THE VILLAGE SOAPBOX
Ron mounts his soapbox to debate various issues that effect us all
As I see it
These days the private sector is clearly the wealth generator and it seems to be agreed that private enterprise within a capitalist system is the only way to construct a society. Nowadays this philosophy is so widely accepted that there is a danger that the public sector worker may be regarded as a parasite. There was a time when some of the wealth creation occurred within the public sector. North Sea Oil, British Gas, Electricity Generation, Telephones, Water and a large slice of the armaments industry, were valuable assets and national treasures, as were many other state owned concerns. Over the years they have been sold off to the private sector, more as a matter of dogma regardless of the benefit that we received , with, it seems, the primary objective of reducing the number of public sector employees to a minimum, preferably to zero in the eyes of some. Ideally, I suspect, the fanatics would prefer to see every public service undertaken by private contractors, including health and education. Presumably they would argue that the private sector would succeed in minimising the costs by minimising the wages, but to whose benefit? Experience might suggest that, whilst they might succeeed in minimising the wages they always attempt to maximise their profits by maximising the amount that they can extract from the public purse. In their efforts to minimise wages experience shows that the private operators will seek to use immigrant labour whenever possible, and, if it can be done, actually taking the work overseas e.g. call centres. The net effect is to encourage immigration and increase domestic unemployment, thereby increasing welfare costs at the same time as reducing tax revenue.
What will be next to be privatised? The Tote has gone now, what was the point of that? That was a nice little earner, much of the profit going to assist the racing industry which has been a very good earner of foreign currency. Royal Mail will be next, once again one must ask why, it is a profitable business that provides an excellent service at lower costs than practically anywhere else in Europe. They tried to sell the forests, but, unlike with all the other more significant and important sell offs, the great British public was stirred enough to object to that, as a nation we clearly know our priorities. It's OK to sell off our oil and gas, our water, our telephones, our power stations and parts of our manufacturing industry, but don't you dare touch our woods. The Dartford Crossing will go, after first increasing the charges in order to make it look more attractive to a prospective buyer, this has been another nice earner for the exchequer that the British public paid for and is just beginning to reap the benefit.
These sell offs of publicly owned assets brings some short term benefit to the exchequer but, as with Gordon Brown's ill judged sale of our gold reserves when the market price was at a low point, when it's gone, it's gone, and the nation is becoming progressively poorer, many of these assets have been sold to foreign concerns. British Rail is probably the best example of bad privatisation, the rail system is a mess and trying to find the best deal and the best way to get from A to B is a nightmare. There is no competition, each of the dozens of operators has a monopoly. It would not be so bad if the public purse had benefitted and if railfares had come down, the truth is rail fares have increased at a greater rate than inflation for years and the subsidy paid to the rail operators is five times greater than the subsidy paid to British Rail, and that is after adjusting for the change in value of the pound. There can be little doubt that the aim behind the reorganisation of the NHS is to allow more competition from private operators, no doubt hoping to see the role of the private operator increase over time. There is no evidence that this will lead to an improvement in the service to the public, the risk, it seems to me, is that it will produce a similar mess to British Rail, even worse, the probability is that it will mirror the American health system that is twice as expensive as the NHS.
Another classic example of the dubious benefits of transferring work to the private sector is that of care homes. Southern Cross is/was a company that bought and ran numerous care homes including many that had previously belonged to local councils, naturally most of the residents in these care homes were funded by local councils. Needless to say the company were in the business to make money, but when they received an attractive offer from a private equity company they sold out. Like all private equity concerns their only interest was making money and when they saw an opportunity to sell off all the properties to property investors with an agreement to lease them back, they took it and the directors pocketed millions. Subsequently they sold the care business. Over the years whilst this was happening the cost to the local councils of funding their residents has increased considerably and is most likely to be more than it would have cost if the councils had continued to maintain the homes themselves, at the same time there has been concerns over the standard of care provided. Now Southern Cross claim they can no longer afford the leases agreed with the landlords that bought the homes from the previous owners of the company and Southern Cross are insolvent. The thousands of residents are in danger of finding themselves homeless, needless to say this cannot be allowed to happen so, one way or another, the public purse is bound to finish up providing some additional support.
The IMF and EU currently insist that this unfettered capitalism is the only way forward. They impose strict conditions on their loans to bankrupt nations, requiring them to enforce strict capitalist principles; privatise all national assets, impose strict austerity conditions, minimise public sector wages etc. The IMF is dominated by rich nations or rather by their bankers and financial speculators and aims to ensure that it works in their interest, ensuring the maintenance and spread of a global financial system that they can continue to exploit. A classic example of the way in which the IMF works was the state of Malawi. According to press reports the IMF loaned them money but required the state to sell off state owned concerns and to stop subsidising farmers and to regard the repayment of the loan to be the first priority. When the IMF discovered that the state owned large stocks of grain to use when there was a bad harvest, they insisted that these stocks should be sold. Then the crops did fail and the population starved. Action Aid looked into the causes of this famine and concluded that "the IMF bears responsibility for the disaster". The Malawi government told the IMF to go, they restored the subsidies to the farmers and other services. Within two years Malawi was growing enough food to become a food exporter.
