A public and private success

There's a great deal of controversy at the moment about the use of private money in publicly owned companies.

Critics of Public Private Partnerships claim that it is outright privatisation which undermines the provision of the public service. But as the song goes: ‘It ain't necessarily so.'

I faced many of the same arguments 11 years ago when I was Secretary of State for Transport, when one of my responsibilities was for air traffic control.

In 1998 the Labour government decided to convert National Air Traffic Services (NATS) into a Public Private Partnership (PPP) to allow the private sector to bring in investment and business experience to modernise our air traffic control system.

We wanted private firms to share the risk, provide a better strategic approach in the day-to-day running of NATS as well as ensuring better value and an improved service for the taxpayer.

The proposals saw NATS remain 49% owned by the Government with the employees holding 5% and the private strategic partner (which was the Airline Group - a consortium of the major airlines including BA, bmi and Virgin Atlantic) with the remaining 46%.

A stakeholder panel was set up to bring together the Government's representatives and the private strategic partner, with an input from customers and the staff through consultation.

The Government retained the golden share, keeping NATS both publicly owned and publicly accountable with a statutory provision that would give us direct powers to take over full control in an emergency.

I remember the arguments against this PPP very well. It would not be in the public interest, the number of air traffic controllers would be slashed, planes would literally fall out of the sky and publicly owned bodies should not have access to private finance.

In fact many of those who argued against PPP then are against private funds coming into Royal Mail now.

So I thought I'd pop into the House of Commons library and see how NATS has faired since it became a PPP in 2001.

Performance has improved dramatically. The average delays per flight attributable to NATS were cut from 109 seconds in 2000-02 to 27 seconds in 2007-08 - a 75% reduction.

It's become profitable. In 2000-02 turnover was £553m with a loss of £80m before tax and net assets of £81m.

But by 2007-08, turnover increased by more than a third to £743 million with a profit of £67m before tax and an eightfold increase in net assets to £666m.

Now that it's a PPP, it doesn't receive a penny of public money and in fact now returns a profit for the taxpayer.

In 2007-08 we received £17.5 million back in tax from the profits and it's been profitable for the last five years.

And the threat of massive job cuts failed to happen - there were 5,652 in 2002 and 5,138 in 2008. And the employees have benefited with free shares. Two allocations have given those who took both, a total of 1,1,02 shares, worth about £2,700.

The Airline Group runs the day-to-day management of NATS whilst the Government has three non-executive directors to ensure the best interests of the British public are served.

The strategic partner meets periodically with the shareholders and our representatives to review the development of the company. But the Airline Group exercises independent commercial judgement on issues of performance and resources, working to the agreed strategic plan.

So to recap, NATS performance has improved, it's become profitable, staff are better off and now the taxpayer makes money from it!

This is but one model of PPP but it shows how successful they can be and it is consistent with Labour's manifesto and policy commitments since 1997 to public private partnerships.

The bodies remain publicly owned and publicly accountable, meeting public service obligations without further public investment.

These strategic partnerships with the private sector have created 225 separate projects worth £60b - that's new hospitals, new schools and new houses.

We were able to deliver them quickly so they could meet the desperate need for modernisation as soon as possible. Not put off until we could find the money from future taxation.

So let's have an intelligent debate about the Royal Mail and Post Office, which are already involved in different types of public private partnerships.

The real issue is how we modernise and keep a universal, publicly owned and publicly accountable post service.