Wednesday, 24 May 2017

Unmasking the Myths- Tory Myth 2- “The Right to Buy” and the gods of the Free Market

On the issue of public versus private ownership, I stand with those great bastions of socialism; Winston Churchill, Harold Macmillan and Ted Heath. I believe in a mixed economy… Hang on a minute, weren’t they Conservative Prime Ministers? Yes, they were, but they were leaders of the Conservative party before Margaret Thatcher. You see on this she really does have so much to answer for.

When Margaret Thatcher became leader of the Conservative party over forty years ago this heralded a huge shift in British politics. It wasn’t so much that she was the first woman leader of a major UK political party. It was that she brought with her a whole new system of political values. For the thirty years since the second world war there had been a consensus in political and economic thinking between the Labour and Conservative parties. There was a belief in an economy that mixed private enterprise across most industries with genuinely public services and privately owned/rented housing alongside a generous supply of affordable council housing. In fact, it’s Harold MacMillan’s Conservative government of the mid 1950s that still holds the record for the most council houses built in a year of ¼ million.  

However, Margaret Thatcher and her early supporters like Keith Joseph were, if you like, the “New Conservatives”. They were zealous converts to the monetarist, liberal economic/political philosophy of Hayeck and Friedman. They had an unswerving faith in “the free market” that almost bordered on idolatry. If we left as much as possible to be run by the markets, as free as possible from state interference, everything would work much more efficiently. This would encourage entrepreneurship which would drive forward our economy and our society. Although this would reward the best entrepreneurs with great wealth, this wealth would naturally trickle down to the rest of us, so that overall we would all be better off. It was the ultimate form of capitalism, but one from which we would all benefit supposedly. Unfortunately forty years of this ultra free market experiment has shown that overwhelmingly this has been very much to the detriment of most of us and to the benefit of a rich few. And it is this ultra free market right to buy philosophy which partly explains away the other two key Tory myths- competent management of the economy (see my earlier blog) and stopping the scroungers off the state (see my next blog).

The flagship policy of this popular capitalism was Mrs Thatcher’s “right to buy” your council house. Ordinary men and women were given the right to buy their own council house for a knock down price, so that they could become little capitalist themselves (and hence presumably voters for Mrs Thatcher’s New Conservatives- the party of the capitalists!).
I would suggest that in itself there was nothing wrong with giving ordinary council tenants the right to buy their own council house. After all, the bible sets a pattern of every Israelite having their own direct stake in their new promised land. Unfortunately, the “right to buy” over a period of 40 years has ultimately been allowed to become the “right to rip off”.
The problem was that as the council houses were sold off there was no real effort to replace the council house sold with new council houses. In fact, Conservative government rules prevented councils doing so. (And sadly the failure to build affordable housing was continued under New Labour governments). It was like chopping down most of the trees in a forest without planting new trees to replace them. In 1979 42% of the UK lived in council houses. This has now fallen to less than 8%.

And what happened to those ex-council homes? Research from 2015 found that about 40% of those properties were no longer owner-occupied but were in the hands of private landlords, charging up to seven times the average social rents.
Over time this “deforestation” of affordable public housing has been a major factor behind the following unhealthy trends:

•             a large increase in property prices relative to income. Over the last 20 years this has increased from 2x to 5x average annual salary and in London 3.7 x to 9x!
•             a significant reduction in young adults able to own their own home. This has fallen from 55% to 20% over the last 20 years
•             a large increase in the average rents or property prices relative to income. Over the last 30 years average rents have shot up from 10 to 25% of income and  about 35% in London. This in itself has been a major factor in increasing “in work poverty”.
•             a significant increase in young adults forced to live with their parents- now up to 1 in 4.
•             a significant increase in homelessness. This has doubled in the last 7 years alone. If you speak to some of the homeless in your own town you will find the lack of council housing is now one of the key reasons why many end up on the streets.

The right to buy did bring short term benefits to the tenants who originally bought their own properties at reduced prices. However, it came at a cost to their children and grandchildren due to the massive reduction in the stock of affordable public housing. The longer term beneficiaries have been a small group of individuals and corporations who have made themselves very rich at the expense of others through expanding buy to let property empires.

And it’s been much the same with the other public assets that have been sold off to the private sector; gas, electricity, water and rail. Like our public housing they were all part of our national infrastructure built at great expense with our money (from our taxes) for the benefit of the common good. Privatising these services (usually at an undervalue) was, to quote the former Conservative Prime Minister Harold MacMillan, like “selling off the family silver.” It brought a short term gain for the government but at a long term loss of annual profits which were diverted for the benefit of the shareholders rather than the greater good of the country. Instead of using the profits to reduce prices for the ordinary consumer or invest more to improve the service, many billions of pounds have been leached from the public purse into the hands of their shareholders; (mostly) rich individuals and corporations. This has happened whilst those same individuals and companies often avoid paying very much in tax. In a typical year for example the water companies declare profits totalling about £2 billion whilst paying taxes of only about £75 million, that is less than 4%!

But the sell off of our public services to the market didn’t end with the big national utilities. Our councils were required to let out most of their services to be run by private companies. And the same is happening now with so many of our central government functions. Our NHS, many of our state schools and key functions of the Department for Work & Pensions and even our prison service have sold or rented out many of their services to the private sector. This might all be fine if by privatising these services they became better and more efficient through being subject to the rigours of the market. However, the evidence points to no such benefits. It is a different matter where an industry is privatised that is genuinely in competition with others, e.g. the car and steel industry or the telecommunications service that became BT.  However, where local or national service monopolies have been privatised overall they have operated no better or more efficiently than the nationalised service. In fact, often they have performed worse. A couple of examples illustrate this; the East coast main line rail service and the DWP’s work capability assessments.

