Private Island: Why Britian Now Belongs to Someone Else (17 page)

When you look more closely at what happened to Thames Water, it is not a simple, and potentially chauvinist, tale of exploitation of captive Londoners by cunning foreign capitalists. It is a tale of clever middlemen. On one side, millions of Thames Water customers, paying an inflated private water tax; on the other, millions of Dutch, Canadian, Australian and British pensioners, dependent on their pension funds in their old age, and millions of Chinese and Emiratis, powerless to influence their government's disposition of national wealth. In
the middle, an international fraternity of fund managers, telling the Thames customers what a brilliant deal they have with the Thames Thirteen as their tax collectors, and telling the world's pensioners what an extraordinary return they're getting on their stake in Thames Water, so extraordinary that they, the private planners of the fund manager class, need to be rewarded with fat fees, options, salaries and bonuses. It's not possible for both messages to be true. And if the Thames Thirteen lose their shirt on their punt – if Ofwat gets tough, for instance, and they end up selling Thames to the next buyer for less than they paid for it – there'll be no clawing back of the extras, the top 1 per cent renumeration, the beachfront homes, the trophy cars and the vintage wine cellars that the fund managers have gained over the years.

In 2012 the new head of the Ontario civil servants' pension fund Optrust, Stephen Griggs, demanded to know why members of the fund's Private Markets Group – the team responsible for buying a stake in Thames Water – were not paid according to what other Canadian pension fund managers were paid, but according to salaries paid by the likes of Goldman Sachs on Wall Street. Soon afterwards, he was sacked.

One day I went to Worcester to visit Malcolm McMurray, a retired Severn Trent manager who worked for the company in its public and its private incarnations. As a senior union leader, he campaigned against privatisation in the late 1980s, addressing public meetings across the region. After privatisation, Severn Trent showered its workforce with shares. Union organisers from outside the water industry used to complain that when they met unionised water workers, they talked about share prices.

Worcester was drenched in hot sunshine when I walked up to McMurray's house, past the double garage and the shining gold Volkswagen estate to his front door. He let me in. He looked lean and fit.

‘Nice house,' I said.

He smiled, a little sadly. ‘I'm always grateful I retired while they still had the final salary pension scheme,' he said.

We sat in his long, neat garden, rolling away into trees in the distance. He was sixty-four. He retired in 2000, in his midfifties. In 1973, as a regional manager, he was based at Mythe for three months; the then state-owned Severn Trent had tried to save money by changing shift patterns, and the shift workers, then members of the TGWU, were throwing strategic sickies to sabotage the scheme. In the years running up to privatisation, McMurray recalled, investment slumped. He's sure that the Thatcher government deliberately starved the water industry of cash to enhance the case for selling it off. After privatisation, more than half the old workforce of 11,000 lost their jobs. He remembers being shocked at the shift in the public's mood when it was privatised. ‘At times of peak demand, we used to be able to use local radio to appeal to our consumers to use less water, to not use hosepipes, and generally they were co-operative, they went along with it. But that suddenly changed when we were privatised. People knew we were only in it to make a profit. It was quite a shock to realise how quickly people's attitude changed.'

I asked McMurray if he knew any union leaders who'd campaigned against privatisation, then taken up company share options.

‘Well, I did,' he said. ‘It would be easier to say who didn't.'

McMurray's wife came in with their two little blond grandsons, bright in scarlet jumpers and covered in stickers from the school races. They went down towards the trees to play and the sun caught on a small fountain that the couple had installed, chuckling away on a pumped loop in the shrubs in the middle of the garden.

‘I had no conscience about it at all,' said McMurray. ‘I'd campaigned against privatisation, but we'd lost that particular battle. Privatisation was inevitable. I wasn't going to leave the water industry and so I thought well, I'll buy some shares, and try and continue to serve the public as best I can.'

