Why - and how - Labour should pledge to renationalise Royal Mail

Yesterday, Labour's shadow Business Secretary Chuka Umunna - tipped as a possible future leader by some - announced that Labour would keep Royal Mail in private ownership if, as is likely, the Tory-led government pushes through privatisation before 2015.

Writing for the Huffington Post, Umunna argued:

"I have been very clear that we are not in a position to pledge to renationalise the Royal Mail if we get into government in 2015. I do not know how much Royal Mail shares will be trading at in May 2015, so I do not know how much it would cost to renationalise. No credible future Business Secretary would therefore make such a pledge"

What struck me was how woefully unaware Umunna seems of Britain's long history of nationalisations. But, first some good news to be read into Umunna's otherwise depressing statement: if Labour won't nationalise because of cost, then rail renationalisation is on the cards - since the franchises can be brought back under public control as they expire, cost-free. Come on Maria Eagle, you can do it!

But I digress. Labour has of course already said it will stick to the Tory spending plans that it criticises as being flawed, and therefore Mr Umunna is unable to make spending commitments, unless funded by some other cut (like Trident perhaps?).

But still, governments have rarely used current expenditure accounts for nationalisations. Even the colossal shovelling of public money at the banking system in 2008/09 was done through an arcane stand-alone Bank of England fund.

The largest swathe of nationalisations occurred under Clement Attlee's 1945 government, and included coal, steel, electricity, gas, electricity, railways, road haulage - alongside a massive expansion of publically-owned social security, public health, education and housing.

Now you might say, 'that's all well and good, but Labour will come to office in 2015 with a very different inheritance. Didn't you hear Liam Byrne? There's no money left!'. To which the reply is 'I never listen to Liam Byrne. Why on earth would anyone? But I see your point, Attlee only took office after six years of war, with the country's infrastructure and labour force decimated, and with a national debt nearly four times what it is today. But I just think maybe today's Labour could manage one relatively small renationalisation...'

Attlee's government also reduced the national debt during its term in office. 'But how?' you ask, 'when they must have spent billions on all those nationalisations'. Attlee's government largely exchanged shares for Treasury bonds - sustainable low cost funding of the purchase of assets that often generated revenue in return (Royal Mail made a profit of £430m last year) or were steered in the public interest to underpin economic growth and to meet social need ('meet social need' aka 'predistribution'). Another question Mr Umunna should be asking is why would any government wanting to reduce the debt, sell off a steady income stream?

But of course saying now that if the Tories privatise Royal Mail, Labour will renationalise will drive away the vultures circling over Royal Mail. Who would pay for shares now, knowing they'll be exchanged in less than 18 months. Labour committing itself now to renationalisation in 2015 could scupper the move entirely.

All is not lost if Labour waits. The inevitable result of Labour committing itself to renationalisation next year would be to reduce the share price of a privatised Royal Mail. Look at the impact of Ed Miliband's modest price freeze announcement for energy companies. This would make even a cash buyback considerably cheaper.

The Attlee government did something very simple, it told the electorate what it would do - boldly - and it won a landslide. Until it finally announced some policies at its conference last week, today's Labour was barely ahead in the polls, against a deeply unpopular government. It went from being level to four points ahead before, to 8 to 11 points ahead after the announcement to freeze energy prices and repeal the bedroom tax.

There's a lesson there. One is that, if Labour wants to look 'credible' it shouldn't oppose privatisation only until it happens. That's rather like being a vegetarian between meals.

UPDATE (05/10/13): It is now estimated that Royal Mail will be valued at around £3 billion for the sell-off. Chuka Umunna has described this as "on the cheap", stating that two of Royal Mail's sites in London are alone worth £1.5 billion - and that these sites are at risk of being sold off once the shares are sold to private investors.
Such asset-stripping is common in privatisation - and occurred following the privatisations of the railways and of the water boards. If such asset-stripping occurs, then Labour should renationalise in 2015 by compensating shareholders on the basis of the valuation of the company at time of privatisation, minus the value of any assets sold off. If they can privatise on the cheap, we can renationalise on the cheap!