In 2009, the private operator of the East coast main line rail service, National Express, walked away from the franchise with a record of declining service. The service was returned to public ownership through the Directly Operated Railways. After 5 years of public ownership it had turned the service around so that it now delivered record levels of punctuality and passenger satisfaction. It had also run at a profit so as to earn the Treasury £1 billion over that period. Yet instead of using this as a blueprint for how to better run our railways in 2015 the Coalition government went for the quick buck and sold it off again- this time to Virgin.

Huge sums have been wasted by the DWP on private contractors like Atos incompetently carrying out disability assessments. Nearly hald of their assessments were overturned on appeal. Atos were sacked. Yet in 2016 the National Audit Office estimated that the DWP would pay over £1.6 billion to other private contractors like Capita to carry out health and disability assessments. And yet over the same period they were expected to only to save £1 billion in benefits. In other words these private contractors were literally costing the government over £1/2 billion more than they were saving! Do we never learn?

One of the damaging effects of the franchising off so many public services is the loss of control we need to ensure sensible and efficient planning of the services we need. One very clear and recent example of this is the last government’s extremely misconceived “free schools” policy. This policy virtually removes “free schools” from any local authority control. It allows individuals, charities or companies to set up their own “free school” almost anywhere they wish rather where new schools are most needed. Not surprisingly this has led to a widespread waste of badly needed resources. Public funds are diverted directly from central government (bypassing the local authorities altogether) to pay for new free schools to be set up in areas where there is often no need for a new school- usually more prosperous and academically successful /middle class areas. Meanwhile in poorer areas where teaching is more challenging schools are left oversubscribed and crying out for more resources. It’s not just unfair it’s a shocking waste of resources and a recipe for chaos. These services need strategic planning which can only sensibly by done by local (not central) government who can best judge what local services are needed. I would add that overall the free schools this policy has spawned actually achieve lower standards than established state schools- again another waste of resources.

Shockingly, despite often performing such a poor service, many individuals in charge of these privateering companies have been able to pay themselves extortionate earnings at the public’s expense. Just one example is Emma Harrison, boss of A4e, a “welfare to work” company favoured by New Labour who in 2010 paid herself a dividend of £8.6 million- all earned from public contracts. (Nice work if you can get it- shame they had such an “abysmal” record of getting the unemployed into work!)

Worse than that, the privatisation of many of our public services also provides a very large opportunity for defrauding the public purse. Witness, for example the fiascos over the tagging of offenders in the community and the Perry Beaches Academy Trust . Serco and G4S between them overcharged the taxpayer nearly £200 million for electronically monitoring offenders who were either back in prison, overseas or even dead. Meanwhile the Perry Beeches academy trust chain, previously praised by David Cameron, last year had to be stripped of all its schools, following “financial shortcomings”. This included substantial “third-party payments” for contracts it gave to businesses belonging to their own chief executive.

Perhaps the starkest illustration of how nationalised services can often do a better more efficient job came from the Olympics security fracas. In 2011 G4S won a contract worth many tens of millions as the official security provider for London 2012. However due to its incompetence it was unable to provide enough security staff to do the job. As a result, a nationalised service- the British Army- had to step in with thousands of troops to plug the security gap.

Incredibly, whilst our government has flogged off its own stake in much of our public services, it has been perfectly happy to see foreign governments buying into and controlling many of them. For example, three quarters of our private rail companies are now partly or fully owned by foreign governments! It is a similar story with many of our energy and water companies.

What is even more shocking is the identity of some of those benefiting from the privateering of our public services. Many Conservative and New Labour politicians have acquired financial interests in these companies. This is especially the case with the growing market in private health companies running NHS service contracts now worth billions each year. For example, the former Conservative Health Secretary Andrew Lansley now earns many £10,000s each year from acting as a consultant for several such private companies.

It was the supposed loss of control of our country to the EU that was decisive in the Brexit vote.  Yet the biggest loss of control we’ve suffered over last nearly 40 years is noyt to the EU, but the huge sell off of our state assets to the rich individuals and corporations and even foreign governments. And the evidence suggests in many cases they run them less efficiently than a public provider. At the same time they leach off billions of pounds of our money in profits from which they reward themselves handsomely (even while often providing often poor levels of service). If we don’t like the way a government or council runs public services we can kick them out but there is nothing we can do when they are owned and run privately.

Very few now would suggest that the state should run everything. That argument was lost by the 1980s as we saw the disastrous failed experiment of communism, epitomised in the collapse of the Berlin wall. For the state to try to control everything just doesn’t work. It leads to terrible inefficiencies, abuses of power from those in charge of the state levers that causes its own unfair inequalities and suppression of freedom.  However, to leave the “market” to run everything without proper state control leads to an equal and opposite failure. To follow the free market in all things is to worship a false blind god who cannot see where it takes us. The free market therefore needs to be managed and regulated to ensure it doesn’t lead us into ditches or off cliffs- as was illustrated so clearly in the banking crisis just over 10 years ago. And there are some areas of life where we do actually need state ownership and control to ensure that basic services and resources are properly planned, fairly shared fairly and efficiently managed. To leave everything to the market is a recipe for chaos, an inefficient use of resources and the accumulation of too much power and wealth in the hands of a few at the expense of the many. However, this is very much the direction this country has been heading in for the past nearly 40 years. We need to change course to take us back to a more mixed economy, which our country enjoyed in the 1950s and 60s, a path followed still by many other successful Northern European countries. The threat of enslavement by Communism fell with the Berlin wall. However, since then we have allowed too much of this country to be enslaved by another false god- the “free market”- a religion that has too often served the interests of the rich few rather than the many. It’s time to tear down the temples of that false religion and build something better, that works in the interests of everyone and better serves Jesus’s Kingdom values of looking after each other and ensuring everyone has enough.

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