Sunday 22 October 2017

Nationalisation: What does it actually mean?

The leaked Labour manifesto promises to nationalise a number of currently private businesses.

By Kameron Virk

The leaked draft of Labour’s election manifesto includes commitments to nationalise or renationalise many British industries.

But what does that mean?

What is nationalisation?

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Nationalisation is the transfer of a private business to state ownership or control. It is normally applied to the takeover of major branches of industry and companies rather than smaller businesses.

Which industries does Labour want to nationalise, according to the draft?

The draft includes nationalisation plans for the energy industry, the railway and bus networks and Royal Mail.

Would this mean the government would just take over running all of those industries?

Rail networks would be nationalised as each private franchise expires. Publicly owned bus companies would be set up. Royal Mail would return to public ownership (it was privatised fully in 2015) and a state owned rival company to the existing Big Six private energy firms would be created.

What do nationalisation supporters say?

Unite boss Len McCluskey said the manifesto policies in general were “really really exciting” and described rail renationalisation as “the most popular policy out there”.

A YouGov poll in 2015 showed 58% of people supported re-nationalising rail, water supplies and other utilities.

Even though the railways are currently privately owned, the government still provides spends a large amount of money operating, maintaining, renewing and enhancing the railway – to the tune of £4.8 billion in 2015-2016.

What do its critics say?

Josh Hardie, deputy director general of the Confederation of British Industry (CBI), said: “Proposals to damage the UK’s flexible labour market and competitive markets will threaten jobs and prosperity.”

Critics of nationalisation say keeping businesses and industries privately owned leads to increased efficiency and less government subsidy.

Has nationalisation been done before?

Many industries were nationalised during the 20th century.

They include railways, coal mining, the electricity, gas, iron and steel and civil aviation industries, telecommunications, the Bank of England and healthcare, which led to the formation of the NHS.

All of this was done by the Attlee Labour government in the late 1940s.

Have any famous names been nationalised?

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Rolls-Royce was nationalised in 1971 by the Conservative Heath government after problems in its aviation engine arm left it in administration and on the brink of total collapse.

Similarly the Northern Rock bank was nationalised in 2008 during the Financial Crisis. Travel firm Thomas Cook was in state hands between 1948 and 1972 because it was owned by a rail firm when that industry was nationalised after the Second World War.

Was all nationalisation post-war?

According to the National Archives in 1916, during the First World War, five breweries and more than 300 pubs and bars in what is now northern Cumbria and south-west Scotland were nationalised as part of the Carlisle Experiment, so the government could control and reduce drinking by workers at armament factories in the area, as part of a nationwide drive to boost war production.

So what happened?

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Sell-offs have happened at various points but they sped up after Margaret Thatcher became prime minister in 1979, promising widespread deregulation after the industrial turmoil of the 1970s.

Her government privatised British Telecom, British Aerospace, British Airways, British Gas and the British Steel Corporation among others.

Her successor John Major broke up British Rail and, most recently, the government sold its last shares in Royal Mail in 2015, having floated it it in 2013.

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