The Tory government made a record £26bn through selling off our assets in 2015, according to the Press Association. George Osborne and his ilk continue to value short term, one-off financial gains over more profitable long term investment that would leave the taxpayer much better off.
The scale of Osborne’s privatisation in 2015 overshadows even Margaret Thatcher’s £20bn sell off in 1987.
Osborne is a fraud
Osborne continues to mishandle the public finances.
Economists draw up balance sheets for financial entities with two categories: assets and liabilities. Assets are what make the institution money and liabilities are money it owes. Liquidity is the ability of the financial institution to make payments on time. A financial institution can have many assets, but lack liquidity because it does not have funds ready to make payments. If this is the case, the financial institution is forced to sell off assets quickly, often at a loss.
Money that is not invested in assets is considered wasteful, as the money could be turning a profit.
When we founded the NHS and built over a million new homes – 80% of which were social housing – under Clement Attlee’s post-war government, public debt was at 225% of GDP. It is currently at 80% of GDP, thus proving that we do not have a liquidity restraint because of the financial crisis.
If Osborne was an economist he would look at public finances in this way, and wouldn’t sell off our assets on the cheap with no liquidity stranglehold. But he’s not an economist, he’s a fraudster. By setting arbitrary dates for deficit reduction, he has concocted liquidity restraints in order to justify selling off our assets to his mates, on the cheap.
A Treasury spokesman said:
Central to our plan to fix the public finances is the sale of government assets to help pay down the national debt and ensure economic security for working people
That’s why we’ve set an ambitious target to sell £5bn worth of assets by 2020, which will put us on track to meet our target
Arbitrary targets give the illusion of progress, while justifying the sale of assets. Why would capitalists want to buy them, if they were not profitable in the long run?
Let’s take a look at the grand 2015 bonanza.
In January the government sold the constructionline database of more than 23,000 construction companies for £35m to Capita. The database was already run by Capita when it was publicly owned, so no possible improvements there. The database contains information that could be worth a fortune. What this is about, is the privatisation of what was public information.
Capita is the Government’s go-to company when it comes to privatisating our institutions. Last year they were awarded a lucrative NHS contract that could be worth up to £1bn. Their profits have increased dramatically under Tory party rule, with 2014 pre-tax profits at £535m, up 13% from 2013.
In 2013 Capita boasted of its close ties with the Tory party:
We also have frequent meetings with the cabinet office at official level, and occasional meetings at ministerial level.
Greencoat UK Wind
The Tories sold our entire share in Greencoat UK Wind for £51.2m. The initial aim of this share was to encourage investment in wind energy. Probably the best investment we could have, considering that averting the biggest crisis humanity has ever faced depends upon a move to renewables.
Meanwhile, in November last year, the Tories made us the only G7 country to dramatically increase fossil fuel subsidies. Follow the paper trail and it’s clear why. The Tory party have close ties to the fossil fuel lobby. The boss of energy trading giant Vitol has donated £500,000 to the Conservatives.
The latest tax breaks, to the tune of £1.7bn by 2020 (according to government figures), are for North Sea oil. This makes the argument that selling off our renewable energy assets is fiscally necessary quite frankly laughable.
The government sold off its entire 40% stake in Eurostar in March. The sale was recently criticised by MPs as being astronomically lower than the £3bn of taxpayer money funnelled into the company.
That’s because the sell-off was for the Tory party’s own political gain. The government’s own predictions forecast a rise in value of the shares, yet they sold it off anyway to make themselves look better for the general election.
Osborne described the sale as:
a fantastic deal for UK taxpayers that exceeds expectations
You could flog Osborne a piece of gum for a tenner and he’d hail it as the deal of the century. Only the other day he called the recent rip-off tax deal with Google a “major success”.
The government sold off our remaining 30% stake in Royal Mail for £1.3bn in June. Royal Mail revealed profits of £440m in 2013, up from £152m in 2012.
Keeping this stake, or larger, would make the public money.
Royal Bank of Scotland
Our 5.4% stake in RBS was sold for £2.1bn in August, at a huge loss of over £1bn. The bargain price for the private sector is a third lower than the government originally paid.
Northern Rock mortgage assets & Lloyds Tsb shares
In November, the government sold off our Northern Rock mortgage assets for £13bn, to US private equity firm Cerberus. This is the largest public asset sale by a European government ever.
The Unite union condemned the deal as handing over British people’s mortgages to the short-term profit focused US firm, saying:
their futures are being placed on the roulette wheel
The reason the mortgages had to be nationalised in the first place was because of the unregulated profit motive of the financial sector. The Tories have failed to properly regulate the banking sector, instead positioning city elites in the regulatory bodies.
Finally, in December, the government sold our shares in Lloyds for £9.1bn.
While these were the largest public asset sales ever, this is not really surprising. The unprecedented nationalisation of the banks in 2008 with the £37bn bail-out, would naturally lead to an unprecedented sale a few years later. The increase in public debt was shouldered by New Labour, while the corresponding decrease has been gifted to the Conservatives.
This does not signify any ideological difference between the Tories and New Labour, as Osborne explicitly backed every penny of Labour’s spending prior to the crash.
Nonetheless, these assets would generate us profits in the long-term. Lloyds Bank profits increased 38% last year.
Osborne continues to trumpet over-simplified deficit hype to justify myopic privatisation. His arbitrary payment deadlines, which he even fails to meet, masquerade as progressive milestones, while acting as a pretext for selling off public assets to the benefit of only the private sector.
Privatisation is supposed to increase competition, yet UK productivity is “shockingly poor”, at its slowest level since the 1990s.
Shadow Chancellor John McDonnell reportedly summarised widespread privatisation as:
like slaughtering geese that lay golden eggs for a one day fry up
If the institutions themselves are profitable in the long term, why would we sell them off? And the flip-side of this question cements its validity, why would profit-centered businesses purchase them, if they weren’t profitable?
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Featured image via mrgarethm.