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Clayton Hirst: So no one does it better than the private sector? Well who does it worse?

Can the doctor resuscitate ITV?

Saturday 28 September 2002 19:00 EDT
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Crowded hospitals. Crummy schools. Creaking trains. Costly fuel bills. This is the doomsday picture that the Chancellor, Gordon Brown, could paint tomorrow at the Labour Party conference of a world where the Private Finance Initiative didn't exist. Coming days after the unions called for a moratorium on PFI projects, the Government will stress the benefits of having private companies running our public services.

Top of the list of reasons for using the PFI is efficiency. That commercially run companies are more efficient than publicly run services is a well-worn argument. Instead of having facilities operated by people who sit around drinking tea and leave the office at 5pm on the dot, our schools and hospitals are managed by real professionals. Managers who are shaped by the rigours of capitalism. People whose performance is judged by the City. Managers who eat babies for breakfast.

Come on, Mr Brown, who do you think you are kidding? Haven't you heard of Railtrack? British Energy? National Air Traffic Services?

First, take Railtrack. We'll hear a lot about the track operator this week. The Transport Secretary, Alistair Darling, is expected to announce the company's exit from administration and its sale to the Government-backed Network Rail. A private company being taken public again? What about all those private-sector efficiencies? Surely the railways can't be run by people who take regular tea breaks?

Obviously not reading from the script, the rail regulator, Tom Winsor, last week pronounced that Railtrack was gripped by "overspending and inefficiency". And not a British Rail sandwich in sight.

Then there's British Energy – an inherited privatisation from Tory days but nonetheless a vital public resource run by the private sector. Despite claims by the Trade and Industry Secretary, Patricia Hewitt, that there would be "no blank cheque" to help the nuclear generator out of its mire, the DTI last week lent it £240m on top of the earlier £410m loan, while restructuring talks continue.

Then there's the part-privatised Nats. This is Labour's very own creation, even though it once assured us that "our skies are not for sale". The Government has already been forced to lend the company £60m, and will in the next few days provide another £60m to prevent its collapse.

So, what should we make of these private-sector cock-ups? The Government says companies are more efficient, but the evidence points in the other direction.

The real issue is risk – the common thread between Railtrack, British Energy and Nats. Railtrack thought it could boost profits by under-investing in its network. It failed; the risk was too great. British Energy thought its investors would be delighted if it became a "focused" company. It sold its distribution business and paid handsome dividends. The high-risk strategy failed. Nats borrowed £750m from the banks, betting air travel would continue to rise. It miscalculated the risk.

Public servants running railways, power stations and air-traffic services don't take big risks. They don't bet on the stock markets and they don't have shareholders to please – only you, me, and their political masters. For a partnership between the public and private sector to work, there needs to be rigorous management of risk. This must be done by the public sector if we are to avoid another Railtrack, British Energy or Nats.

Can the doctor resuscitate ITV?

It must be a scary thought for the bosses of Carlton and Granada that their future now hinges on a drama set during the Russian Revolution. ITV has had a rotten year: falling viewers, the ITV Digital debacle and the failure to secure the services of Dawn Airey – to name but three blows. In the words of the joint managing director, Mick Desmond, ITV is now hoping to "draw a line in the sand" and woo audiences with strong programmes this autumn. Topping the bill is a remake of Dr Zhivago.

This back-to-basics approach to investing in programming has already won praise from some influential media buyers. But the next few months will be the real test, as many of ITV's long-term contracts with advertisers are renegotiated. As we report today, some are considering walking. Let's hope for ITV's sake that they are fans of David Lean, Omar Sharif and Julie Christie.

clayton.hirst@independent.co.uk

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