Polly Toynbee
If you think the government might
hesitate to sell other national assets after the Royal Mail fiasco, think
again.
The Land Registry, the office that certifies property ownership, a quasi-judicial function, is being readied for privatisation. It collates data on prices and transactions and catches fraudsters.
It has cut its fees, scores 98% satisfaction and last year made a £98.7m profit for the Treasury – yet it's part of this government's £20bn asset sell-off.
In the Royal Mail debacle, shares sold at £1.7bn rose to £2.7bn.
The 16 investors chosen as "long-term" custodians included the most wolfish hedge funds, who sold the shares at once. Let's hope that ends any pretence that shareholders look after companies.
What's more, the investment arm of Lazards, key adviser to Vince Cable, was also given "priority" status. But Lazard Asset Management sold its entire stake within a week at a profit of £8m.
Likewise Goldman Sachs, employed to facilitate the sale, told its investors share prices would hit 610p a month after advising the government to float at 330p.
How well these companies deserved their tongue-lashing from Margaret Hodge:
"You all know each other. You work together. You trade with each other. You are part of this little clique and we the ordinary taxpayer lose out on it."
This is a case of caveat vendor.
We should beware the inherent asymmetry when the state sells contracts and assets.
On the government side, this is negotiating with a political gun at the head, conducted by inexperienced civil servants told to secure complex objectives, unable to walk away from already announced sell-offs.
On the market side is rat-like native cunning impelled by profit, willingness to give mendacious assurances with one easy objective – to make money.
Governments will always need to deal with markets for procurement and regulation – but that needs a strong, experienced civil service with equal cunning, not one cut by 30%, losing memory of past errors.
Private finance initiative deals, for example, improved with experience from the catastrophic early ones (such as Gordon Brown's London tube wreck), but they are still more advantageous to the other side.
Weakened civil service cadres will never strike good deals; the West Coast mainline was an inevitable disaster.
What better time to review the history of privatisation.
The 1980s promise of a shareholding democracy failed: fewer shares are now held by individuals, more by institutions.
In a rigorous report, the High Pay Centre's analysis is not a rosy picture.
The state sold off its assets at knock-down prices, with an average increase in profits of 419% in nine companies from privatisation to 2010, compared with an FTSE100 average of 206% in the same period.
Many are now owned by foreign companies, so all that gain went overseas.
British Airways and BT may have flourished – but shouldn't the state have held some share in that success?
Ed Miliband was right to pick on energy companies, whose bills rose by 140% in 10 years, while household incomes rose only 20%. Water bills rose by 74%, with leakage rates up 30%.
The government did raise £50bn (at 2000 prices), but that doesn't take into account debt write-offs, pension obligations or extra subsidies the state has paid.
The pay of privatised staff has stagnated while 170,000 jobs were lost.
Remember Cedric, the first corporate pig? He was a mere runt compared to chief executives of privatised companies now earning £5m – 50 times the pay of a senior public servant.
Above all there is rail, and the botched sell-off by John Major exactly 20 years ago has seen fares rise by between 100% and 200%.
John Prescott and 40 Labour candidates are calling for Miliband to take back services, as 19 of the 25 franchises come up for renegotiation over the next five years.
Prescott points to the doubling of the state subsidy that used to go to old British Rail: "Private train companies last year handed out £200m to their shareholders from the £4bn subsidy."
Compare that to the nationalised East Coast trains, which "achieved greater punctuality, provided a better service and has given more than £800m back to the taxpayer".
No wonder there is overwhelming public support for taking the franchises back – 66% – including among Tories.
Instead the government is selling East Coast and Eurostar in February, just before the election – unless it can be stopped.
There is no evidence about how well contracting and privatising work: the best experts can find is 1980s assessments of early contracts for simple local services.
At the very least, there should always be a state comparator.
NHS contracting is galloping ahead, with no centrally gathered monitoring for comparison.
Other privatisations rush on – probation and the court fines collection service – while companies built by cashing in from the state, such as G4S, A4E and Serco, are in disgrace.
While Serco is being investigated by the Serious Fraud Office after overcharging on tagging, it emerges that its finance director sold £2.7m shares two months before the share price tanked on a profits warning.
The Land Registry, the office that certifies property ownership, a quasi-judicial function, is being readied for privatisation. It collates data on prices and transactions and catches fraudsters.
