Burnham ally to unveil ambitious plan to reverse decades of privatisation

Exclusive: Productive State policy paper envisages state regaining control of basics to make life affordable, in fleshing out of Manchesterism

Andy Burnham’s government should reverse 40 years of privatisation with a long-term plan to take over failing utilities in administration, issuing “bonds for shares” and setting up state competitors, according to a new blueprint for “Manchesterism”.

The policy paper – The Productive State – is released on Monday as Burnham arrives in Westminster to be sworn in as the MP for Makerfield. He widely expected to seek to enter No 10 to replace Keir Starmer in a matter of weeks.

Its author, Mathew Lawrence, who is close to Burnham and has worked with him on his thinking on public control of utilities – is publishing the paper with Mainstream, the Labour group that has been the vehicle for Burnham’s leadership ambitions.

Miatta Fahnbulleh, the former minister who has been advising Burnham on policy, called it “an important contribution to the debate on how we fix this, deliver the change that people are crying out for and start to rebuild our broken economy”.

Lawrence said the essay envisages “a state that owns, invests and provides to make life affordable. A politics that takes back control of the foundations of a decent life: clean water, cheap energy, warm homes, reliable transport, built and run by institutions that answer to the public.”

The paper, which has the subtitle A Framework for Manchesterism, criticised the long trend of privatisation of utilities and says it is at the heart of the UK’s growth and productivity struggles – because of the loss of control over the basics that make life more expensive.

Though the essay – and Burnham himself – do not advocate for blanket nationalisation likely to cost hundreds of billions, it argues for a framework for greater state intervention to protect the public from soaring costs and from picking up the bill for failing private companies.

Lawrence, the director of the thinktank Common Wealth, drafted the essay independently of Burnham inspired in part by his arguments and agenda, and seeking to provide a framework for national renewal.

The Guardian has previously reported that Burnham’s allies have talked about overseeing a 10-year project to take large parts of Britain’s water and energy sectors into public control – likely to start with Thames Water, the stricken utility.

Eventually Burnham’s allies want to bring energy transmission and supply companies, possibly including National Grid, into public control.

The Productive State essay argues that people are facing a “privatisation premium” – essentially a regressive hidden tax embedded in everyday bills that transfers wealth from households to investors. The government is then forced to subsidise inflated costs with welfare transfers such as housing benefit or support with energy bills.

“For millions of households, the basic non-negotiable expenses of life – rent, energy bills, water charges, transport fares, the cost of care – now consume so large a share of their income that insecurity has become a permanent condition,” the essay argues.

“Britain’s essential sectors cost more than comparable alternatives not because they deliver more, but because they are organised to extract more. Working people pay the price.”

Burnham’s commitment to public control of utilities – not necessarily full nationalisation in all cases – has been one of the measures which has raised alarm in the markets. But the essay argues that “rebuilding Britain’s systems of public provision is not the alternative to fiscal prudence. It is fiscal prudence.”

It says public control can be asserted in a number of ways in the long term – when a company like Thames Water is in financial distress, the government can step in using a “special administration regime”.

For utility companies that are financially healthy, the law typically requires the government to pay fair market value to acquire them. To achieve this without a massive upfront cash expense, the state can use a “bond-for-share exchange”, the essay argues, though the move would need legislation and would probably provoke significant legal challenges.

And the state can also gradually assert control by setting up its own commercial public corporations – though the process would requite potentially major borrowing.

“The ultimate goal of The Productive State approach is … an economy … in which the essentials of life are treated as rights rather than revenue streams, and society builds the abundance, security, and stability it currently lacks,” it says.

The essay has been praised by a number of Labour figures including Fahnbulleh and Stewart Wood, the Labour peer who was an economic adviser to Ed Miliband. He said the essay was a “valuable contribution to rethinking a social-democratic case for a more active state that helps to generate wealth and improve lives across the country”.

Fahnbulleh said: “At the heart of the cost of living crisis gripping this country is a basic truth. The essentials that everyone needs to survive – a decent home, clean water, electricity, transport – have become unaffordable for too many. The public have put us on notice: we must deliver the change we promised in 2024.”

The Labour MP Yuan Yang, a member of the soft-left Tribune group who has been a key thinker contributing policy ideas to the Burnham campaign, said: “Change requires a diagnosis and a solution that matches the scale of our challenges, and a broad consensus is emerging within the Labour party on the need for bolder measures to tackle the cost of living crisis at its root, reducing inflation and ensuring sustainable growth in the long run.”

Luke Hurst, the national coordinator of Mainstream, said a new leadership in Labour could not be “business as usual … We need a much more transformative offer and real debate within the party about our platform and priorities.” He said the essay was “an urgent rethinking of Labour’s political economy”.