Does it matter that the power Britain relies on to make the country glow and hum no longer belongs to Britain? After all, the lights still shine. The phones still charge. Does it matter that the old electricity suppliers of eastern and north-west England and the English Midlands, the coal-fired power stations of Kingsnorth, Ironbridge and Ratcliffe-on-Soar, the turbine shops at Hams Hall, the oil and gas stations on the Isle of Grain, Killingholme, Enfield and Cottam are the property of E.ON of Düsseldorf? Is it of significance only to sentimental Little Englanders that the former electricity boards of Tyneside and Yorkshire, the power stations at Didcot in Oxfordshire, Fawley in Hampshire, Tilbury in Essex, Littlebrook in Kent, Great Yarmouth in Norfolk, Little Barford in Bedfordshire and Staythorpe in Nottinghamshire belong to RWE of Essen (the last being the only one the German company built itself)? Is it a sign of some atavistic hostility to the Other – nationalism, chauvinism, even racism – to find it strange that the one-time public purveyors of electricity in North Wales, Merseyside and southern Scotland, along with another set of large power stations, are owned by Iberdrola of Bilbao? Are you an enemy of liberal principles if you question the fact that, when local electrical engineers dig up the roads in London, they're working for East Asia's richest man, the Hong Kong-based Li
Ka-shing? In north-east England, they work for Warren Buffett; in Birmingham, Cardiff and Plymouth, the Pennsylvania Power and Light Company; in Edinburgh, Glasgow and Liverpool, Iberdrola; in Manchester, a consortium of the Commonwealth Bank of Australia and a J.P. Morgan investment fund.

More than anyone, you'd think, it would matter to the people who made these arrangements possible in the first place. What has happened is not what they promised or intended when they put Britain's state-owned electricity industry on the block. This is not a trivial issue. When politicians, regulators and corporations decide the future electric life of Britain, they determine how the lights will be kept burning and the wheels turning without severely affecting the world's climate or impoverishing us. But as a result of actions taken a generation ago by Margaret Thatcher's Conservatives – a party whose nationalist programme promised independence from Europe – the decisions aren't Britain's alone. Thatcher promised less state involvement in industry but the future of Britain's energy supply now hinges on companies based in Paris, Electricité de France, better known as EDF, and Areva, maker of nuclear power stations, that are majority owned by the state of France.

Defending her record in Parliament on the day she resigned in 1990, Thatcher spoke in patriotic tones of how, with millions of people buying shares in former state industries, privatisation was giving ‘power back to the people', and how competition at home and open markets in Europe would free British enterprise to lead the world. Today it's clear that the result of electricity privatisation was to take power away from the people. Small British shareholders have no influence over the overwhelmingly non-British owners of the firms that generate and distribute power in Britain. The fact that individual households and small businesses can choose to switch from the confusing tariff of one oligopolistic supplier to another doesn't protect them from sharp, unpredictable swings in prices. In overseas chanceries the Thatcher doctrine came up against ambitious leaders who were
no less patriotic, but not so arrogant and naive. Unlike Thatcher, they didn't assume that if their country levelled its playing field, others would level theirs. The problem with the ideal of competition is that there are winners and losers. The electricity competition has now been held. It is over, and Britain lost. From the point of view of technology and capital, electric Britain is no longer a centre. It is another centre's province.

The most unexpected consequence of selling the country's electric legacy, the consequence that most directly contradicts what the Thatcherites were trying to do, was the gradual absorption of swathes of the industry by EDF. Beginning with the takeover of London Electricity in 1998, exploiting the Thatcherites' open-door market structures and their decision to split the electricity industry into small, easy-to-swallow chunks, France in effect renationalised the industry its neighbour had so painstakingly privatised. Renationalised it, that is, for France. As well as being one of the six dominant UK suppliers of energy, EDF now owns a fat portfolio of British power stations, including the fleet of nuclear plants that still provides around a sixth of the country's electricity, and is to begin replacing them with new reactors.