John McDonnell MP's verdict on Ed Miliband's conference speech

Since Ed Miliband became leader, the strategy of the left has been to make issues safe for him by building support within and outside the party issue by issue. Only when it's safe is he confident about moving on an issue. Today's speech demonstrated that we are setting the agenda but there's so much further to go. A major housebuilding programme is needed, but it needs to be public housing alongside rent controls to stop landlords profiteering from housing benefits.

Challenging the scapegoating of unemployed and disabled people needs to be made a reality by scrapping the rigged capability tests associated with Atos and abolishing workfare. Time limited price controls won't end the rip-offs. A clear commitment to end privatisation is needed, especially in the NHS, and to bring rail, water and energy back into public ownership plus, if it goes ahead, Royal Mail. 

To tackle low pay, we need to make the minimum wage a living wage by right, re-establish trade union rights and restore a commitment to full employment. People already suspect this is a recovery for the rich and ongoing recession for the rest. This is exactly the time when people want more radical action. Make today's speech a beginning.

Osborne ‘slays Lloyds goose for quick buck’

Chancellor sells £3.2bn stake in profitable bank 

MINISTERS began reprivatising Lloyds yesterday, flogging off a £3.2 billion stake in the once failing bank.

Chancellor George Osborne hailed the sell-off as evidence that Britain was “turning the corner,” but economists raised concerns that the banking sector was merely returning to the light-touch approach central to the severity of the financial crisis in the first place.

Investors snapped up the stock at 75p a share – just above the 73.6p average the Treasury paid in the £20.5bn bailout the bank at the height of the financial crisis.

The taxpayer’s stake has been reduced from 38.7 per cent to 32.7 per cent, with no further sales for at least 90 days.

Mr Osborne said the sale eased the national debt by £586 million, based on a paper valuation of the shares on government books, though that figure is subject to Office for National Statistics approval.

The Tory Chancellor said: “This is another step in the long journey in putting right what went so badly wrong in the British economy.”

But left economists warned that the fire sale would be bad for Britain in the long term. Left Economics Advisory Panel co-ordinator Andrew Fisher said: “Lloyds was bailed out by the state, and propped up with public money.

“Now Lloyds has returned to profit, rather than maintaining a long-term income stream, it is being sold off for private profit.

“This is slaughtering a goose that lays golden eggs for a one-off fry-up, even leaving aside the government’s criminal failure to use its public stake in the banks to change banking culture or invest in the public interest.”

And the Socialist Economic Bulletin’s Michael Burke warned that the sell-off was “a return to the system we had before.”

“It’s a drive by the government to bail out the most failing aspects of the private sector – that of light-touch regulation in the financial sector, while imposing austerity cuts for the rest of society.

“They’re selling off one of our assets instead of using the profits for regeneration.”

This article first appeared in the Morning Star

 

MP calls for RBS sale 'at all costs'

by Luke James

A privatisation-mad Tory MP today demanded that profitable parts of the publicly owned RBS bank must be flogged at all costs.

Andrew Tyrie (pictured), who chairs Parliament's commission on banking standards, wants to let privateers cherry-pick parts of the bank and make the taxpayer shoulder bad debts.

Splitting RBS into good and bad banks was just one option given in a recent report by the cross-party commission.

But even austerity-obsessed Chancellor George Osborne is believed to be unenthusiastic about the prospect.

Mr Tyrie has now urged the Chancellor to examine the "future structure" of RBS as "a matter of urgency."

In a letter to the Financial Times laced with bankers' jargon, he argued: "Formal accounting conventions should not be allowed to get in the way of what is best for the economy."

Left Economics Advisory Panel co-ordinator Andrew Fisher said the misplaced debate centred on "what is the best way to privatise RBS."

He explained: "Tyrie argues the taxpayer will get more in the sell-off if the public first absorbs the toxic debts as a 'public bank.'

