Tag Archives: privatisation

An example of Taking Back Control

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We can be a vassal state – it’s just the overlord would be different

For those who actually believed, or still believe, the guff that leaving the EU would mean that UK would indeed “take back control” and negotiate advantageous trade agreements around the globe, a recent document from the Office of the United States Trade Representative offers a firm douche of reality.

Entitled United States-United Kingdom Negotiations: Summary of Specific Negotiating Objectives it sets out with remarkable candour the ways in which our one-time special friend intends to screw the UK once we have isolated ourselves from the rest of Europe. The key objective is set out on the first page: “The United States seeks to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities for trade and investment with the UK.”

OK, so it’s a negotiating document and sets out the opening bids.  But the US knows that it holds most of the cards and their track record in trade negotiation, as in many other areas of foreign policy, is broadly that what the US wants, the US will get.  The UK’s Department for International Trade will be no match, given the lack of trade negotiation skills in this country: the Department’s chief negotiator had to be imported from New Zealand.

Some statistics first.  The US document uses the word “ensure” 37 times, 14 of which specifically relate to ensuring the UK, not the US, does or does not do certain things.  “Require” or “requirements” appear 28 times, 17 of which apply unilaterally to the UK.  And so on.

Next, some of the specific US objectives.  These are the highlights, and there are many more in the document.

The UK would be bound to accept US interpretations of what “unnecessary” differences in regulation are.

Secure commitments with respect to greater regulatory compatibility to facilitate U.S. exports in key goods sectors and reduce burdens associated with unnecessary differences in regulation, including through regulatory cooperation where appropriate

Specifically in relation to agricultural products, for “regulation” read “deregulation”:

Promote greater regulatory compatibility to reduce burdens associated with unnecessary differences in regulations and standards, including through regulatory cooperation where appropriate

Establish a mechanism to remove expeditiously unwarranted barriers that block the export of U.S. food and agricultural products in order to obtain more open, equitable, and reciprocal market access.

And just to make sure the UK won’t be able to regulate nasties like GMO products:

Establish specific commitments for trade in products developed through agricultural biotechnologies

You think food labelling is important?  Read this:

Establish new and enforceable rules to eliminate unjustified trade restrictions or unjustified commercial requirements (including unjustified labeling) that affect new technologies

More generally on regulatory policy-making, the US is not going to let the UK have its own way. US lobbyists will be guaranteed access to the decision-making process:

Include strong provisions on transparency and public consultation that require the UK to publish drafts of regulations, allow stakeholders in other countries to provide comments on those drafts, and require authorities to address significant issues raised by stakeholders and explain how the final measure achieves the stated objectives.

Worried about Facebook and the rest?  The US will get your personal data which currently remains subject to tough EU rules on privacy.

Establish state-of-the-art rules to ensure that the UK does not impose measures that restrict cross-border data flows and does not require the use or installation of local computing facilities.

And just as we are beginning to wake up to the dangers of algorithms [1]:

Establish rules to prevent governments from mandating the disclosure of computer source code or algorithms.

No question of a UK government putting an end to outsourcing in the NHS and local government, however many more Carillions we have:

Retain the ability to support SOEs[2] engaged in providing domestic public services.

And no question of publicly owned services using their discretion about favouring quality, environmental benefits, workforce policies etc over price:

Ensure that SOEs act in accordance with commercial considerations with respect to the purchase and sale of goods and services.

Privatise and privatise:

Seek to develop disciplines that address the creation or maintenance of capacity inconsistent with market principles

This isn’t about protecting the environment it’s about protecting trade;

Establish rules that will ensure that the UK does not waive or derogate from the protections afforded in environmental laws for the purpose of encouraging trade or investment.

But there are limits to US openness

Keep in place domestic preferential purchasing programs such as: “Buy America” requirements on Federal assistance to state and local projects, transportation services, food assistance, and farm support; and

And if the disputes resolution mechanism doesn’t come up with the “right” answer it can be overruled:

Provide mechanisms for ensuring that the Parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply.

