How did we get into this mess? The railways creak with poor service or cancelled trains; sewage in our rivers or seas is in the news almost daily; our energy companies rake in bumper profits whist our bills go through the roof.
A Festival of Debate event on 11 May, Think Tanks: Malign of Benign? will examine one of the key factors that created this dismal situation.
Thatcher’s privatisation
Some disastrous policies promoted by the Conservatives have a remarkably long life, in spite of the proven damage they have done to the UK’s infrastructure and people’s quality of life.
One of those is privatisation.
Margaret Thatcher wrote in her autobiography: “Privatisation was one of the central means of reversing the corrosive and corrupting effects of socialism … the state’s power is reduced and the power of the people enhanced … privatisation is at the centre of any programme of reclaiming territory for freedom.”
Her thinking, and the policy direction she took after her 1979 election victory, drew on a body of conservative economic and social thought popularised in the 1970s and 1980s by right-wing think tanks that are still actively promoting their vision of a low tax, free market Britain unencumbered by the state playing any role in economic activity.
The think tanks that influenced Thatcher
The key think tanks behind these policy ideas were the Centre for Policy Studies, the Institute of Economic Affairs and the Adam Smith Institute. Their influence was amplified through a network of contacts extending through academia, journalism and industry into the Cabinet. The Centre for Policy Studies, for example, was established by Keith Joseph MP in 1974 to act as a think tank for the right of the Conservative Party.
The Institute of Economic Affairs was founded in 1957 and at its 30th anniversary dinner Margaret Thatcher said:
“What we have achieved … could not have been done without [the Institute of Economic Affairs].”
The Adam Smith Institute, set up in 1977, published policy documents throughout the late 1970s and 1980s. By 1989 it claimed that it had influenced over 100 policy measures under the Thatcher governments.
All three are still active today, while other more recently formed think tanks, like the Taxpayers’ Alliance, share these same core beliefs.
Privatisation: a win for private companies
The canonical zeal for privatisation which these think tanks promoted had an enticing simplicity. No more subsidies for state-owned industries would mean tax cuts. People would be able to select their preferences in a marketplace providing greater choice – a marketplace that they would have a direct personal stake in as shareholders in the privatised firms. At the heart of this view was a belief that private companies would finance the large investments needed to sustain their new acquisitions.
Now, over three decades later, we can see what the impact of these policies has been across a range of privatised industries. The key point though is that these were public services which were privatised.
The privatisation of Britain’s water companies had nothing in common with the free-market romanticism and shareholder capitalism Thatcher promoted. Until her government privatised them in 1989, she starved England and Wales’s regional state-owned water and sewerage utilities of much needed public investment to upgrade the infrastructure.
When she transferred ownership of the ten public water utilities to the private sector, she wrote off their existing debts (worth over £5bn) and threw in some seed money (£1.6bn) as well.
The companies were put up for sale at a substantial discount and the new regulator OFWAT established an extremely generous pricing regime. As a result, the pre-tax profits of the ten sewerage and water companies rose by 147% between 1990/91 to 1997/98 with sewerage and water prices rising respectively by 42% and 36%.
The disaster of privatisation for consumers and the environment
Over the ensuing three decades the experiment has worked well for investors but has been disastrous for consumers and the environment. The monopoly nature of the water companies means customers have had no choice of supplier, no choice but to take the water, and no choice but to pay more for it once they were privatised.
The track record of the Environment Agency over sewage in our rivers and seas has been, frankly, abysmal. As a Financial Times opinion piece points out: “It is only thanks to third parties – including the musician Feargal Sharkey, the Rivers Trust, Surfers Against Sewage and independent scientists who have paddled out and taken samples – that the scale of the horror has been exposed.”
The continued damage of think tank influenced policy
The problem is that the damage is still being done by the policies think tanks promote. Take freeports as an example. We see yet again, like with privatisation, all sorts of rose-tinted predictions about the positive impact of job creation the latest new tranche of freeports will have.
In November 2016 Rishi Sunak, then a backbench MP, wrote a report for the Centre for Policy Studies extolling the virtues of The Free Ports Opportunity: How Brexit could boost trade and manufacturing and the North.
They remain a pet project for him, but the gap between the real and imaginary benefits of freeports is very wide. Indeed, when challenged about the evidence for the number of jobs that two new Welsh freeports would create, the government cited the estimates of the freeport bid winners, who clearly have an interest in not underselling themselves.
Sunak has form on this. He fudged the numbers in his Centre for Policy Studies report by claiming that freeports could create 86,000 jobs in the UK. He arrived at this figure by taking the number of jobs in US freeports and then adjusting them, pro-rata, to the UK workforce. But US freeports are different propositions to the ones in development in the UK.
Freeports are a flagship government policy, and will receive up to £75mn in annual tax breaks and £25mn to each freeport in seed funding, but the government is unable to provide any solid evidence for its calculations of how this will be money well spent.
Truss’s premiership was straight out of the think tank playbook
Finally, we need to remind ourselves of the short-lived, disastrous Truss government which right-wing think tanks boasted about their access to and influence over. The policies Liz Truss and her chancellor Kwasi Kwarteng adopted, incubated by these think tanks over the years, were praised by them until the economy crashed.
We need to remind people of the central role of think tanks in the privatisation debacle and highlight the consequences of what happens when governments implement the snake oil policies they promote.
The MediaNorth event, in partnership with the Festival of Debate, will explore some of the issues raised in this article. Think Tanks: Malign or Benign? is a free online event on Thursday 11 May and details on speakers and how to book are here.
Granville Williams edits MediaNorth: www.medianorth.org.uk