"Osborne worries that the public bad bank would worsen his deficit figures and that the toxic debts aren't too bad anyway."

But Mr Fisher said: "Labour should be calling for a publicly owned bank that can invest in new infrastructure to create jobs, reduce unemployment and operate in the public interest - something neither side of the Osborne-Tyrie pantomime cares about."

This article first appeared in the Morning Star

Lloyds bosses to speed up privatisation with 70% payout

by Luke James

Bosses of bailed-out Lloyds bank revealed today they will hand a massive 70 per cent of profits to shareholders in a bid to speed up privatisation plans.

Chief executive Antonio Horta-Osorio issued the invitation to asset-strip the part-publicly owned bank because private investors have so far only shown modest interest.

The government owns 40 per cent of Lloyds, acquired when it saved the bank from collapse in 2008 with £17 billion of public money.

Ministers are desperate to flog the stake - and so cut the public out of dividend payments - because of their privatisation obsession and have offered Mr Horta-Osorio a £2 million bonus to deliver the sale.

His plans to give away a staggering 70 per cent of profits by 2016 would mean that Lloyds pays higher dividends to shareholders than any other bank.

Leading left-wing economist Andrew Fisher said it was a "slap in the face for the British public, who bailed out banks like Lloyds.

"It makes it clear that what many of us have said all along is true - we nationalised the debts, while the profits are privatised," said the Left Economics Advisory Panel co-ordinator.

"Lloyds's grotesque dividend and executive pay bonanza comes at the expense of its customers, the taxpayer and its own staff - at a time when over 3,000 job cuts have been announced."

This article first appeared in the Morning Star

Poorest hit hardest by Thatcher's legacy

A few weeks ago I cut out an interesting table from the Metro newspaper - showing how the cost of essential items had risen in the past five years.

The table to the left shows quite clearly how the unavoidable cost of several essential items has risen well in advance of inflation.

Nearly four years ago, LEAP published some ground-breaking research on how inflation affected different income groups. The report Why Inflation is a class issue was published in conjunction the then newly formed Trade Union Co-ordinating Group. One of that group's unions - the PCS - has been on strike this week, with the decline in living standards one of the main issues in the dispute. Their general secretary, Mark Serwotka, told the media that his members had seen their incomes fall by 20% in the last five years - due to a combination of below inflation pay rises (including two years of pay freeze) and increased pension contributions (for a smaller pension at a later date).

For the poorest in society - those on low incomes or surviving on social security - increases in the essentials hit hardest. Our 2009 research found that the poorest 10% spend 67% of their income on essentials, compared to the richest 10% who spent only 29% on essential items. This massive differential is the legacy of the Thatcher years when inequality grew, reversing the equalising post-war consensus.

Many of the essentials - formerly publicly owned utilities - were privatised under Thatcher and now operate for the benefit of private shareholders, with only the lightest of regulatory touches. Their profiteering is evident in the table above, as households are hit by the rising costs of essentials like electricity, water, gas and telecommunications. The table above shows the reality for those facing a 1% cap on their benefits.

Likewise the spiralling costs of rents and house prices are rooted in the selling off and failure to replace council housing, the abolition of rent controls and tax breaks for buy-to-let merchants.

Whatever the origins though, the reality is that the poorer you are the harder you are hit by the seemingly unending rise in the cost of essential goods. In 2009 we called for a new measure of inflation - Essential Inflation - it is needed more now than ever, because the poorest are still being clobbered in a way that the headline CPI and RPI figures fail to reflect.

In a society as grossly unequal as ours, no single inflation measure can reflect the true picture for UK households.

The Dash for Cash - the Great British Energy Rip-Off

British Gas announced a 6% increase on gas and electricity on 12 October, which will add an average £80 per year to bills (Npower will increase the gas by 8.8% and electricity by 9.1%).

Energy companies blame the rises on declining North Sea gas supplies, rising global prices, and costs of maintaining the UK distribution network. The reality is somewhat different.