It has cut its fees, scores 98% satisfaction and last year made a £98.7m profit for the Treasury – yet it's part of this government's £20bn asset sell-off.
In the Royal Mail debacle, shares sold at £1.7bn rose to £2.7bn.
The 16 investors chosen as "long-term" custodians included the most wolfish hedge funds, who sold the shares at once. Let's hope that ends any pretence that shareholders look after companies.
What's more, the investment arm of Lazards, key adviser to Vince Cable, was also given "priority" status. But Lazard Asset Management sold its entire stake within a week at a profit of £8m.
Likewise Goldman Sachs, employed to facilitate the sale, told its investors share prices would hit 610p a month after advising the government to float at 330p.
How well these companies deserved their tongue-lashing from Margaret Hodge:
"You all know each other. You work together. You trade with each other. You are part of this little clique and we the ordinary taxpayer lose out on it."
This is a case of caveat vendor.
We should beware the inherent asymmetry when the state sells contracts and assets.
On the government side, this is negotiating with a political gun at the head, conducted by inexperienced civil servants told to secure complex objectives, unable to walk away from already announced sell-offs.
On the market side is rat-like native cunning impelled by profit, willingness to give mendacious assurances with one easy objective – to make money.
Governments will always need to deal with markets for procurement and regulation – but that needs a strong, experienced civil service with equal cunning, not one cut by 30%, losing memory of past errors.
Private finance initiative deals, for example, improved with experience from the catastrophic early ones (such as Gordon Brown's London tube wreck), but they are still more advantageous to the other side.
Weakened civil service cadres will never strike good deals; the West Coast mainline was an inevitable disaster.
What better time to review the history of privatisation.
The 1980s promise of a shareholding democracy failed: fewer shares are now held by individuals, more by institutions.
In a rigorous report, the High Pay Centre's analysis is not a rosy picture.
The state sold off its assets at knock-down prices, with an average increase in profits of 419% in nine companies from privatisation to 2010, compared with an FTSE100 average of 206% in the same period.
Many are now owned by foreign companies, so all that gain went overseas.
British Airways and BT may have flourished – but shouldn't the state have held some share in that success?
Ed Miliband was right to pick on energy companies, whose bills rose by 140% in 10 years, while household incomes rose only 20%. Water bills rose by 74%, with leakage rates up 30%.
The government did raise £50bn (at 2000 prices), but that doesn't take into account debt write-offs, pension obligations or extra subsidies the state has paid.
The pay of privatised staff has stagnated while 170,000 jobs were lost.
Remember Cedric, the first corporate pig? He was a mere runt compared to chief executives of privatised companies now earning £5m – 50 times the pay of a senior public servant.
Above all there is rail, and the botched sell-off by John Major exactly 20 years ago has seen fares rise by between 100% and 200%.
John Prescott and 40 Labour candidates are calling for Miliband to take back services, as 19 of the 25 franchises come up for renegotiation over the next five years.
Prescott points to the doubling of the state subsidy that used to go to old British Rail: "Private train companies last year handed out £200m to their shareholders from the £4bn subsidy."
Compare that to the nationalised East Coast trains, which "achieved greater punctuality, provided a better service and has given more than £800m back to the taxpayer".
No wonder there is overwhelming public support for taking the franchises back – 66% – including among Tories.
Instead the government is selling East Coast and Eurostar in February, just before the election – unless it can be stopped.
There is no evidence about how well contracting and privatising work: the best experts can find is 1980s assessments of early contracts for simple local services.
At the very least, there should always be a state comparator.
NHS contracting is galloping ahead, with no centrally gathered monitoring for comparison.
Other privatisations rush on – probation and the court fines collection service – while companies built by cashing in from the state, such as G4S, A4E and Serco, are in disgrace.
While Serco is being investigated by the Serious Fraud Office after overcharging on tagging, it emerges that its finance director sold £2.7m shares two months before the share price tanked on a profits warning.
This
is the world David Cameron assumes always does better than public service, as a
matter of unproven conviction.
Laying out his Open Public Services policy, he said
everything was up for sale, with "a new presumption" that
"public services should be open to a range of providers competing to offer
a better service".
When he said: "The old narrow, closed state
monopoly is dead," he forgot to say that services sold or contracted would
become private monopolies making handsome profits at our expense.
The dogma
driving these privatisations wilfully ignores past experience.
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