Rachel Reeves will be presenting her Budget on November 26, if the Labour government of which she is a part lasts that long.
I will be commenting on that Budget on the day on BBC Radio 2, and elsewhere afterwards, but what is already clear is that whatever Reeves has to say, she will miss the required mark by a very long way. Being aware of that, I thought it appropriate to offer an alternative Budget speech ahead of the time when she offers her own. Given the significance of this issue, it will be addressed in parts over the next week or so, leading up to Budget Day.
This fourth part addresses a key issue in the UK economy: the future ownership and control of our public utilities. Unless this issue is addressed, the future basis for our economic and climate security cannot be guaranteed, and inflation will be much harder to control.
If there is one arena where the failures of neoliberalism are most apparent, it is in the country's essential public services. Nowhere has the dogma of privatisation — and the deference to markets that accompanied it — done more harm. The evidence is not marginal. It is woven into the daily experience of millions of people.
Water that is polluted.
Trains that do not run.
The post either does not arrive or arrives late.
Our energy infrastructure cannot deliver the green transition.
Electricity and gas cost far too much.
Banking systems threaten to collapse whenever markets become anxious.
It is impossible to rebuild this country unless we reconstruct these and other services upon which a civilised society depends.
This Budget begins that reconstruction.
First, water, rail and postal services will be returned to public ownership
These sectors provide services that cannot be interrupted. They are the foundations of health, mobility, and social connection. They are natural monopolies. They cannot, by their nature, be sensibly regulated by markets.
Privatisation of these activities has delivered neither efficiency nor innovation. It has delivered profit extraction and debt-fuelled business models. The result has been rising prices and falling standards as corporate behaviour has placed the interests of shareholders above the interests of the public and consumers.
This government will end that model.
Plans for the renationalisation of water, the remaining private-sector rail services, and core postal services will be put in place immediately. As the number of companies in core broadband services continues to shrink, that sector will also now have to be considered, but I am leaving that issue aside for the moment.
Compensation will be paid in accordance with established legal principles, based on the market value of each company at the point of transfer.
Shareholders and bondholders will be paid their fair share, and no more. What they subscribed for shares or loaned to companies will not determine what they receive in compensation, now that the businesses on which they took a risk have failed: only market value will. Assets over which they claim security for loans will be compulsorily purchased on the same basis: we cannot be held to ransom by the equivalent of vulture fund operators in international debt markets.
All other creditors — secured or unsecured — will be paid in full, because the continuity of essential service provision must never be jeopardised by financial engineering.
Compensation will be made using new Treasury bonds, issued in precisely the same way as happened with the postwar nationalisations undertaken in the national interest. These bonds will:
- pay no more than 4% per annum in interest
- have maturity dates of not less than 50 years in the future
- include an option to extend repayment further if required
This is fair, transparent, and sustainable. It protects both the public interest and financial stability.
Second, the energy system will be redesigned as a whole
The green transition cannot happen without a stable, accountable, publicly governed energy system. The present mix, part privatised, part regulated, and most definitely opaque, is not only failing to meet climate goals but also failing consumers.
Therefore:
- The National Grid will be brought back into public ownership
- Electricity generation and supply will be nationalised, except where community and small-scale local operations provide genuine public benefit
- The national coordination of North Sea gas supply will return to public hands
This is not ideology. It is a necessity.
It is also essential that energy be priced fairly. We accept that consumer prices must cover generation costs and appropriate returns, but the current pricing model, which is almost always based on the cost of generating electricity from gas, maximises consumer and industrial energy prices, and that has been profoundly destructive of well-being in this country, as well as harming our international competitiveness. Ofgem will be reformed to sweep away this archaic pricing model, ensuring a fair one can take its place. Compensation on nationalisation will be based on that new model, not the one that should have been replaced long ago.
Energy is the bloodstream of a modern economy. When the system fragments, the transition to net zero becomes impossible. When profit extraction becomes the organising principle, long-term investment collapses. When governance is outsourced to corporate boards, public accountability disappears. This government will deliver an energy system designed for climate security, not shareholder return.
