CBI boss slates utilities but knocks down Labour's re-nationalisation plans

The director-general of the Confederation of British Industry (CBI) made a series of “concrete proposals for reform” about the UK’s infrastructure, utilities and public services in a speech last week, after criticising their accountability and operational performance but arguing against the Labour Party’s public ownership solution.

Delivering one of the 2019 Roscoe Lectures at Liverpool John Moores University,

Carolyn Fairbairn (pictured) said Labour was asking the right questions: “The Labour Party’s decision to focus attention on our railways, water, electricity and gas is a considered one, because they are industries in which, in recent years, accountability has felt most elusive. During last year’s crisis on the railways, Northern Rail was forced to cut 170 trains services a day. Energy bills are likely to increase, despite the government’s price cap. And though water companies have cut leaks by a third since privatisation, we still lose 3bn litres a day. Water ultimately paid for by us, through our bills. So, we agree. These industries are not always working as they could and should.”

Fairbairn proposed reforms including:

• Dividend controls – “It isn’t right when shareholders are paid at the expense of investment that would benefit consumers. Dividends to shareholders should be stopped when a company fails to meet its commitments to customers or anyone else, and the cash should instead be diverted to address the areas where customers are being let down, until things improve.”

• Local investment – utilities should employ more local businesses, create more local jobs and apprenticeships, and contribute more to the local environment. She said: “It would be the precise opposite of the centralised, nationalised model in which the big decisions are taken not in the area where they have their effect but in a distant arm of the state in Whitehall.”

• Automatic customer compensation for outages and service provision failures.

• Automatic customer transfer to the cheapest deal at the end of a contract term, based on previous usage.

Fairbairn called Labour’s public ownership proposals “the biggest departure from economic consensus that politics has seen for 30 years,” arguing the market rather than Parliament is best placed to ensure accountability and efficiency. She also argued the plans would cost the country over £175bn which could be better spent elsewhere, and focused in particular on the detriment to the 8m pensioners with money tied up in utilities.

These would “end up poorer in old age” if Labour nationalises the industries at below market rates. She said: “The sense that the current system is run not for consumers, but for shadowy investors exploiting ordinary people for personal gain, is not the true picture. Those investors are not the unaccountable fat cats of fiction. They are you and me. They’re anyone who pays into a pension, donates to one of our big charities or participates in an employee ownership scheme.”

The director-general concluded: “The Labour Party’s current proposals get the balance wrong. And will harm the very people they are intended to help. They already have prompted investors in our country to reach for their coats. The conversation between business and the Labour Party must continue. We believe they are asking the right questions. But by working with business – and not against it – we believe they can find much better answers.”

Public ownership campaign group, We Own It, said this was the first time the CBI had admitted some of the problems with privatisation. Director Cat Hobbs said: "It’s great that the CBI has at long last abandoned their ideological commitment to the failed model of privatisation and recognised the lack of accountability in privatised services. It’s a real shame that they are missing the real opportunity to tackle it – embracing democratic public ownership as part of a mixed economy. The CBI’s fear-mongering statement shows that they are far more interested in protecting the interests of wealthy shareholders than the public, or of the wider business community.”

• A number of media outlets reported last week that National Grid’s shares fell by more than 3% on Thursday after the BBC reported Labour was to announce plans to renationalise the energy network giant. The online article was removed quickly, reportedly because Labour leader Jeremy Corbyn delayed a speech he was due to make on Thursday announcing the policy.