Would renationalisation work? It depends on whether you live in 1945 or 1979

For Labour it's the glad confident morning of 1945 all over again. "Rail, water, energy, Royal Mail - we're taking them back," John McDonnell declared at the party's conference on Monday, reaffirming Labour's manifesto pledge to renationalise a swathe of industries and topping it off with new pledge to take public finance initiative contracts back "in-house".

Cementing the analogy, the Shadow Chancellor cited the post-war Attlee government, which "built a new society from the debris of the bomb sites".

Yet for the right it's all a repeat of a horror movie from 1979. "Labour seeks to reverse almost 40 years of economic reform that turned our country from the sick man of Europe into [a] global success story," tweeted Elizabeth Truss, the Chief Secretary to the Treasury. Renationalisation, the right suggests, will inevitably plunge us back into public sector sclerosis, union militancy and relative economic decline.

So who is right? Would renationalisation be a dream or a nightmare? Is it 1945 or 1979? The answer, which will not please ideologues on either side, is that it depends. It depends on a multitude of factors, some of them structural, some technological, some industry specific, all hinging on the unknowable future competence of public officials, regulators and politicians.

But first let's not talk about money. A common argument is that programmes of renationalisation of energy companies, water companies and the like would be ruinously expensive for the state in themselves. Even attempting this programme would supposedly prove prohibitively expensive.

Double-entry bookkeeping is the answer to this kind of confusion. When you sell something for what it is genuinely worth, you do not make yourself any better off. You simply swap one asset for another. The same is true in reverse.

If a future government were to raise money from the bond markets to buy out the shares of, say, privatised water companies, it would not make the UK state any worse off in substantive economic terms because, while debt would have risen, the state would have also have acquired an asset. There would be no hole in the national balance sheet.

The right question to ask about nationalisation does not relate to the cost of the transaction but the cost of the change in the form of ownership. Are there are any grounds for believing that the assets in question would be run more efficiently and satisfactorily by the public sector than the private sector? Would UK public officials likely prove more efficient at running the trains than the patchwork of companies (many of them ultimately controlled by foreign governments) that do the job at the moment? Would our civil servants be superior at operating water companies than the private managers that currently do the job? Would traders employed by a public energy company do a better job of securing the best-value fuel contracts for British households than traders hired by private firms? 

Other vital questions come into focus. Is the need to pay dividends to private shareholders impeding investment? Is there evidence of price gouging under the current arrangements? How effective is competition in these sectors - and does the basic structure of the industry present an insurmountable impediment? Could the objectives of nationalisation - driving up service and efficiency - be achieved more effectively through better regulation? 

Labour's programme is superficially popular. Polls show majorities of the public in favour of national ownership of energy, water and rail. There are well-documented failures in all of these sectors. And the clear evidence from Europe is that nationally owned utilities can deliver good results. There is nothing inherently superior about private ownership.

But polls also show there is little support in Britain for public ownership of airlines or telecoms firms. Few seriously want to reverse the Thatcher-era privatisation of British Telecom or British Airways. Those are privatisations that have broadly delivered what was promised. That suggests public support for nationalisation of rail and water could evaporate if those assets turned out to deliver a worse deal for consumers in public hands.

Tony Blair is not attending Labour's conference this week but one of his old sayings deserves to be heeded by both sides in the excessively ideological battle over nationalisation: "What matters is what works."

Why the taxi industry has to be regulated

Why licence taxi cabs at all? It's a question we might well ask, in the wake of the stunning decision by Transport for London to revoke Uber's right to operate in the capital.

Licensing cabs diminishes competition because not every prospective provider of taxi services gets one.

That makes travelling by taxi more expensive for the public than it otherwise would be. The excess profit flows into the pockets of the taxi drivers (or taxi companies) with licences. So why not simply scrap licensing (or strip regulation to the bare minimum) and instantly make customers financially better off? Why not redistribute from producers to consumers? Whose side are you on? This is the kind of economic argument one hears from libertarians, and technological "disruptors" of existing industries such as Uber's founders. Yet it does not take too much thought to see the problem with this kind of deregulatory proposal.

Imagine if pretty much anyone was allowed to drive a car to the airport and pick up disoriented tourists, charging whatever they could get away with. Imagine if we permitted anyone with a vehicle to cruise around city centres on a Saturday night, offering to drive the inebriated home for cash.

The libertarians are quite right that state licensing creates higher profits for providers of these services than would otherwise exist. Yet this is a cost we, as a society, are willing to bear. Why? Because it's clear to most of us that the alternative of a free-for-all would be worse.

The fear of the nasty consequences of such a free-for-all is why we require doctors to train for up to decade before we allow them to treat people in hospitals. It's why we require pharmacists to attain certain qualifications before we allow them to run a chemist. It's why pilots have to pass recognised exams and have a certain number of flight hours under their belt before they can work in the aviation industry. It's why those who want to look after other people's savings have to be vetted by the financial regulator.