The UK has to behave itself in relation to third countries…

Provide a mechanism to ensure transparency and take appropriate action if the UK negotiates a free trade agreement with a non-market country

…. but the US doesn’t

Discourage actions that directly or indirectly prejudice or otherwise discourage commercial activity solely between the United States and Israel;

Discourage politically motivated actions to boycott, divest from, and sanction Israel

Not surprisingly, foreign policy is at last overt.  There will of course be many other opportunities for non-trade issues to come up during the negotiations.  OK, you Brits, we won’t press on chlorinated chicken provided you give us back some bases for lodging US aircraft and weapons.

Do we really want to leave a partnership of equals, the EU, to become second-fiddle to the almighty US?  Remember that the US almost always gets what it wants.  Is this what taking back control means?

 

NOTES:

[1]  The 2019 AGM of Liberty will consider a motion from the organisation’s executive drawing attention to the expanding use of algorithmic decision-making by public authorities, the lack of accountability of algorithms – which are non-neutral – and their users, and the implications for civil liberties.

[2] State-Owned and Controlled Enterprises.

 

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It’s not just the infrastructure, stupid!

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Making better use of what transport services we have already will provide quicker and cheaper solutions.

Down here in Devon discussions about transport invariably end up talking about improving the resilience of transport infrastructure on the peninsula. Whether it’s dualling the A303 to provide an alternative to the M4/M5 or building another railway between Plymouth and Exeter, there is a real head of diesel fuel behind the campaign to give Cornwall and Devon better physical transport connections to the rest of the country.

The collapsed railway on the Dawlish sea-front in February 2014 has become the icon for what’s wrong with the peninsula’s rail services. The fact that Cross-Country Voyager trains still regularly break down on the sea-front because the waves chuck seawater into their diesel engines is presented as another reason for “doing something about Dawlish”. Commentators generally ignored the quicker and cheaper solution of replacing those trains with ones that can withstand a bit of sea water, such as Great Western Railway’s ageing 125s.

Every so often, a body called the Peninsula Rail Task Force pops up with yet another report aimed at persuading central government to find a lot of money to provide a new railway line across Devon. This body, which is made up of local authorities and the two Local Enterprise Partnerships (aka the Plymouth business lobby), focusses almost entirely on improving resilience through capital expenditure. Leading local politicians and MPs read from the same song book, though since all but one of the MPs are Tories their demands for more public spending are inevitably unconvincing.

So we have a campaigning mindset focussed on infrastructure. That’s not wrong but it’s not the whole story. The problems with our transport network extend well beyond the this. One of the greatest disincentives to using public transport is the lack of good local connections between rail services to or from the rest of the country and those communities without a railway station.

Much of the problem is due to the lack of evening bus services. Someone living in the South Devon town of Kingsbridge who needs to do a day’s work in London will get the first bus to Totnes station, wait over an hour and then a train to Paddington arriving at 11.24am. Several meetings later, the same person just manages to catch the 5.03pm from Paddington arriving at Totnes at 7.55pm. Sadly, the last bus from Totnes to Kingsbridge left at 7.05pm. The well-off will have no problem summoning a taxi, but not everyone is well-off. So our traveller drives from Kingsbridge to Totnes and back again, because there is no public transport option at the end of the day.

These examples are replicated all over the Westcountry, and beyond. What they show is, despite the endless rhetoric of politicians about “integrated” transport, nothing changes. There was a publicly-funded Commission on Integrated Transport which lasted from 1998 until its abolition in 2010, presumably on the grounds that it hadn’t actually integrated anything. When I mentioned the importance of better connections at a meeting where train and bus operators were present, their representatives looked at the ceiling and shook their heads.

In our system of public transport which depends on private sector operators, the needs of passengers regularly come second to the needs of the companies’ owners to make a profit. So if it’s not profitable to run a bus from Totnes to Kingsbridge in the late evening, and Devon County Council has insufficient money to subsidise one, it won’t run.

Is there a solution?   There is, and the government already has the statutory powers to achieve it.

The Railways Act 1993, which privatised the railway network, contains the relevant powers.  They just haven’t been used to their full potential.