It was a setback for the pro-market ideologues. Unlike E.ON and RWE, EDF is a state-owned monolith with a near monopoly on the production and supply of electricity in France, run by technocrats and members of a powerful trade union, the Confédération générale du travail (CGT). Its mission is to empower France in foreign markets, and the government agency that owns it, L'Agence des participations de l'Etat, isn't embarrassed to say so. In her foreword to the agency's 2010 report, Christine Lagarde – then minister for economic affairs in François Fillon's cabinet – boasted that the state would be more active than ever in building ‘champions capable of competing with global market rivals'. In Thatcherite terms EDF was a public sector mammoth that would inevitably be hunted to extinction by the hungry and agile competitors of post-privatisation countries like Britain. The laws of economics said so. And yet the
opposite happened. The mammoth thrived, and Britain failed to produce new competitors, agile or otherwise.

If the power of EDF in Britain is an embarrassment to neoliberals, does that mean it's good for their opponents, the pastel-shade socialists of the legacy left? Unison, the British union that represents electricity workers, seems happy. Greg Thomson, Unison's head of strategic organisation, told me that since it crossed the Channel, EDF had gone against prevailing management orthodoxy by reinstating a final salary pension scheme for workers. Unison was given seats with the CGT in an EDF/union body, a ‘European Works Council', and enough leverage over EDF management to get union recognition for previously non-union workers at a call centre in Sunderland. ‘When London Electricity was privatised, we adopted a policy of returning it to public ownership, and I'm pleased to think I delivered on that,' Thomson said. ‘Obviously to the wrong nation, but you can't be too picky.'

Yet EDF's foreign adventures make Unison's French counterparts suspicious. They don't understand why Britain gave away its native electricity industry so easily. A colleague of Thomson's told me that the CGT was ‘apoplectic' Unison didn't resist in 2010 when EDF sold off the local networks of cables and transformers it owned in East Anglia, London and south-east England to Li Ka-shing, in order to fund its purchase of Britain's nuclear stations. ‘When the sale went through they were absolutely pissed off because we had done nothing to stop it. They voted to man the barricades.' Thomson remembered an early trip to a European Works Council meeting in Paris, when one of the CGT men said to him at lunch: ‘There's only one country that's stupid enough to sell off its electricity industry, and that's Britain.'

How did we get here? In 1981, with inflation and unemployment at 10 per cent plus, with the recently elected Conservative government forced to yield to the demands of the miners, public spending cuts provoking general outrage and Thatcher's prime
ministerial career seemingly doomed to a swift, ignominious end, a thirty-eight-year-old economist from Birmingham University called Stephen Littlechild was working on ways to realise an esoteric idea that had been much discussed in radical Tory circles: privatisation. Privatisation was not a Thatcher patent. The Spanish economist Germà Bel traces the origins of the word to the German word
Reprivatisierung
, first used in English in 1936 by the Berlin correspondent of the Economist, writing about Nazi economic policy. In 1943, in an analysis of Hitler's programme in the
Quarterly Journal of Economics
, the word ‘privatisation' entered the academic literature for the first time. The author, Sidney Merlin, wrote that the Nazi Party ‘facilitates the accumulation of private fortunes and industrial empires by its foremost members and collaborators through “privatisation” and other measures, thereby intensifying centralisation of economic affairs and government in an increasingly narrow group that may for all practical purposes be termed the national socialist elite.'

The gung-ho free marketeers who rode to power with Thatcher in 1979 don't seem to have been aware of the Nazi prelude, although they would have known of later privatisations in Pinochet's Chile. Until Bel's recent research it was Peter Drucker, in his writings about management in the 1960s, who was said to have coined the term ‘reprivatisation'. Nigel Lawson, a champion of privatisation, attributes the dropping of the ‘re-' to a fellow Conservative, David Howell, one of the back-room Tory ideas men tinkering obscurely with economic models while Edward Heath and Harold Wilson squared off against the unions in the 1960s and 1970s. (Howell was Thatcher's first energy minister. He is, as I write, Baron Howell of Guildford, Foreign Office minister, and until 2012 remained in government under his fellow Etonian David Cameron, alongside his son-in-law George Osborne.)