Third, we will create a National Network Bank
The basic banking system, which supplies us all with the means to make payments to each other, is not just a service. It is a part of our core national infrastructure. It underpins every transaction in the economy. When private banks behave recklessly, as they repeatedly have, we have been forced to bear the cost of bailing them out because this payment system must be saved at all costs. Banks know that, and have exploited that knowledge to their own advantage.
That will end.
A National Network Bank will be established to provide personal banking services to everyone who wants them.
Those old enough will recall that the UK state once provided a service called Girobank. We will now recreate that, but go much further.
This new bank will guarantee access for everyone to a modern, reliable, nationwide banking platform capable of supporting the payments system that we all need, ensuring that no one will ever again face the risk that the behaviour of private financial institutions might threaten their ability to pay for food at the supermarket.
The National Network Bank will:
- Operate alongside existing commercial banks but independently of them
- Be available in all communities, physically where needed, and digitally everywhere
- Act as a stabilising anchor for the entire payments system, with all private sector banks being required, eventually, to use its system to underpin their own operations, guaranteeing that in the event of failure, they can be continued seamlessly by the state, just as rail companies did, until recently, operate on the lines provided by Network Rail.
- Guarantee continuity of transactions during any future financial turmoil
Importantly, this National Network Bank will make use of some of the funds saved with National Savings and Investments as a result of changes in its nature, to which I will refer later in this budget. As a result, it is likely to become a major mortgage lender and a vital source of capital for small and medium-sized enterprises in the UK. When existing banks are failing to meet the needs of customers in either of these sectors, this innovation is essential.
When banks fail, it is not their business models that concern the public; it is the threat to the payments system. By providing a public banking backbone, we will remove that existential risk.
Fourth, we will respect the needs of the four nations
Public services cannot be rebuilt on a one-size-fits-all basis. England, Scotland, Wales and Northern Ireland face very different conditions and have distinct institutional structures. Scotland, Wales and Northern Ireland have their own governments. England does not, and that itself is a constitutional anomaly requiring future attention.
This Budget respects those differences.
Each national government will have its own water, rail, postal, energy and banking institutions. Coordination will exist where necessary, but control will be devolved wherever possible, because this Union survives only as a voluntary association of nations that recognise each other's autonomy.
This approach will strengthen the Union by acknowledging its reality rather than denying it.
Why do these reforms matter?
Firstly, that is because essential services are just that: essential. They cannot be run in ways that ignore public need.
Secondly, they are required because privatisation has demonstrably failed. It has produced weak investment, collapsing service quality, and the diversion of billions of pounds that should have been spent on investment and maintenance into shareholder payouts.
Thirdly, they are required because a modern economy requires an integrated infrastructure. Markets cannot provide that integration. Only a public framework can.
Fourthly, they are necessary because the green transition demands it. No private company can prioritise 30-year investment horizons while being judged on quarterly returns.
Fifthly, they are essential because the public pays the price when essential services fail. We have to address that issue.
Finally, we must do so because democracy requires institutions that operate in the public interest, and not in the interests of financial intermediaries. We will ensure that is the case.
What comes next
In the next part of this Budget, I will turn to the question of how the structure of UK savings should be reformed.
Other posts in this series:
- The Alternative Budget 2025 – The Background
- The Alternative Budget 2025, Part 2: Understanding tax and ‘borrowing'
- The Alternative Budget 2025, Part 3: Creating a new fiscal framework
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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Every progressive campaigner should know – but many do not – that there need be no up-front cost involved in taking back into public ownership privatised utilities. Shareholders only need to be compensated insofar as the equity has a positive value, and they merely relinquish their shares in exchange for bonds. The exchange ratio is not generally one for one.
There is an ongoing cost in the coupon rate attached to the bonds.