The key point is that the Secretary of State for Transport is under a general duty “to contribute to the development of an integrated system of transport of passengers and goods” (section 4 of the Act). So far so good, but general duties need to be put into practice. Again, the Act provides the power and the rail franchising system provides the mechanism.

Almost all rail passenger services in the Westcountry are provided by Great Western Railway (GWR) under a franchise agreement. This is a legal contract between the government and the company. The revised GWR franchise agreement runs to 581 pages, plus three more substantial documents about levels of services to be provided. There are only two references to bus services in the entire franchise agreement, both relating to the conditions in which bus services may be substituted for rail. Nothing in the agreement compels GWR to coordinate its services with buses.

However the Act empowers the Secretary of State to set conditions in a franchise agreement (section 29(5)) which give effect to the general duty to develop an integrated system and, specifically, which may require the franchisee as a condition of its operating licence to enter into an agreement with other bodies to achieve the requirement to achieve integration (section 9).

So it’s all there. What is now needed is the will to make it happen. As we saw above, part of the integration problem is that the bus operators will not run late evening services on some routes. Using the franchising system places the duty to secure integration on the rail operator rather than the bus company. This is inevitable because bus services are not regulated in the same way railways are.

Before the train operating companies dismiss the idea out of hand, they might reflect on their ownership. GWR is part of First Group which runs bus services in most of Somerset, much of Cornwall, and the Plymouth, Tavistock and South Devon area. Stagecoach buses – part of Stagecoach Group which runs the London–Salisbury–Exeter rail franchise as South West Trains – cover the rest of Devon. Instead of running their bus and rail divisions as if they were on separate planets, they should look for beneficial business opportunities arising from a more integrated approach.

More challenging is engaging the other Westcountry bus operators which are not owned by train and bus conglomerates. They may see market opportunities in providing services to connect with trains, and then publicising them – something the bus industry as a whole is lamentably poor at. The train operating companies make good profits from their rail businesses. Putting a little back into supporting connecting bus services could improve their public image as well as encouraging people to make better use of their own services.

Yet at the end of the day the experience of voluntary integration in this country outside the metropolitan areas has been poor. Big companies like First Group and Stagecoach are, at bottom, about making profits for their shareholders and will not provide commercially unviable services. Local authority funding for subsidising such services has been severely cut. Central government has the tools to put this right, and should be prepared to do so.

 

 

 

 

Why can’t we talk about income tax?

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We need to reframe our view of income tax as a source of community benefit, not as a raid on individual pockets.

Of all the elephants in the political arena, the idea of increasing income tax rates is one of the most immovable. The present government is driven by the idea that taxes are fundamentally bad, and that people and businesses should pay as little tax as possible. Labour is less dogmatic, but remains very nervous about any move that would increase the tax take from anyone other than the rich and institutional tax evaders.

The defenders of a low-tax regime say that people should be able to make their own decisions about how they spend their earnings. Or that high taxes will drive businesses, top-flight managers and entrepreneurs away from the UK. Or that the public sector squanders public funds on ineffective projects.

There is some truth in all of these points: if there wasn’t no one would believe them. As it is they’ve become mantras, unquestioned in too many influential circles. We have been conditioned into believing that taxation is inherently bad. So what is almost never discussed in public, let alone in Parliament, is the case for raising income tax rates.

The Government is making it clear that, if re-elected, its austerity policies will continue. In its commentary on the Chancellor’s Autumn Statement in December 2014 the statutorily independent Office of Budget Responsibility observed that the government was in the fifth year of 10-year programme of reducing public expenditure. It stated: Around 40 per cent of these cuts would have been delivered during this Parliament, with around 60 per cent to come during the next. The implied squeeze on local authority spending is similarly severe [1]. The Chancellor appears sanguine about this.

Cutting the state is a political choice. It sounds good to both social and economic liberals, but its consequences are frequently underestimated. The state, particularly at local level, is a collective enterprise in which we all have a stake. We pay in, and in return, a range of essential services is provided. From schools to street-cleaning, from parks to social care, from child protection to bus services [2], from waste disposal to highway maintenance, local government provides the glue that keeps society together. It provides these services at cost. In other words there are no shareholders wanting a dividend.

