and services. It shouldn't be chasing safe revenues at the taxpayers expense.