So, the compensation necessary is not prohibitive but it should be acknowledged that there is an urgent need for investment in utilities post-nationalisation to make up for the underinvestment of privatisation and that will be costly. But the cost is likely to be lower under public ownership than under privatisation, because there is no risk capital and no dividends to be paid.
The ignorance about the cost of public ownership is lamentable. At the start of the 2024 general election campaign, Keir Starmer was interviewed by Beth Rigby on Sky News. Her first question was on water nationalisation. Starmer said he had asked his minions to research the issue and they had reported that it was too expensive to be a viable option. There was no follow up by Rigby.
Starmer was allowed to get away with this statement, which revealed him to be either an ignoramus or a liar. The facts are known by Jonathan Reynolds MP, who is a minister in Starmer’s own cabinet. Reynolds asked the House of Commons Library to research the facts of public ownership under the Attlee Labour governments of 1945-51 and the library reported them on 28th February 2018.
The Attlee government undertook its program of public ownership when the national debt was 250 percent of GDP. That was possible precisely because the up-front cost was negligible in the way described.
No politician should be allowed to get way with this ignorance or mendacity from now on.
You are right.
In the case of Thames Water the shareholders have already accepted that there is no value in their holding. Here, the only question is what lenders should get – how big a loss should they be forced to take? But whatever loss they are forced to take the upfront cost – indeed, even the ongoing cost – to Government is nothing. If we say the bond holders should take a 30% loss then they should not be given £70 in cash – rather £100 face value of a 50 year bond carrying a coupon of 3.5%. This bond (in current market conditions) would have a price of about 70 (which would represent their 30% loss if they sold).
This coupon would be then paid by the new Water company out of revenue and the interest expense would be far lower that the hideous rates that Thames Water would pay under proposed rescue schemes. That saving would then be available to invest in the infrastructure we so badly need.
It is easy for Thames Water – it is clearly a basket case. Other utilities might be a bit trickier as current owners bleat about what they “deserve”…. but government holds all the acrds.
Agreed
Stealing money from the private sector is theft – to suggest there is ‘no cost in nationalisation’ is ridiculous and those proposing to do so are basically demonstrating the facist tendencies of the far left.
Paying fair compensation is not theft so, very politely, stop talking utter drivel.
Correction:
Stealing money from the public is theft – to suggest there is ‘no cost in privatisation’ is ridiculous and those proposing to do so are basically demonstrating the acquisitive propagandist trolling tendencies of the wealthy.
As I am sure you are aware, water, (mainly), and rail, at least the rolling stock, are in the public sector in Scotland. What I doubt is when you refer to devolution, and a voluntary association of nations. Yes, I have no doubt that would work, except there is a massive fly in the ointment. Westminster. Frankly, I don’t believe they will ever give up control, voluntarily, to what amounts to their last colonies. History, I believe, will vouch for this statement, as very few countries, in what was referred to as the British Empire, left entirely peacefully. And in that respect, coordination, as far as Westminster is concerned is, do as we tell you. You only have to look at the most recent example when our First Minister was met with a refusal from the Prime Minister, when he asked for a meeting to discus the forthcoming Budget. This won’t surprise anyone, but I believe the only way forward is for the four nations of the present U.K, to become fully independent countries in their own right, and to follow their own individual paths.
Remember, this is my budget. I know it won’t happen. I am imagining what is possible, without writing a book.
And let’s also be clear: the purpose of that statement was to ensure that the pathway for independence is there.
Pleased to see your recognition of the value of community energy schemes.
Likje many references in budgets, just a hint, but important…
If this could be adopted by Rachel from Accounts it would be up there with Scotland’s result last night! Unfortunately I can’t see any Westminster gov’t ever giving up control of Scotland without a long and frustrating fight: it’s too reliant on Scotland for energy, nuclear submarine bases, contribution to GDP, etc and potentially water.
Last night was good!
“Rachel from Accounts” OMG this cheered me up so much this morning
Yep. Focusing on what I know a bit about.
