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Business Comment

Whitehall will be sold off in the name of reform


Westminster Outlook Royal Mail aside, this Tory-led Coalition has not been a government marked by grand privatisations.

Indeed, Cabinet Office minister Francis Maude has been fairly true to his word in a meeting with CBI director-general John Cridland three years ago. A leaked memo showed Mr Maude vowed that there "would not be a return to the 1990s with wholesale outsourcing to the private sector".

Although he was once a managing director at Morgan Stanley, Mr Maude argued that the Government "was not prepared to run the political risk of fully transferring services to the private sector". The Horsham MP did not want the Coalition to be accused of "allowing excess profitmaking by private sector firms".

Instead, the Coalition has altered the corporate status of great swathes of the state, slowly ripening departmental bodies for privatisation. Large chunks of taxpayer-funded work, from the £14bn-budget arm of the Ministry of Defence that buys military kit to parts of the Health & Safety Executive, have been loosened from the Civil Service's grip and granted certain commercial freedoms.

The legislatively thin Queen's Speech on Wednesday might have betrayed that this is a Coalition preparing for separation at next year's general election, yet still there was a continuation of this policy.

The Infrastructure Bill will turn the Highways Agency – which runs, maintains and improves Britain's most important 4,300 miles of motorways and trunk roads – into a Government-owned company. This means the agency will be able to break the Civil Service's strict pay code to help attract top staff from the private sector and could be granted certain borrowing powers, in moves the Coalition believes will save £2.6bn over 10 years.

The transport minister, Robert Goodwill, has been very clear that he doesn't see this as a move towards privatisation, as many industry insiders hope and virtually all union chiefs fear.

What is unquestionable, though, is that it will be less of a major step, and therefore not as controversial, for a future government to sell off the Highways Agency – as well as those other parts of the state that have been commercialised under David Cameron's watch.

This leaves two big questions: will a Conservative government armed with a sizeable majority after the next election make that final, decisive move and float shares in these agencies or at least outsource the management to the likes of Serco and Capita? And what is next?

I'm not sure of the answer to the first, but I'd be willing to bet that the Government is taking a good hard look at the Environment Agency.

After being trounced for its lax response to the winter floods, the Environment Agency finds itself in a precarious position. And this gives the Government the excuse it barely needs to expand a policy of commercialising Whitehall under the guise of necessary reform.