The demise of Carillion has sparked a strong and loud debate on public-private partnerships (PFI): the Opposition has been as voluble as any in condemning this approach to public services and publicly financed infrastructure, with Jeremy Corbyn leading the fray.
Yet the chart shows that it was the Labour Party, with Gordon Brown as Chancellor, who bore the main responsibility for putting these projects in place: indeed Andy Burnham, Mayor of Manchester, was good enough to acknowledge this on the BBC’s Question Time last Friday.
One of the people best placed to understand the real dynamics of public-private partnerships is Rupert Soames, Chief Executive of Serco: another huge public service contractor which has had its fair share of troubles but, unlike Carillion, has survived. In a very perceptive article in the Telegraph business section today, he points out that Government has become too proficient for its own good at making suppliers take risks they cannot possibly manage – for example by offering only long-term fixed price contracts, which can be derailed by policy changes that suppliers cannot plan for, such as increases in the minimum wage.
Referring to the Brown era, he writes: “A pendulum, which in the Nineties and 2000s had swung too far in favour of suppliers, has now swung too far the other way, and we need to bring it back to centre if suppliers are going to want to work for government to deliver public services.”
So this made me think about Gordon Brown’s other legacies during his 10 years’ tenure at HM Treasury. For the sake of brevity, I will dwell on just a couple more of these legacies in this newsletter.
The first is immigration: for this was the ‘magic’ through which Gordon Brown was led to declare ‘the end of boom and bust’, just before the most spectacular bust since the 1930s - the 2008 financial crash. Through immigration he was able to keep GDP growing even when GDP per capita stalled, and the revolving Home Secretary’s door was testament to the tensions it generated.
But by far its most far-reaching impact was to build up such resentment against the rapid influx of incomers as to turn the 2016 vote for Brexit, therefore ending the country’s membership of the European Union: another area where the aftershocks will reverberate for years to come.
However there are more benign legacies: one of which is the introduction of the ‘All Employee Share Ownership Plan’ or AESOP. Now re-named as the Share Incentive Plan, this radical development in employee participation has benefited huge numbers of employees, providing both upfront and ongoing tax relief. Shares acquired in this way are free of lock-in conditions within five years, and can therefore be used to provide a diversified boost to pensions.
We would like to see employees, in companies whose boards have not yet introduced the plan, being allowed to open them with a provider of their own choice, as a self-started Share Incentive Plan. This would encourage more companies to introduce the plan for all their employees, thereby increasing their sense of participation with the business. For more on this, read my profile piece for the Employee Share Ownership Centre news bulletin last week.
But, taken as a whole, Gordon Brown’s benign legacies are dwarfed by the scale of those which have shaken our world today.
So how should we rate him as Chancellor? There is no doubting his will to make the world a better place, but he was undoubtedly also driven by a wish to achieve apparent short-term success notwithstanding risks in the longer term. It could be said that this is evident in many politicians, but we have seen his PFI legacy come home to roost in a big way through the collapse of Carillion.
What is the solution? Probably that somewhere in Government there should be people representing the country’s long-term interest. Perhaps this could be used as a basis for electing the second Chamber, but more about that another day ..