In October 2021, the government announced it was to sell off its half of the Eurostar. This shouldn’t have come as a great surprise, as the government seems keen to sell off any public asset that hasn’t been nailed to the ground. But Class warned at the time that selling off the Eurostar was a bad idea, because rail infrastructure is fundamental to the success of our economy. We pointed out: “The French government knows this, which is why it is not selling off its half of the Eurostar.”
And so it has come to pass. The National Audit Office has found that the government’s sale of its stake in Eurostar left the taxpayer £2.3bn out of pocket and has deprived the Treasury of potentially £743m in future dividends from the high-speed rail business. To put that in some kind of context, the total accrued by introducing the bedroom tax was projected at £410m – and that’s the most generous estimate.
This is the second disastrous high-profile sale of national assets in the past 18 months, following the selling off of 70% of Royal Mail for an estimated £1bn less than it was worth. The government is apparently so desperate to privatise public services that it will do so even at the expense of the taxpayer.
But there is a problem with selling off the Eurostar that is bigger than the terms of the sale itself. In making this decision, the government is choosing to dispense with the family silver. We are now in the bizarre situation where the ongoing benefactor of a rail system that was built with British tax revenue is a Canadian investment management company, Caisse de Depot et Placement, who now part-owns Eurostar. In fact, three quarters of UK railways are now foreign-owned.
It’s important to be clear that this trade-off is not leading to more efficient services. In 1992, the government justified privatising the rail system by arguing that it would cut costs and create profit. In reality the opposite has happened. The most cautious view would be that net Government support to the railways has more than doubled in real terms since privatisation (from approximately £2.4 billion per year during the five-year period 1990/91-1994/95, to around £5.4 billion per year during the period 2005/06-2009/10, all at 2009/10 prices).
The energy sector has also experienced troubles. The government has recently made an agreement which will result in China building nuclear plants at Hinkley in Somerset and Sizewell in Suffolk. But it has emerged that the China General Nuclear Corp, which is one of two Chinese power firms expected to invest in the plant at Hinkley, left out hundreds of critical steel rods when building its first reactor near Hong Kong in 1987 because workers misread the blueprint. Professor Steve Tsang, senior fellow of the China Policy Institute at Nottingham University, told the Guardian:“[This a prospective] partner who, when they built the first nuclear power station in China, forgot to put in a large percentage of the protective steel. Potentially we are putting ourselves in a very difficult situation.”
In many ways, Britain’s obsession with privatisation makes it an outlier. Much of the rest of the world is eschewing privatisation in favour of innovative new and hybrid models of public ownership. To take water as one example, Professor Andrew Cumbers, who wrote the paper Reclaiming Public Ownership for Class, writes: “Since 2000, 86 major cities around the world have taken back their water systems from private contractors. This started in Latin America with violent uprisings in 2000 against massive hikes in water prices in the city of Cochabamba in Bolivia but then spread to La Paz and other cities and regions throughout the continent. Subsequently cities as diverse as Atlanta, Houston, Indianapolis, Paris, Bordeaux, Toulouse and Berlin have followed suit. In Uruguay and Mali, national water services have also been returned to public hands after failed privatisation experiments.”
This is not just because privatisation has failed to bring about the profits and efficiency these countries and cities expected, but also because national assets are valuable in and of themselves. As Cumbers notes, “Cash-strapped cities and regions are rediscovering that public utilities can provide profitable and sustainable revenue streams to cross-subsidise other services in times of austerity and budget cutbacks by national governments. In Frankfurt, as in many other German cities, the local stadtwerke finances local swimming pools, parks, libraries and other public services.”
This government will say it had no choice but to sell Britain’s half of the Eurostar. Don’t believe it – the truth is we are still clinging on to an outmoded form of ownership that an increasing number of countries are choosing to reject.