Last year British Gas announced profits of £1.5 billion. It supplies to around 9.5 million households so is making £160 a year profit per household.

So even if we take British Gas at face value about their rising costs, they could have absorbed them and still made £750m profit.

But it's not just British Gas ... 

On 15 October, Scottish Power announced gas and electricity bills would go up by 7% in December. Scottish Power has 2.3 million customers – average fuel bill will rise by £100 per year.

Scottish Power made £1 billion in profits last year – this price rise will raise £230m – so just one-quarter of their profits!

This is the grotesque profiteering that has happened since our gas and electricity was sold off in the 1980s.

Last year British Gas put up gas bills by 18% and electricity bills by 16% - that’s how they made £1.5bn in profits.

We are being told we have to pay more so that the energy companies can invest in renewable energy, but this year, last year and every year for the last 25 years billions from our energy bills have been going to private shareholders’ dividends instead of into investing in the energy network.

We urgently need to invest in renewable energy. Sweden gets nearly half its energy needs from renewables, France is 12% and Germany around 10%. In Britain it’s less than 3%. 

A large reason for us lagging behind the rest of Europe is that energy companies have been siphoning every penny they can - and successive governments have done nothing to stop them.

So what can you do? Support Fuel Poverty Action's day of action on Saturday

Privatisation - ideological theft from us all

The article below appeared in the October 2009 edition of the LEAP Red Papers. It highlighted why it was economically inept to privatise assets, and counter to the propaganda that promotes privatisation, i.e. if the private sector is so efficient, dynamic and entrepreneurial why not give it the liabilities to turn into assets?

Often, as in the case of the London Underground and most notably the banks, the private sector manages to turn assets into liabilities - a sort of reverse alchemy.

In the Observer this weekend was another great expose of the myths around privatisation with news that in-house public sector bids for prisons earmarked for privatisation, had 21% added to them to make them more expensive that private sector bids. It's well worth reading: Unions blast scandal of prisons privatisation by Jamie Doward.


Everything must go? Brown’s asset sales assessed

Andrew Fisher, LEAP Co-ordinator

Just as Thatcher bagged up the family silver and flogged it at knock-down prices to her mates in the City, so Brown and Darling have scraped around for any valuable bits that Thatcher and Major inexplicably overlooked.

And so on 12th October 2009, Gordon Brown announced what Alistair Darling had already announced in the Budget in April 2009: the great New Labour sale – everything must go! – from the Royal Mint to Royal Mail, the Ordnance Survey, the Channel Tunnel Rail Link and much much more!

The flaw is that many of these government controlled assets are exactly that: assets. They generate income into the Exchequer, and so Brown is – as John McDonnell MP pointed out – “slaughtering geese that lay golden eggs, for a one-day fry-up”.

The table below shows the level of revenue that some of these assets generate to the Exchequer every year. In addition the Student Loan Company received £900m in 2008/09 in student loan repayments (although these should be written off as unjust debts).

Organisation Turnover Surplus
Ordnance Survey £117m £16m (13.7%)
Royal Mint £159m £5m (2.9%)
Tote £2,900m £156m (5.4%)
Royal Mail £9,560m £321m (3.4%)
Dartford Crossing £23m £4m (17.7%)
Urenco (1/3rd) £1,130m £240m (21.2%)

Without even taking into consideration the revenue generated by some of the proposed asset sales (e.g. Channel Tunnel Rail Link, land sales), we can see that these raise around £1.5bn per year for the Exchequer.

It therefore makes no sense to sell these assets, but to actually create more revenue generating assets for HM Treasury. The state has also recently acquired several banks and the profitable East Coast Mainline franchise – all of which, if properly run, should generate revenue to the Exchequer.

Another income generator is council housing which, as Defend Council Housing has shown, has money taken from it every year. This is why the private sector is keen to get its hands on it – and Brown is only to happy to oblige.

