Issue 183 of SOCIALIST REVIEW Published February 1995 Copyright © Socialist Review

Going public

Where is Tony Blair taking Labour and how far can he go? Peter Morgan explains the background to the Clause Four debate
The Durham miners gala in 1947: dancing in the streets to celebrate nationalisation

Labour's verbal association with nationalisation is enshrined in Clause Four. Its practical association goes back 50 years.

Labour was swept to power in the election of 1945 with a majority of 180 seats. A mood for change gripped the population following the war, and expectations were high. As Labour MP Hugh Dalton wrote in his diary:

Here was a real chance for Labour to shift power in favour of working people and take control of the commanding heights of the economy.

The Second World War showed that state intervention was an effective way of managing the economy. During the war 49 percent of the working population was engaged in some type of employment for the government, with large sections of the economy under government control. In the railways, for example, a system of centralised control was introduced over the private rail industry in 1941 because of the inefficiencies of the system. The question of public ownership of many essential services had already been raised in concrete terms.

Following the war Britain's economy was in a poor state. A quarter of its national wealth had been destroyed, along with two thirds of its export trade. Something like 4 million homes had been destroyed by German bombing. The policy of the new administration centred on the need for greater public ownership.

Despite the long history of socialist rhetoric, and although Clause Four was written into its constitution, Labour had simply made no plans for implementing a large scale nationalisation programme--no policy documents existed; no blueprint was at hand. When the leadership sent people to search the archives at Transport House (labour's headquarters) for the products of Labour thinking over the years, all they found were two copies of a paper written by John Griffiths, one of them a translation into Welsh. The Minister of Fuel and Power, speaking on coal nationalisation in 1948, confessed, 'We thought we knew all about it; but the fact of the matter was that we did not.'

Privatisation always met with opposition

The Bank of England was nationalised first in March 1946, civil aviation came next in August 1946, then coal and Cable and Wireless in 1947, followed by transport and electricity in 1948, gas in 1949. with iron and steel to follow in 1951.

The mines and the railways were two of the most important public utilities--coal accounted for 90 percent of Britain's energy needs. But by 1945 both were thoroughly dilapidated. They had been starved of investment for many years, they were unprofitable, run by many companies which paid poor wages and had a bad record of industrial injury. Even the mine owners recognised that some form of centralised control was necessary. The Economist commented shortly after Labour took office:

Much of the bill to nationalise the coal industry was taken up with the transfer of assets and compensation. The former bosses were not disappointed as the sum handed out proved to be extremely generous--£164 million. The National Coal Board was established and on 1 January 1947 at pits across the country it was proclaimed that, 'Today the mines belong to the people.'

Control, however, was still in the hands of the former bosses. The new chairman was Lord Hyndley, a former chairman of the largest group of private collieries, and there was no provision of miner representation on any of the NCB committees above pit level. The old owners were happy to get rid of unprofitable companies, received generous compensation, and were still able to exert some control over what the state now owned.

Coal production rose over the next five years, because of increased productivity--output per man shift rose from 1.07 tons in 1947 to 1.21 tons in 1951. Lord McGowan, head of Imperial Chemical Industries, declared that it had been right to nationalise the mines, and that under private ownership weekly production would have been a million tons less. The workers were less than happy, however, and within a year of nationalisation nearly half of Yorkshire's miners were involved in an unofficial strike sparked off by increased workloads. Between 1947 and 1951 the coal industry was hit by 8,000 unofficial strikes.

The railways were in an even more dilapidated state. In 1938 only one of the four main private rail companies had operated at a profit. In the postwar period the only option was to continue with massive subsidies or nationalise. It was no wonder, then, that when the government offered £1,000 million in compensation to the owners there was very little opposition. The owners were glad to be rid of these loss making ventures, and they were able to put the compensation, which had all been paid out of taxation, into more profitable private capital.

The Transport Act of 1946 transferred the railways, canals and most long distance road haulage into state ownership. But the various sections of transport were under the control of separate boards which each had a directive to compete against each other--hardly the unified transport policy favoured by Labour voters. A survey showed that fewer than 15 percent of railwaymen thought they had any share in the running of their industry.

When Labour nationalised the Bank of England in 1946, the stockholders received enough compensation to keep them happy. Control at the Bank remained in the hands of the former bosses with the governor, the deputy governor and all other leading officials reappointed to their posts.

The nationalisation policy of the Attlee administration, therefore, provoked little anger among the bosses. Compensation of £540 million was paid out for electricity and £265 million for the gas industry. The nationalisations created a cheap infrastructure to get Britain's economy moving again--largely for the benefit of private industry. It was all the old and bankrupt industries that were nationalised--the most unprofitable 20 percent of British industry.

