One Way or Another, but not a Third: Why Semi-Private Public Services Cannot Work.

Abhijit Tembhekar, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons

I am not an economist, but I do frequently use trains. This, I believe, gives me enough authority to say that the rail system does not financially or operationally function in an optimal manner. There are many reasons for this, some specific, some structural, and there are many different proposed solutions. If you ask a particular generation of Italians, you might hear that trains only run on time when authoritarian leaders decree it to be so, although I rather hope this is not true. Perhaps there is no one-size-fits-all, silver bullet solution to train delays. What certainly doesn’t help, however, is the bizarre, Byzantine arrangement of public and private ownership and management that we currently have. 

Stations, tracks, and rolling stock all owned and managed by different entities despite being mutually dependent to get anything done; strict government-set targets and requirements that are carried out by private operators, public-private enterprises, and publicly-owned carriers alike; and wildly different standards between different parts of the country (compare the 12-coach all-electric Class 700 behemoths of Thameslink, built-to-order in 2018; and the 2-coach, diesel-only Class 150s from the mid-80s still operated by Northern). It is clear that this model: semi-privatised, but with government oversight, regulation, and indeed active participation too, through the Operator of Last Resort and the new Great British Rail plans- obviously isn’t working very well, likely because of the inherent tensions of an operation that combines both the sluggishness and bureaucracy of government with the austerity and avarice of private operations.

Nor are trains the only sector subject to this nonsensical, distinctly suboptimal arrangement. Childcare has the same problem: a mix of private and public providers, with incredibly stringent regulation, and a government grant for free childcare hours that comes nowhere close to covering the real costs of providing that amount of childcare. Another sector on its knees, with more and more closures, due to this impossible semi-private model.

The same is true for social care- a huge sector where private and public operators exist in uneasy tandem, since the public service is not even remotely enough to cover demand, resulting in government use of private facilities at a fixed cost that simply, factually, is not enough. This essentially forces private companies to house patients that are in the state’s care at a heavy loss, threatening the business model of care homes across the country (and/or/but-usually-and forcing them to increase their rates for their other, full cost patients to subsidise the loss-makers, creating a sort of redistributive tax that no one voted for and has never been properly acknowledged). The insanity of this system should not have to be spelled out, and yet no one in government seems to be taking responsibility for it. In no other instance except start-of-life and end-of-life care does the state nobly declare that it will provide for a vulnerable section of the population, only to run into the awkward fact that this actually costs quite a substantial amount of money, and subsequently decide that the best solution is to force the private sector to do their job for them at an exploitatively and unsustainably low price, only then to have the audacity to be shocked when these private sectors run into financial issues. 

Just imagine if the same model was applied to other state services: welfare? Yeah, you’ll get that from Tesco now (but we won’t pay them enough to provide it, and so everyone else’s grocery prices will go up to accommodate this forced burden). Council housing? Easy! We’ve bought the centre of Manchester for 50p and a Freddo and we’re converting the Hilton into apartments. Such a reductio ad absurdum illustrates that these chimera systems we have are not, in fact, even close to being sensible. Government cannot wimp out of dealing with tough issues by sneakily offloading the cost burden to private companies who then naturally pass on the additional cost to customers.

The sins of the fathers

Like with many faulty systems, the origins of this mess arise simply because of a lack of long-term thought and proper planning. We must start with the obvious question: if healthcare is nationalised, as envisaged by the Attlee government, “from cradle to grave”, why then does it not encompass social care? To imagine that it doesn’t count as health care is obviously belied by the requirements for trained nurses to be present in care homes at a certain ratio, in a similar manner to how nursing ratios are mandated for hospital wards. Added to that our modern understanding of dementia and related debilitating conditions as medical conditions that can be treated and possibly prevented, rather than a ‘natural byproduct of old age’, and we see that all healthcare is nationalised except when you’re old. Rather than cradle to grave, we have a cradle to retirement system. 