Brown’s £16bn asset sale announcement on 12th October included the sale of tens of thousands of council homes – which a cynic might suggest slightly undermines his council housing credibility gained at Labour Party conference for promising to build about 2,000 council homes over the next few years.

As Jeremy Corbyn MP said: “To sell assets means a loss of already huge public investments and enables the purchaser to fleece the public for decades to come” – which is of course why they are ‘assets’ and why the private sector wants them.

Brown’s asset sales make no economic sense – they will damage the UK exchequer in the medium to long term and result in worse services due to the innate inefficiency of the private sector.


Private sector – more efficient?

This asset sale further exposes to ridicule the rhetoric of private sector efficiency and dynamism. Why not sell state ‘burdens’ to these entrepreneurial alchemists to turn to profit – using their innate efficiency? Because it’s all a myth as this recession has already demonstrated.

One private train operator was recently quoted in the trade press as saying, “I do find it slightly irritating that we don’t operate on a level playing field with [state-owned] European companies . . . you have entities supported by the state in Holland, Germany and France which do not have the same constraints on them of delivering for shareholders in the way we do. I was concerned that the Dutch could be satisfied with a very low return.”

In the days following the public sector takeover of the East Coast mainline rail franchise, it was announced that . . .

Here’s a basic economics lesson: which will provide a better public service – a public sector operator where any surplus is reinvested into service improvements, lowering costs, and raising staff wages; or a private sector operator that must divert a proportion of that surplus to its shareholders?

A similar instance occurred with the nationalisation of Northern Rock. CBI director general Richard Lambert, said: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms”. This roughly translates as a publicly-owned bank can offer better terms to savers (aka “distort the savings market” in CBI-speak).


The best alternative to privatisation is a positive alternative. You can download LEAP's 2008 publication Building the new common sense: Social ownership for the 21st century (you can buy a hard copy here).

You can't control what you don't own

If there's one lesson of the banking crisis and bailouts of 2007-09, it's that 'you can't control what you don't own'.

Today the government implores the banks to lend more to businesses and to constrain executive bonuses, but to little avail. Perhaps the irony is that we do still own large stakes in several banks. Indeed if it were not for the various guarantee schemes that underpinned UK banking, we would have ended up owning most of them as they fell like dominoes. However, the ownership model devised was arms-length, temporary, and was in reality the privatisation of public money rather than the nationalisation of private assets (or liabilities).

The New Labour government had introduced the market further into areas such as welfare, education and health, had part-privatised the London Underground, and more of the civil service than the governments of Thatcher and Major combined. But here it was facing the possibility that its golden child - the finance sector - was about to collapse.

In 2007, what struck LEAP was the lack of debate about public ownership. What really sent the message home clearly for me was this press release from Unite, the union that represents Northern Rock staff, from 20 November 2007. It sets out a six point 'Charter for Northern Rock' the sixth point is "To retain Northern Rock as a UK listed company".

I don't use this example to in anyway demean Unite, but simply to highlight how little issues of ownership and control were being discussed and debated in the labour movement.


Today, Southern Cross - which owns 753 care homes across the UK - remains on the verge of collapse. The 2011 GMB Congress asked 'If private equity and the private sector are places fit for the care of our elderly, our most vulnerable and our most dependant?' Indeed.

A new debate is starting up about media ownership in the wake of the News of the World hacking scandal. With energy and supermarket prices both rising above inflation to enable gratuitous profiteering, the demand for public ownership should be made.

Earlier this week it was also revealed that Virgin Trains received £40 million in public subsidy, and paid out nearly £35 million in dividends. The case for rail re-nationalisation is overwhelming.

It therefore seems an opportune time to publish free online for the first time LEAP's 2008 publication Building the new common sense: Social ownership for the 21st century (you can buy a hard copy here).

The pamphlet looks at different forms of public ownership from the Morrisonian post-war model to workers' co-operatives.

