Friday, 27 February 2009

A privatised affair

I’m a staunch believer in capitalism, though I admit I’m prone to try and have it both ways – as an ugly necessity that provides the money to pay for the nice things in life; schools, hospitals and the like. And as I’m someone who grew up in the eighties I’m generally comfortable with the privatisation of national industries; the notion of allowing potentially successful companies to operate free from political interference seems eminently sensible. Since our politicians are often failed businessmen, businessmen on the make or people who’ve never had a real job, they’re the last people who should be trusted to run anything. In addition there’s an inherent conflict of interest in having the same people who own a company being tasked with its regulation.

Whilst Harold Macmillan may have likened it to selling off the family silver, all this remark really demonstrated was (perhaps not unsurprisingly) how out of touch he was. The repeated windfall taxes are ample evidence that the government can, if it wants, steal money just as easily from the private sector as it can the public.

The earliest examples of privatisation (BT, British Gas) were extremely successful; we may complain about the prices but these are driven by market forces and we now have a very real choice. In later years however, flushed with the success of what had gone before, the Conservatives became almost dogmatic in their approach. If they could privatise those industries, they could privatise anything, and at times it appeared they weren’t too bothered with the outcome.

Had there been much left then I’m quite sure the current Labour government would have equalled, perhaps even excelled, the Thatcher years. However they found ways to make the Conservatives look almost prudish by comparison; the fluttering of its eyes at the merest suggestion of a PFI and the sluttish manner in which it jumped into bed with any industry that would have it. The re-employment of Arthur Anderson (accountants to the dodgy but, tellingly, sponsors to various Labour party events) who Thatcher herself had banned from government contracts, was ample evidence that there really were no limits.

Not even the Royal Mail was safe.

In principal I have no issue with a privatised mail service; I do however have a problem with the timing and reason behind the decision to sell a share in the company. I’m no great financial expert but it’s a pretty safe bet that selling in a busted market results in a much lower price than if you sell when all is well. It’s as idiotic as having a large pile of gold for sale but instead of selling it quietly, a little at a time to maximise your income, you announce your plans in advance and thus drive down the price. That particular example, courtesy of Gordon Brown, cost the taxpayer several billion pounds - and that’s back in the days when several billion pounds was a lot of money.

Of greater concern than the government’s incompetence is their duplicity over the need to sell. The company pension scheme has a crippling £6bn deficit and we know the government, in the form of Peter Mandelson, wants to sell. How convenient then that the chair of trustees for the pension scheme should write a letter to Peter Mandelson, stating the urgent requirement to do just that. There are two other methods to deal with the shortfall, one of which suggests the government take over the running of the scheme, allowing the company to run as a profitable concern. This is by far the fairest solution because had the government (past and present) not taken a 13 year pension holiday from paying in, then this problem wouldn’t exist; and neither would the negative image of the company (cultivated by the government) as a drain on public finances.

If The Royal Mail is to be sold, it should be as a going concern and at a time when the best price can be obtained for the British tax payer, not at a time that is politically expedient and the focus of the populace is elsewhere. But before selling we should first ask whether it needs to be; and this can only happen after an informed debate that doesn’t involve the orchestration of correspondence for the purpose of leaking it to the press.


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