The explanation is likely uncomplicated: back in 1945 when the NHS was being shaped, the lifespan was significantly lower, and people just didn’t reach an age where they needed round-the-clock care in the numbers they do today. Added to that a Victorian-era aversion to thinking properly about mental afflictions like dementia, and we see that social care just simply wasn’t on the radar of Bevan and co in their postwar discussions. That does not, however, excuse the subsequent refusal to meaningfully discuss the issue: while we are rightly proud in the UK of our brilliant NHS system, we assume that it is set in stone, in its final form, that what we see is what we get, and that no further changes (beyond discussions of extra funding) are necessary. This has calcified our healthcare system into continuing to ignore the issues that didn’t matter as much in the 1940s, despite the extraordinary demographic and medical shifts that have happened since.

The story with childcare is similar: the welfare state’s founding fathers were drafting their system at a time when (even with wartime changes) the societal norm was for women to stay at home and take care of the children. In such a system, childcare was obviously nowhere near the top of their list of concerns, when 50% of the country were doing it for free anyway. Coupled with multi-generation houses and the convention to only get married once you’d secured an independent income (meaning older siblings stayed at home often deep into their 20s) they had vast childcare reserves in people’s homes. This is now no longer the case, but again the difficulty of the issue has discouraged governments of all stripes from dealing with the far-reaching fall out of this societal revolution.

With trains the story is more political- the current system is a product of the uncomfortable coupling (pun intended) of Major’s privatisations of the early 90s, exceeding the goals of even Thatcher, and almost completely disposing of government interest in the railways; and New Labour’s half-hearted attempts to correct some of the excesses of full-throated private rail. Nationalisation had since become a bogie man, emblematic of the half-remembered financial hell of the 1970s, and so policy solutions to the immediate issues with private rail had to tip-toe around big scary solutions and instead take small bites out of the corporate rail monster. 

Crossing state lines: a new Epicurean paradox

I present to you that most interesting of philosophical problems: a trilemma. You can have two, but only two, of the following three options in the social care sector. Which do you choose?

1. Strong workers’ rights and industry regulations, e.g. a minimum wage, staff to patient ratios, nutritional standards, etc;

2. A state-provided safety blanket for the most vulnerable: a guarantee that those who need it most and those who have the most severe conditions will be provided for in their care;

3. That the businesses who run care homes remain profitable.

Why can’t we choose all three, you ask? Well we are attempting to force the issue of all three, and it isn’t working very well. If you dispute this issue, I challenge you to find one care provider who is satisfied with the current system, or indeed one person who has had the experience of having a loved one with a particularly severe condition in a care home who thinks that it’s a good, well-running model.

So, pick two. I think we can all agree that Number 1 is non-negotiable. While it would be so easy to have profitable care homes and a government safety net simply by reducing the number of trained care professionals, and paying the remaining staff less, I’d wager it’s relatively uncontroversial that this would be a bad idea, both for those working in the sector, and those cared for by it. 

Similarly, we could have profitable care homes and strong regulations by getting rid of the government safety net. It’s just one change, after all: government should simply leave families to it, only get involved in the sector via regulation. Those who have no assets to pay for their care, and those who have conditions so severe that care homes wouldn’t want to accept them, would suffer unimaginably, however. And as an empathetic society, as a country which prides itself on its care for its citizens through a robust welfare state, I think we can safely rule this option out. Providing for the most vulnerable is thankfully ingrained into our national ethos.

So that leaves option 3 as the one that must go- care homes cannot be profitable. And since we cannot reasonably expect anyone to run a care home at a loss, nor can we allow care homes to close, that leaves one option: that we nationalise the care sector. Care homes, just like hospitals, are national assets after all, they provide vital care for a large swathe of our population, why should we have outsourced such a vital task to private companies anyway? Does our duty of care to the sick not also apply to the elderly? Do the same moral imperatives that led to the foundation of the NHS not also necessitate action here?

Now you might worry that this all seems rather Soviet, putting an entire sector out of business and nationalising it in one fell swoop. However, it should not be the state’s responsibility (or perhaps even desire) to keep businesses afloat, not even in a capitalist economy. Indeed, such a principle is against the very spirit of capitalism in its pure sense, for capitalism relies on the failure of businesses. If a business is not profitable, it has failed, and should necessarily fail, such that others can take its place with better ideas. “Creative destruction” can only function if there is destruction; businesses failing are a necessary part of the capitalist ecosystem just as wildfires or species extinctions are to natural ecosystems. Too many at once and there’s an issue, but too few can be equally as damaging. 