Download chapter by chapter

• Preface by Andrew Fisher
• The Case for Industrial and Economic Democracy by Gregor Gall
• Why we need a culture of social ownership by Rosamund Stock
• The economic case for worker-owned co-operatives by Jerry Jones
• Telecommunications of the future under public ownership by Maria Exall & Gary Heather
• Rail privatisation - a failed experiment by Bob Crow
• The Growing Case for Social Ownership by Gerry Gold
• The Campaign for Social Ownership in the 21st century by John McDonnell MP

Asset sales, privatisation and the Tory agenda

The Coalition government is a coalition in name only, it is pursuing a Tory agenda. That agenda is the same as it has been for 30 years: an attempt to roll back the post-war settlement - removing welfare rights and cutting public services.

While most of the attention and opprobrium has rightly been aimed at the £80 billion of cuts announced by George Osborne in the Comprehensive Spending Review, there has not been enough attention and analysis of the privatisation agenda.

The level of privatisation already announced are mind-boggling, both in their scale and economic ineptitude. The CSR announced the intention privatise the Royal Mail, the Tote, Royal Mint, Ordnance Survey and air traffic control. Of course this agenda is not new, and in fact is most a regurgitation of what New Labour announced in the 2009 Budget (which LEAP rightly condemned).

These aren't referred to as privatisations, but as "asset sales", but why would a country in debt, according to Osborne on the "brink of bankruptcy", sell off revenue generating assets? Each of the Royal Mail, the Tote, Royal Mint and Ordnance Survey generate income for the Exchequer - vital in closing the deficit and paying off the debt.

But, as Irish comedian Jimmy Cricket used to say, "c'mere, there's more": under the radar there's a huge swathe of privatisation planned for the NHS (as this wonderful video shows), for education (through 'free schools') and in welfare delivery where nearly 10,000 Jobcentre workers are set to lose their jobs and more jobcentres close to fund the private sector to deliver workfare programmes.

The Morning Star also features on its front page this morning a new report from the influential ResPublica think-tank which calls for "the government to privatise swathes of hospitals, schools and libraries". It is, as the Star titles it, "The Ultimate sell-off"

As I told the Star, the Tories plan is "to relieve the state of the burden of providing high-quality services". But that is only one side of the story - the other is that they wish to transfer publicly funded assets to the private sector.

We should never forget, privatisation is the redistribution of wealth from the public to the private; from communities to shareholders. It increases inequality by removing access to services from the poorest and by increasing the wealth of the richest.

More on the Great Rail Rip-off

Following on from our post of 4th May about threatened rail cuts, news now emerges of franchises redesignating peak times to increase - by up to 4 times - rail fares.

In our January 2009 report for the RMT union, we identified the following threats from the rail companies:

1. Either attempting to renegotiate franchise agreements, which could
include:
a. Reducing premium payments or requesting extra subsidies
b. Cutting services on less profitable routes

2. Cutting staff numbers to reduce overhead costs, which would increase
unemployment and could lead to worse services and less passenger
safety

3. Raising rail fares, which could drive passengers from the rail into
private transport

We have now seen all three in this recession. On point 3, the BBC reports that "Virgin decided to extend ticket restrictions for more than an hour a day", so many services are now peak. One example is that last year, taking the 0915 from London Euston to Manchester, returning at 0855 the next day, would have cost £66. Now that Virgin has extended its peak hours, the same ticket costs £262. It's a similar story at South West Trains - owned by homophobe Brian Souter.


Virgin remember is owned by tax exile Richard Branson who takes tax subsidy but avoids tax. Virgin is so named not because of its owner's sex appeal but because it is based in the Virgin Isles.

Afraid of more franchises defaulting, it appears the Office of Rail Regulation inside the Department for Transport is doing nothing and allowing passengers to be fleeced.

However on the East Coast mainline, which was taken over by the government last year, five trains a week have been reassigned the other way, from peak to off-peak.

The answer is simple: renationalise the railways!

