How the government is selling the family silver, and why you should care.

ANTHONY PERIES

The issue of privatisation is a very heated debate in politics, but what is “privatisation”, and why does it matter?

george-osborne-finishedIn beginning to deconstruct this idea of “privatisation”, we must first look to the ownership of large companies, which is usually split into shares. Whoever has the majority of shares, gets to call the shots and often a small group of investors will own the majority stake between them. Sometimes it will be one (typically rich) person, and other times, it’s the government. If the government buys the majority stake in a company it is said to have been “nationalised”, meaning that the government’s shares in the company are said to be an “asset”, which belongs to the nation. If the company does well, and makes a profit then the share price will rise. When the share price rises then the government, and thus the taxpayers, whose money they are spending, will gain money. If however the company does badly, then the share price will drop, and this means that the investors lose money. So there it is, state ownership in a nutshell.

Some people believe that the government should not get involved in business trades like this, and that rather than seeking to earn money from partial or full ownership of companies, that they should simply allow private investors to run the companies, and tax their profits. This creates less risk to the taxpayer because if a company does badly, the taxpayers cannot lose money. When the company does well however, they still reap the rewards through taxation.  Although this would generally bring less money in for the government, supporters of this argument often state that parliament spends too much providing services that should be in private ownership. An example of this would be that Britain has the NHS whereas the USA has healthcare provided by private companies. On the other hand, there are those who say that the government should own all businesses, and that all the profits of all businesses should be spent by the government to pay for more public services, like schools, roads and hospitals as they do currently, but also much more, such as investing in energy companies, to keep prices down or providing free internet (as some countries already do, Estonia for example), or in companies of all descriptions, to provide employment.

I will save arguing the benefits of state ownership for another article. What I want to talk about, is why you should care that the current government are selling our stake in some companies. For the most part, governments pursue a policy of nationalisation in times of crisis, for example many industries were nationalised after WWII, and many banks were bailed out (nationalised) after the 2008 crash and the credit crunch. The government steps in, and uses our money, to stop companies from collapsing and causing high unemployment leading to a downward economic spiral. Later when the crisis has past, they sell off the assets and allow markets to re-gain control. However here is my problem, if you sell something, that you’ve bought very cheap because it was damaged, and then spent money repairing it, when you sell it, you should sell it for a higher price to make sure you get that money back.

The government, however, has been selling off our stake in companies much cheaper than they should be. Shares in Royal mail were sold at about 40% less than they were worth, resulting in a loss of over £1 billion, but while taxpayers were losing out a man named Peter Davies was cleaning up. Peter Davies is on the management committee for a hedge fund called Lansdowne Partners, which bought over £50million worth of shares in Royal mail, and after a single day of trading, those shares had risen in value by approximately £18million. You might be forgiven for thinking “so the taxpayers didn’t get the full value of the shares, but what’s special about Peter Davies? It doesn’t seem like anything is wrong so far.” But here’s where it gets interesting, Lansdowne Partners should never even have had access to those shares, they bought shares which were only supposed to be for sale to Royal Mail employees, and that many of them didn’t get a chance to buy any, because big hedge funds had already bought them all. It may seem a little unfair, but again it doesn’t sound like anything wrong has happened. “But what has this got to do with Peter Davies?!” I hear you cry. Well, Peter Davies is one of George Osborne’s closest friends, so close in fact that he was actually the best man at George’s wedding. Suddenly it doesn’t seem likely Peter Davies just got lucky and guessed that the shares would rocket in value, and invested £50 million on a hunch.

Now for the important bit, why you should care. When the government loses this kind of money, it means that it has to come from somewhere else. Either through higher taxes, or from cuts to public spending. So at a time where we are being held to ransom for our education as a result of the cuts to the Higher Education budget, and being told that “tough decisions are going to have to be made” about cuts to disability living allowance, cuts to adult social care, cuts to child benefit, cuts to housing benefit, cuts to mental health provision (particularly for young people), and cuts to the NHS, it is a disgrace that the government is giving away this kind of revenue. I say ‘giving away’ rather than ‘losing’ because this is not a gamble that hasn’t paid off, it is the result of a carefully formulated plan intended to make money for those in power, and their friends – it’s called ‘insider trading’, and it’s illegal. It is for this reason that regardless of which party you support, you should consider this an insult not only to the principle that the country should be run in the interests of its citizens, but also to the idea that “we are all in this together”.

These assets, correctly managed could provide billions of pounds of income, which could be used to lower taxes, and still provide the improvements to public services this country so desperately needs. It is within our power to hold these politicians to account, and it is our duty to do so. The time has come to cut the ties between money and government and for the public to demand that governance in the UK serves the people, not the banks or businesses. If you’re unsure of what you can do to stop this, I’d give you this advice, do anything you can. Tell people, on social media, in the pub, in the gym, anyone who will listen. Get involved in protests, get your friends involved, and get organised. Just do something, because the power of the people is greater than that of the people in power. Remember the words of the late Bob Crow, “If you spit alone, you can’t do anything, but if we all spit together, we can drown the bastards.”

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