If you’re still not convinced that letting an unprofitable sector go out of business by nationalising it is not right then consider this: should it be the government’s responsibility to keep Asda in business, even if that brings higher prices for most people? Not supermarkets as a whole, just Asda? If your answer is “obviously not that would be a corporatist hellhole of a government” (cough cough Tesla cough cough), then you accept the premise that it is not government’s responsibility to keep a business profitable. Now extend that to a sector: should it have been the government’s responsibility to keep the ivory trade in business? Should we even now remove restrictions on the ivory trade because to put it out of business through government regulation would be beyond the pale of capitalist acceptability? Again, the answer is obviously not. 

Even in a case with a less moral dimension, we can once again compare social care to health care. Was Attlee wrong to put the many thousands of independent, in many cases family run, medical surgeries across the country out of business when they were nationalised? Indeed this is a tougher case to prove than the care home question, for these businesses were far healthier and more profitable than care homes are now. Was it, then, a dereliction of the state’s duty to businesses to nationalise an entire sector like that? Since, unless you are a fervent libertarian, the answer once again is no, then there is no ideological case against nationalising care homes. 

Just like with the creation of the NHS, this would not come with scything job cuts- in most cases the current staff would retain their jobs, the same infrastructure will still be used, just with the branding taken off. In many ways, this proposal is more like a corporate change-of-hands than a major shake-up of what actually happens on a day-to-day level. 

My point here with the trilemma is that with all public services there are necessary boundary conditions within which changes can happen. We cannot, for example, decide to make savings in the education sector by no longer requiring DBS checks for teachers, just like we cannot achieve efficiency in the defence budget by delegating intelligence work to offshore, perhaps Chinese labour. And in these semi-private cases if, when all boundary conditions have been applied, there is no viable solution via private companies, then we must accept nationalisation as the best route forward. If appropriate regulation and the strong safety net allow for no profitable path forward, then we might have to think outside the capitalist box.

A price worth paying?

There will naturally be those who worry about the increase in state expenditure this would entail, and this is a valid concern. However, there are several points to ease this worry. Firstly, we’re already paying for the failure of this system, so we might as well be paying for a successful one. The very nature of trains, care homes, and nurseries is that almost everyone is either using them, has used them, or will use them. This is only going to be ever more true as public transport networks are developed in the fight against climate change, and as lifespans increase further. This puts these sectors in the rare position of having guaranteed, near universal demand. Thus, in many ways, since we pretty much all pay for these services anyway, it does not matter in terms of raw cost to the average person whether they are paying for them via their bank account or via taxes. Indeed, due to the fact that some taxes are progressive whereas train ticket prices are not, there may even be a slight fall in the cost to those who earn less. 

N.B. to offset the potential counter-argument that ‘if any service which has universal demand should be nationalised, does that mean food as well’ we should remember the fact that certainly for trains, and often (due to geographic restrictions) for care homes and nurseries as well, there is no, or very little, choice of service for the consumer, whereas there is of course plenty of choice in the food sector. 

Secondly, we already pay inflated prices for these systems due to their inefficiencies and failings (in the case of trains, because train operators need to pay for the rights to operate on the rail network, extra costs that wouldn’t be needed if all train and rail infrastructure was operated by the government; in the case of care homes and nurseries as mentioned before due to government-mandated prices for some patients/hours of childcare necessitating higher prices to non-government-mandated customers). Transferring these sectors to public ownership would eliminate these inefficiencies, and potentially reduce how costly these would be to the state’s budget. Similarly, due to the fact that government is already paying a certain amount to subsidise these sectors, the increase would not be as dramatic as nationalising from scratch.