Those who call for the deregulation of professions fail to understand that all markets are socially embedded. We allow them to function only in a wider regulatory framework that guarantees certain standards and oversight of practitioners.

Those who argue that the framework is unnecessary, fail to grasp the fact that without the framework there might be no market at all. At best trading in a totally unregulated market would be thin, and outcomes would be unsatisfactory. The signal of quality conveyed to the user of a service by regulation plays a vital economic role in facilitating the economic transaction in the first place.

Transport for London has ruled that Uber's failure, among other things, to properly investigate complaints against its drivers makes it unfit to hold an official licence. It's perfectly possible to agree or disagree, based on the evidence that has been made available, on whether TFL's decision was warranted.

One can argue about whether TFL has cravenly capitulated to the lobbying of traditional black cab drivers, whose livelihoods were threatened by Uber. We can discuss the capture of regulators by vested producer interests. It's quite naïve to imagine that such capture doesn't happen.

Yet we have to start from a basis of realism about the social framework for the exchange of goods and services in any modern and complex economy where buyers and sellers have never met and may well never interact again. The advent of a new technology such as Uber's app, even with its transparency over prices and the ability of customers to rate drivers, does not change the fact that the broader market for taxi services is socially embedded.

TFL had every right to make a judgement about whether the company was fit to run taxi services in the capital's streets. Indeed, as citizens and consumers, we demand it.

Think the row over £350m a week is a pointless squabble over numbers? Here’s why you’re wrong

What is your reaction to the re-ignition of the row, courtesy of an “essay” by Boris Johnson, over whether or not Britain will be able to “take back control” of £350m a week of money that currently goes to the European Union after Brexit?

Perhaps it is a weary shrug of the shoulders. “So what?” you might say. “Whatever the precise figure no one disputes we send rather a lot of cash to Europe. Why obsesses about the exact amount? Why send everyone to sleep by debating ‘gross’ and ‘net’ measurements of our contributions to the EU Budget?”

Such a reaction might be understandable. But it’s misguided. This is not an arcane squabble about numbers by people who have nothing better to do. What is at stake here is the hygiene of our public realm.

In a pluralistic political system people and parties can disagree endlessly on values and objectives. They can disagree about how to navigate the multitude of trade-offs that a country faces. They can even disagree about the interpretation of evidence.

But what a liberal political system requires to function effectively is a shared belief in certain objective realities. It demands a level of respect for non-partisan institutions such as the law courts and statistical agencies.

Those are the rules of the democratic game. Without that acceptance and institutional respect the whole ship of government is perilously unanchored and our system is thrownwide open to demagoguery.

The “£350m a week” assertion, to put it bluntly, breaks the rules of the liberal democratic game. It’s manifestly untrue that the UK sends that amount of money to the EU each week. The figure takes no account of the UK’s rebate, which takes the actual sum down to £250m a week at most. The rebate portion is never sent to the EU. Quite simply, you cannot “take back control” of money that you never relinquished control of.

It was a disgrace that the official Vote Leave campaign continually asserted this inflated figure in the referendum despite being informed by statisticians that it was inaccurate and misleading. And it’s even more of a disgrace when Boris Johnson dredges it up again now more than a year later.

Our political system has delineated standards in what we expect from ministers when it comes to their use of official figures. Johnson has fallen disastrously short of those standards. That is why the head of the UK’s Statistics Authority, Sir David Norgrove, publicly, and quite properly, reprimanded the Foreign Secretary for a “clear misuse of official statistics” at the weekend.

We should be clear about what is happening here. This wasn’t a mistake. Boris Johnson knows full well that the figure is simply wrong. But he asserts it anyway. Why? In part it’s probably because he wants to exaggerate and whip up public anger over transfers from UK taxpayers to foreigners at an acutely sensitive time in the Brexit negotiations. But it’s also partly because he wishes to assert his authorityover objective facts; to show that the rules don’t apply to him.

We can discern this sense of entitlement from his contrition-less response to Sir David, which reads like an attempt to intimidate the regulator. This fits a dismal pattern of behaviour. Johnson baselessly accused a previous chair of the Statistics Authority, Sir Michael Scholar, who had the temerity to rebuke him for misusing statistics when he was the London Mayor, of being a “Labour stooge”.

Johnson arrogates to himself the authority to lie with impunity. And he is prepared to smear public officials who contradict him. If this reminds you of the behaviour of Donald Trump, who consistently asserts things that are manifestly untrue and attacks those who challenge him, it should.

One popular interpretation of the row over the £350m a week claim during the referendum campaign was that it actually turned out to be a great coup for the Leave campaign because it increased the salience of the costs of EU membership in the public’s mind. It might be tempting to conclude from this that one should just ignore the noxious resurrection of the figure and focus on other aspects of Brexit. But what matters – ultimately even more than Brexit – is the health of our body politic. If we don’t fight for standards in public life, we cannot expect them to survive.