For workers, however, there seemed to be little change. A series of studies by the Acton Society undertaken between 1950 and 1952 showed there was a widespread feeling that public ownership had merely provided 'jobs for the boys' and the 'same old gang' in power again. Even the editor of the Economist remarked to an American audience in 1949:

Thus nationalisation signified no new beginning for Labour. It didn't mark a shift in the distribution of wealth in favour of the working class. Control remained essentially in the hands of many of the same capitalists who were then able to use the compensation they received from the government to invest in more profitable industries. Workers were accorded no greater say in decision making, and gained no economic benefit. Labour's plan had nothing to do with socialism--it provided a state overview and assistance for the revival of British capitalism.

Between 1950 and 1970 the basic ownership pattern of British industry hardly changed. The Wilson government did renationalise steel in 1967 after the Tories had privatised it. But even this was done with large concessions to the former owners. As Clive Ponting admitted:

It was in the 1970s, as the British economy lurched into a major recession with the slowest economic growth since the war, that the old nationalised industries were seen as too inefficient and too bureaucratic. They could not play the role of directing the economy that they had 30 years earlier. They were an unpopular albatross around Labour's neck. In 1974 the Labour chancellor Denis Healey announced massive increases in the prices of coal, electricity, steel, postage and rail fares, in order to reduce the need for state subsidy. Combined with attacks on health and education Labour paved the way for the Thatcher attacks of the 1980s.

Scots march to keep water in public ownership

The privatisation programme adopted by the Tories after 1979 was not some coherent thought out strategy, rather they stumbled across it by accident during the course of their term of office. It became a useful means to raise large sums of money for the Treasury (£40 billion had been raised by the late 1980s). It also had a certain popular appeal. The years of neglect and under-investment that plagued the old nationalised industries and their bureaucratic, impersonal structures meant that few mourned their passing. The Tories also claimed that large sections of the British working class wanted to be part of a share owning democracy, embracing the ideals of capitalism.

The Tories used the privatisations to attack people working in these industries as well as using the sell offs to line the pockets of their supporters. They privatised British Telecom in 1984. British Gas followed in 1986, the water companies in England and Wales in 1989 and the electricity industry in 1990.

These policies were by no means unopposed, especially by the workers in the various industries, who saw the process as an attack on jobs and conditions. Bosses have used privatisation to slim down workforces as well as increase the profits of those at the top. This has been the story of all the former nationalised utilities.

There are now 29 private utility companies comprising British Gas, British Telecom, the ten regional water companies and the 17 electricity supply or generation companies. All those at the top of these companies have benefited. In 1993-94, for example, the leader of Anglian Water, Bernard Henderson, made a profit of £160,502 on his share options; the chair of East Midlands Electricity, John Harris, supplemented his salary of £221,302 with a share profit of £303,896; whilst the chair of British Telecom, Iain Vallance, awarded himself a pay rise of 17.5 percent on his salary of £663,000.

Following privatisation, control of the utilities has effectively moved to the City as the big shareholders are now City institutions. Regulation is through government appointees who are not publicly accountable. Labour Research stated recently:

This is why so many socialists feel that nationalisation is worth defending, however limited its approach has been.

Nationalisation, in theory if never in practice, was seen as an attempt to run the capitalist system under some sort of planned control for the benefit of people as a whole. The problem with the nationalisation of the 1945-51 Labour government is that it was on capitalist terms. There were no democratic controls over nationalised industry and workers didn't have a say in the running of 'their' industry.

Today the Tories are much more frightened of opposition to privatisation than they were ten years ago. One reason they abandoned Royal Mail privatisation was that they were aware that privatisation would have to have been accompanied by a full scale assault on a militant group of workers.

In addition, sections of the British ruling class recognise the importance of state spending and subsidy for sections of British capital. The rail industry cannot exist without substantial government subsidy. The bosses see the need for an efficient transport network because they need to get their workforce to work each day, and move freight around as quickly and cheaply as possibly. Privatisation, therefore, even in capitalist terms doesn't make sense.

Ultimately, however, the fight for better public services and utilities depends upon the organisation and strength of the working class, regardless of the form of ownership under which they work. The fight to defend Clause Four and public ownership today is the fight to resist Tony Blair's attempts to shift the Labour Party to the right. It is a fight for better wages and conditions, for a transfer of wealth back from the rich to the poor. It is also a fight for a better future, one where workers run, control and own the industry in which they work. And for this to be achieved it must be linked with the fight for socialism.

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