Thirdly, when these services are in private operation their methods of accountability and democratic input are somewhat stunted. The existence of the rail ombudsman, for example, carries with it the inherent implication that private companies cannot be trusted to sort out issues by themselves without the threat of government intervention if they fail to do so. Indeed anyone who’s had to navigate the Knossos-esque labyrinth of Delay Repay for their train, or has had to sit through the relatives meetings at care homes that are reminiscent of the worst parts of school council, can vouch for the fact that accountability and openness to outside suggestion are not the strong suits of privately run services. However, were these services to be put under properly public control, they would then be subject to the more rigorous accountability standards of government agencies (leaders subject to select committee grillings, written questions aired in Parliament, etc.), and, moreover, the ultimate accountability that comes from elections. 

Government control of these bodies would also enable us to have some sort of say in how they are run, or at least as much of a say as we do in other governmental sectors like education or health. Parties would begin to include their suggestions for trains and nurseries and social care in manifestos, leading to greater public debate about their management, and thereby we would all have a concrete say in their future. Incumbent private contractors who severely mismanage a railway cannot be voted out if enough passengers dislike them; incumbent governments who preside over such failure can be. Having an identifiable ‘social care’ minister, or ‘nurseries’ minister allows for a target for public questions and complaints, and some degree of transparency as to what their future plans are (since white papers and policy documents are publicly published, whereas obviously companies don’t have the same obligations). None of this offsets any of the additional cost to the public budget that nationalisation would entail, of course, but we might decide that such additional accountability and democracy might be worth paying for.

The cost argument is still a powerful and valid one, but considering all these factors, should go at least some way to assuaging fears that this would bankrupt us all. After all, exactly the same arguments are put forward before any expansion of the state- they were made in the 1910s, and the 1940s, and the 1990s, and will be made likely till the end of time. That is not to dismiss them entirely, but to add the consideration that fear-mongering about state expansion frequently seems archaically misguided several decades down the line.

How is an ice cream different to a train?

There is probably a wider point here about the definitions of what can and cannot be privately run. We have gone over the moral considerations of whether the state should be outsourcing care of its own citizens to private businesses, but on a practical level, there are some obvious flaws with trains, in particular, being privately run. 

As well as capitalism relying on the ability to fail, as detailed earlier, it also relies on the ability to compete. Free and fair competition in the market is the cornerstone of capitalism, the feature that drives prices to the best possible levels, that allows for so many businesses to flourish. This is why monopolies are so bad for economies- because fair prices come from fair competition. 

A core part of competition, though, is being able to enter the market in the first place. Three fruit-sellers at a market are better than one for sure, but if there is no ability for a fourth to set up a stall, then what you have is closer to a cabal than a fair market. This is a good analogy for the current state of how rail contracts work.

Just think about it- could you reasonably compete for the rights to operate a rail company the next time a contract comes up for bidding? If I wanted to open an ice cream café, chances are I could make a good go of it with some hard work and bootstraps of sufficient tensile strength. However, if I wanted to found a train operator, even with years of research and preparation, even with countless hours of hard graft, even with steel-stringed bootstraps, there is not a chance I could do it. The entry barriers are simply too high, the initial costs and materials too inaccessible. And if there is no space for reasonable competition, there is no basis for capitalistic operations.

It’s simple: if the necessary conditions for capitalism are not present in a sector, then capitalism should not happen. Yet for some reason, we continue to try to shoe-horn capitalistic management of the railways into an environment it simply cannot thrive in, and stand back, amazed, when it doesn’t work as intended.

This town ain’t big enough for the both of us

These services- trains, care homes, and nurseries- have to be run one way or another: the halcyon 90s days of Third Way structure have simply failed to deliver the intended results. It has to be fully private, or fully public. And given our stomachs and morality rule out privatisation (unless you decided to cut out option 2- the safety net- of the trilemma presented earlier), that leaves only nationalisation remaining. I argue this not based on any sort of ideological compulsion or adherence to economic doctrine. Nationalisation, or privatisation for that matter, should never be seen as ends in themselves, only means to the best management of a particular sector. However, I strongly believe that, considering all the evidence and arguments, there is a strong case to make for nationalisation in these three sectors. We have applied all the necessary boundary conditions and only one option remains. It seems insane not to try it, and exist in a permanent state of inadequate trains and not-quite “cradle to grave” care, simply because nationalisation can often be a big scary nasty word. 

By Thomas Britton