This appears to have been the story of the IMF, whole countries have been helped to collapse rather than helped to avoid collapse, notably, it is claimed, Argentina and Thailand. Hungary is a country where the government that wished to follow the IMF directives was rejected by the people. The people wanted the banks that had caused the crisis to pay. The IMF withdrew their support and claimed that the nation would collapse when the banks fled the country. The new government imposed a levy on the banks and increased taxation to pay off the loan, but the predicted collapse did not happen.
In this country we have seen the wealth of the nation almost double in the last thirty years but the position of the average worker has hardly improved at all. One might ask where all this increase in wealth has gone. In the last year alone the top executives of the FTSE 100 companies saw heir median pay increase by 32% to give an average annual income of £3.5m, whereas the average earnings across the UK increased by 2%, half the rate of inflation making them worse off. While most people are now struggling to make ends meet the sale of luxury cars, Rolls Royces, Aston Martins etc, and luxury goods has rocketed. Bankers/City traders, directors and company executives continue to pay themselves in a way that has no relationship to the economic reality, most often with no relationship to the performance of their company. The top 0.1% of the working population now receive 5% of the nation's total earnings, a situation not seen for over seventy years. According to the Sunday Times the one thousand richest people in the UK are worth £395.8bn, having increased by no less than £62bn last year. The wealth of this tiny proportion of the population is equal to 40% of the national debt. It is all grossly unfair. Much the same situation, only worse, exists in Greece. It is easy to understand the anger of the Greeks, but it is difficult to understand why we are not more angry in this country. No doubt the Greeks have their obscenely wealthy individuals and, as in this country, part of the national problem is the manner in which they manage to evade and avoid paying their fair contribution to the national purse. Our own government could do much more to ensure an appropriate contribution is obtained from the better off in our community, but they have never put the necessary effort towards dealing with tax evasion and avoidance. Of course, to increase taxation on the more wealthy would be against IMF principles.
The IMF, the EU and our own politicians insist that this unfettered capitalism is the only way forward and oppose state ownership and state interference with their selfish and greedy money making methods, things have got worse since the big bang de-regulation of the City that led to the collapse of financial institutions. Matters continue to get worse as the role of the state is steadily diminished. Now we have accumulated a huge national deficit that has to be tackled but the manner of tackling it is to apply IMF principles even more strongly and to attack the incomes and pensions of the ones least able to afford it whilst leaving the greedy, those that caused the problem, to continue to fill their pockets. In my view the whole system is rotten and it is time for a very different course of action.
I believe we have been very badly governed for the last 30/40years. We have more and more professional politicians, who have never run anything as big as a fish and chip shop, finding themselves running multi-billion pound organisations and thinking they know better than the professionals in the business. We have been plagued by bad decisions, indecision, U-turns and muddled thinking over such matters as energy policy, defence and transport. Our manufacturing industries have been allowed to decline and decay, our scientific research has been inadequately funded, our education system is a complete mess, our financial sector has been allowed to run wild and remains inadequately regulated, immigration has been out of control, unlike our European partners we have seen our government place large public orders with overseas companies,
not to mention engaging in illegal wars. I'm sure I could go on.
The recent decision by the government to change the rules for pensions in the public sector has provoked strong arguments. I would just make the following observations.
1. Public sector pensions are not all that generous. The average pension for a teacher with 23years of service is £10278, a health worker with 11 years might receive £4087, Armed forces after 10years £7987, civil servant 13 years £5023, MP after 13 years £21364 (has there been any suggestion for increased contributions by MPs?)
2. Public sector schemes are contributory, the Hutton enquiry concluded that the teacher's pension scheme was affordable. Conscious that people are living longer the teacher's union offered some time ago to negotiate an increase in contributions.
3. The public sector pensions were a contractual agreement. People accepted posts in the public sector on the understanding that the pension was part of the contract. It is wrong to tear up the contract retrospectively.
4. People have heard much of the high pay received by some public servants (and the associated pension rights) and it is true some are high. The Chief of Defence Staff, Air Chief Marshall Sir Josh Stirrup earned £250,000 last year. David Nicholson, Chief Executive of the NHS (easily the largest organization in the UK) earns around £255,000/year. Good salaries, but they do not compare with the average £3.5m of the FTSE 100 top Chief executives. This very unequal comparison extends down into the lower ranks. No doubt many of those very highly paid executives also have very generous pension agreements.
5. As someone whose career was in both sectors, I know that private sector pensions, at least for the middle grades, were, until a few years ago, better than those in the public sector. Although many were not index linked they were reviewed annually, often more generously than the index would indicate.
6. Private sector pension funds were very wealthy, so wealthy in fact, that many companies thought that they could have a holiday from paying their contributions. So wealthy that Gordon Brown thought that he could help himself. So wealthy that, when the going got tough, the company directors thought that they could spend some of it. All this was very wrong so that private sector pensions and pension schemes are no longer adequate. Private sector workers have a genuine grievance, some have a justifiable claim for compensation from the government for the money stolen by Gordon Brown and from those companies that raided the pension pot. There is no justification, however, for private sector workers to get cross over the rather meagre public sector pensions, they should be fighting for the restoration of their own schemes.