Labour in 49% sell-offs

Government departments look at partnerships between public and private sectors as alternative to full privatisations
Key Government targets for sell-off or commercialisation - including the London Underground, National Air Traffic Control and the Post Office - may instead be converted into public/private partnerships.

The move, which is being studied by the Treasury and other government departments, could mark the end of privatisation of state assets in Britain.

But it would also produce millions of pounds in revenue for the Government while retaining public control of the businesses.

The latest proposals being debated by ministers involve a split of the businesses, which would keep 51 per cent of the equity in government hands and sell 49 per cent to the private sector.

That would enable the Government to avoid the politically contentious step of privatisation, which remains a sensitive issue for Labour.

At last week's party conference in Brighton, John Prescott, the deputy prime minister, saw off a move to commit the Government to renationalising the rail network.

However, senior Labour sources are aware that embarking on a new round of privatisation would provoke opposition both inside and outside government.

At the Treasury, the unit which dealt with privatisation has now been instructed to focus its effort on a broader range of measures designed to bring the private sector in. Among the options it is investigating, is the proposal for the 51/49 per cent split.

Ministers in the Department of the Environment, Transport and the Regions have made known their reservations, however, about the possibility of selling the air traffic control system. They are particularly concerned about the prospect of splitting up the network.

The new proposals are thought to be compatible with an expected plan to change London's tube system by dividing it into four businesses.

The main drawback to the partnership idea remains the Government's strict accounting rules, which count all borrowing against the public sector borrowing requirement.

The Treasury is believed to have ruled out any changes to these regulations for public/private partnerships on the basis that control of the new companies would remain in the public sector.

While the Post Office, which is a profitable concern, is likely to be an attractive investment opportunity, government sources concede that greater incentives would be needed to tempt private money into the tube.

During the general election campaign, privatisation became a central issue when the Conservatives claimed that there was a pounds 12bn "black hole" in Labour's spending plans.

With Labour's tax and spending proposals based on the then government's plans, Gordon Brown, then shadow Chancellor, said that he might have to sell state assets worth up to pounds 122bn.

At the time, his aides made clear that he would consider any privatisations, including Channel Four, Parcelforce and other Royal Mail agencies, and the National Air Traffic Control system - sell-offs Labour had previously opposed.

Earlier, Robin Cook had moved quickly to squash suggestions that a Labour government might privatise the Tote.

Under the Conservatives the Post Office was a long-standing target for privatisation. The last government's plans for a sell-off were ditched only after a high-profile campaign by the post office unions struck home with Conservative backbenchers, and it became clear that there was no parliamentary majority for the move.

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