Bring back the area elec boards – but this time make them area energy boards – covering gas & elec. Historically gas & elec competed – this cannot be any more the case, for a range of reasons. The 1969 MANWEB approach to customers should be implemented nationwide: “what is our relationship with our customers”: “to help them use electricity (energy) more efficienctly and effectively”. Community energy (CE) only works (mostly) when led by Local Gov. LAs funded to implement i.e. form CEs with a view to these morphing into Municipal Energy orgs. Area Boards to participate in a positive way. There is a range of tech stuff that I would also mandate/implement e.g. autonomous networks. I would also require both nat grid and the area boards to implement their own private fibre networks (using BTs ducts) for system protection and control. Cyber attacks would then be a thing of the past. Ditto water. The tech to do this quickly & easily exists (BT’s blown fibre) & low cost – 1 mtr of a single fibre core costs less than 1mtr of high quality bog paper.
Thanks
Mark Carney, Canada’s current Prime Minister headed the Bank of Canada then went to the UK to head your central bank. Obviously, he did not meet with you Richard or, if he did, he didn’t pay attention. He’s now inflicting Starmerism on Canada. Perhaps you could send him your alternative budget. Better yet, take him back.
🙂
Thank you again. As an ex-economics teacher in FE (some while ago now!), I sometimes wish I could back and do things a bit differently!
🙂
One public service which is usually overlooked is buses. South Yorkshire in the 70’s was famous for its cheap 2p and 10p fare policy anywhere in the county. What’s little known was it was designed to be a zero fare service by 1984. Thatcher destroyed that aim. Currently totally inexperienced in public services metto mayor “ I’ll do it my way “ Oliver Coppard is, like Burnham, pouring hundreds of millions into bus franchising where tenders are invited to run routes. The dominant company is German bank owned Stagecoach which will receive millions for dividends and high manager salaries. The company will employ the drivers etc which we know will be at the lowest wages possible nd conditions of service poor with flat overtime rates. Al thst was required was a repeal of the 2917 bus act which would allow full municipal ownership and perhaps either a return to cheap fares or even zero fares as they have in Dunkirk and many other cities and places. Neoliberalism lives in the shape of an unnecessary public/private partnership.
The ostensible subject gives way to a discussion of a series of substantial public domain related issues, of which ‘energy and net zero transition’ is perhaps the Biggie although some would say National Network Banking ( if it included credit unions.) Great to see someone tackle the obscene energy market structures Labour have failed so far to transform.
And, when one’s gone round all the houses here, the purposes and parameters of public ownership stand out as never before. If you didn’t fully draw those implications out here today others, including here in LI, will be inspired to do so. Great material for a post Budget session on Public Economic Responsibility, something you reminds us is a much bigger subject than managing market stability.
I am absolutely with you on a publicly owned bank , I suspect the lobby against would be quite formidable given the profits banks make. The giro bank was a precursor at the time, initiating electronic settlement and having the greatest number of personal accounts. It’s downfall was perhaps Margaret Thatcher’s aversion to public enterprises, if ever ideology triumphed over common sense it was with everything publicly owned being inferior to private ownership and there began the demise of public services in Britain.
The current market rate on long dated bonds is above 5%, but your proposal is to issue bonds at 4% – instantly making them worth around 30% less than market value!
Why would anyone buy them?
The rate will be considerbly lower by the time this happens.
You are igoring all the measures together.
Typically.
Thanks for this Richard. It is giving me hope.
I know it’s your budget and not the government’s, but it’s giving me hope there are decent thinkers out there, who can do the calculations and the research and are on the side of the majority of the population.
It shows that what is necessary, is actually possible.
Thanks
Agree Re National Bank
I’d also like to see a phased withdrawal of FSCS depositor compensation from the private banks.
Needs thinking through but my logic is that it would help ordinary savers understand the real power of the state bank in guaranteeing their GBP savings, and force private banks to compete on a more equal basis and price their risks and money appropriately, which I suspect would curtail a lot of banks’ facilitating of speculative and unproductive activity.
In effect National Savings already has this advantage