Watchdog warns of British energy crisis

From the Morning Star

Energy regulator Ofgem has warned that the current free-market model for the industry is not fit for purpose and could lead to supply shortages and spiralling fuel poverty.

Following an extensive consultation period, the watchdog unveiled a set of radical proposals for a "secure and sustainable" energy supply across Britain.

It acknowledged that sticking with the current market was "not an option" - barely two years after it declared privatisation was working - and hinted at nationalisation as a possible solution.

The report expressed "reasonable doubt" over the security and sustainability of the country's power supplies amid a perfect storm of the financial crisis, environmental targets, dependency on imported gas and the closure of ageing power stations.

It warned that failure to reform the energy system could mean power shortages after 2015, while inaction would lead to a "degree of crisis" in three or four years.

Ofgem has predicted that average household bills could jump as much as 25 per cent to nearly £2,000 without urgent action.

"The higher cost of gas and electricity may mean that increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements," the report stated.

Ofgem put forward a range of proposals it claimed would help release the estimated £200 billion Britain may need to invest by 2020 in order to ensure future supply.

The most far-reaching of these was a call for a "dramatic move away from competitive markets" and towards the creation of a central energy buyer that would set the amount and type of new power generation needed.

In short, the government could be forced to reverse Margaret Thatcher's privatisation of the energy market and renationalise the industry.

The report was endorsed by left economists, environmentalists and union leaders.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for "renationalisation without compensation" and to use the surplus to secure the investment needed for publicly owned supplies that are sustainable and affordable.

"The major investment work needed has not happened despite years of massive profits and will not happen in the future," he stressed.

"The only solution is full nationalisation. The private energy companies have been ripping off consumers for long enough."

GMB national officer for utilities Gary Smith said that the report was "a death knell to the liberalised energy market. We now need the political courage to grasp this and look after people's needs."

And Friends of the Earth executive director Andy Atkins made the case for more substantial investment in renewable energy to protect the planet and our future.

"A commitment to radically reform the energy system must be a significant element of all the political party manifestos," he added.

Energy and Climate Change Secretary Ed Miliband insisted that the government was "confident" of meeting energy supply needs until 2020.

But he admitted that Britain would need more "interventionist energy policy" to deliver secure and sustainable supplies beyond 2020.

Everything must go? Brown’s asset sales assessed

Andrew Fisher

Just as Thatcher bagged up the family silver and flogged it at knock-down prices to her mates in the City, so Brown and Darling have scraped around for any valuable bits that Thatcher and Major inexplicably overlooked.

And so on 12th October 2009, Gordon Brown announced what Alistair Darling had already announced in the Budget in April 2009: the great New Labour sale – everything must go! – from the Royal Mint to Royal Mail, the Ordnance Survey, the Channel Tunnel Rail Link and much much more!

The flaw is that many of these government controlled assets are exactly that: assets. They generate income into the Exchequer, and so Brown is – as John McDonnell MP pointed out – “slaughtering geese that lay golden eggs, for a one-day fry-up”.

Table 1 below shows the level of revenue that some of these assets generate to the Exchequer every year. In addition the Student Loan Company received £900m in 2008/09 in student loan repayments (although these should be written off as unjust debts).

Table 1

Organisation Turnover Surplus
Ordnance Survey £117m £16m (13.7%)
Royal Mint £159m £5m (2.9%)
Tote £2,900m £156m (5.4%)
Royal Mail £9,560m £321m (3.4%)
Dartford Crossing £23m £4m (17.7%)
Urenco (1/3rd for sale) £1,130m £240m (21.2%)

Without even taking into consideration the revenue generated by some of the proposed asset sales (e.g. Channel Tunnel Rail Link, land and council house sales), we can see that these raise around £1.5bn per year for the Exchequer.

It makes no sense to sell these assets. In fact the imperative would be to create more revenue-generating assets for HM Treasury. The state has recently acquired several banks and the profitable East Coast Mainline franchise – all of which, if properly run, should generate substantial revenue to the Exchequer.

Another income generator is council housing which, as Defend Council Housing has shown, has money taken from it every year. This is why the private sector is keen to get its hands on it – and Brown is only to happy to oblige.

Brown’s £16bn asset sale announcement on 12th October included the sale of tens of thousands of council homes – which a cynic might suggest undermines his council housing credibility gained at Labour Party conference for promising to build approximately 2,000 council homes over the next few years.

As Jeremy Corbyn MP said: “To sell assets means a loss of already huge public investments and enables the purchaser to fleece the public for decades to come” – which is of course why they are ‘assets’ and why the private sector wants them.

Brown’s asset sales make no economic sense – they will damage the UK exchequer in the medium to long term and result in worse services due to the innate inefficiency of the private sector. Yes you read that right

Private sector – more efficient? No.

This asset sale further exposes to ridicule the rhetoric of private sector efficiency and dynamism. Why not sell state ‘burdens’ to these entrepreneurial alchemists to turn to profit – using their innate efficiency? Because the dynamism of the ‘profit motive’ is a myth, as this recession has so clearly demonstrated.

One private train operator was recently quoted in the trade press as saying, “I do find it slightly irritating that we don’t operate on a level playing field with [state-owned] European companies . . . you have entities supported by the state in Holland, Germany and France which do not have the same constraints on them of delivering for shareholders in the way we do. I was concerned that the Dutch could be satisfied with a very low return”. Still a return you note, but the inefficient distribution of surplus to shareholders is factored out.

In the days following the public sector takeover of the East Coast mainline rail franchise (formerly operated by National Express) it was announced that seat reservation charges would be abolished and an extra £12m invested in station improvements. The Transport Secretary Lord Adonis stated that he expected to “see real improvements in the service and better value for money”, and Elaine Holt who now manages the franchise on behalf of the state said, “over time we'll introduce further improvements to the service, the stations and the trains”.

This crisis is throwing capitalism into sharp relief – profit is wasteful, and the corporate sector has consumed more state welfare than if the whole country was on the dole. But it’s always been obvious, which would provide a better public service – a public sector operator where any surplus is reinvested into service improvements, lowering costs, and raising staff wages; or a private sector operator that must divert a proportion of that surplus to its shareholders?

A similar instance occurred with the nationalisation of Northern Rock. CBI director general Richard Lambert, said: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms”. This roughly translates as a publicly-owned bank can offer better terms to savers (aka “distort the savings market” in CBI-speak).

The private sector is terrified of fair competition from the state and non-profit models of production – and this should give us the confidence to argue for and develop the alternatives.


*This article is taken from the LEAP Red Papers: The Cuts, which can be discussed in full on the LRC website

£30bn worth of cuts and privatisation, says LEAP

The 2009 Budget announced a further £9bn on public service cuts, on top of the £5bn announced in the Pre-Budget Report. The Chancellor also announced £16bn of "asset sales", which will include the privatisation of Royal Mail and the Royal Mint. This is a total of £30bn of public service cuts and privatisation.

John McDonnell MP, LEAP Chair, said:

"Buried in this Budget is a programme of public expenditure cuts and privatisations never seen before in the history of this country. It means the Government is pressing ahead with the sale of Royal Mail in the face of massive public opposition. This programme of cuts and privatisation will be made worse when the Chancellor's unsustainable growth predictions are exposed.

"Cutting and privatising jobs in the public sector will simply put more people on the dole, and runs counter to the Government's overall approach of stimulating the economy."

Andrew Fisher, LEAP co-ordinator, said:

"By pushing ahead with the privatisation of Royal Mail and the Royal Mint, Darling is putting ideology before evidence. Thatcher sold off the family silver, now Brown is selling off the family gold.

"As public businesses both Royal Mail and Royal Mint are net contributors to the public purse - and with an ever-widening deficit, the Chancellor is wrong to sell-off a valuable source of public income. Darling is slaughtering the goose that laid the golden eggs."