As a society we have become used to having public services provided for us. We really don’t want to pick up the litter ourselves, take all our waste to the central depot, fill in the potholes in our road. We can’t all afford to send the children to fee-paying schools, so the availability of a state-run service is essential.

What we’re less good is understanding that these services have to be paid for. The low-tax brigade would argue that all these services can and should be provided by the private sector, with the result that we’ll pay on an item of service basis. Of course then we’ll pay more, because these services are fragmented and need to be run at a profit for the shareholders (not to mention high executive salaries). The contention that handing over public services to private companies leads to competition which will drive down prices can no longer be taken seriously, as one glance at the energy and rail transport sectors will show.

This is not an assault on private businesses. They are essential for providing occupation and innovation and will always, I hope, be with us. The criticism is of the privatisation of services that are best run in the public or social enterprise sector. What is lost through privatisation is the key idea that public services are in effect a community insurance scheme: we don’t need all the services all of the time but they are there when we do need them. And because they are universal services, there are economies of scale – and so reduced costs – in providing them.

It’s through this prism that we should view income tax rates. Not as a tax, but as a payment for communal services that we all need at some time or other. Those services cannot be provided at no cost.

All the main political parties in England (except the Greens) believe we must continue cutting public services to reduce the annual deficit.  In December the Chancellor insisted that the UK will have a surplus of £23bn by the end of the decade provided public spending is cut in line with government plans. The trouble is, as the OBR and others have pointed out, the squeeze implied by those plans will be so severe that many public services will cease to exist in any recognisable form before then.

The Institute of Fiscal Studies has developed a tool to enable each of us to play at being Chancellor: its guideline is that 1p on all rates of income tax would generate about £5.5bn in a year [3]. Adding that 1p would more than compensate for the cut of £3bn in the government’s revenue support grant to local authorities in England in 2015/16 and subsequent years. It’s not going to wipe out the deficit – expected to be over £70bn in 2015/16 – but it would lessen the severity of the short-term expenditure cuts.

No one will like an increase in income tax. But it is a progressive tax in the sense that it is directly linked to ability to pay, and so unlike VAT which hits everyone irrespective of means. The question for us all is whether we want to see filthy streets, transport subsidies cut, care homes closed, youth services decimated and the rest of it, rather than stump up a 1p tax rise.

But the politicians won’t let us answer, or even ask, that question.

Notes

[1] OBR Economic and Fiscal Outlook, December 2014, paragraph 1.7 http://cdn.budgetresponsibility.independent.gov.uk/December_2014_EFO-web513.pdf

[2] Yes, publicly-owned bus companies still exist, see http://en.wikipedia.org/wiki/Municipal_bus_company

[3] http://election2015.ifs.org.uk/how-would-you-balance-the-books

Public lies and private greed

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I’ve just finished reading Owen Jones’s polemic The Establishment: And How They Get Away With It.  Almost anyone reading it should come away angry.  Angry because if you’re part of the “Establishment” you won’t like the effective hatchet job done on your lack of social morality.  Or, if you’re like the rest of us outside the “Establishment”, you’ll be – or should be – angry because of the exposition of the various ways in which a small group of people are lying to us and screwing us.

The fact that Jones’s reasoning is at times specious, his selection of targets somewhat scattergun and his use of evidence all too obviously intended to support his thesis doesn’t detract from the impact of the book.  What he is saying – broadly – is that successive governments since 1979 have espoused the rhetoric of a “free market”, have deregulated and privatised, and in so doing have allowed big business – particularly the financial services sector – to exercise unaccountable power in society on an unprecedented scale.

And the irony, as Jones makes clear, is that big business in this “free market” is highly dependent on publicly-funded support, ranging from the provision of roads to the bailing out of the banks in 2008.  The lie of free market capitalism in the UK – supported by supine mass media whose proprietors and editors are themselves part of the “Establishment” – reaches its apogee in the handing-out of government contracts for public services, from weapons for the armed forces to cleaning services in hospitals.

It’s interesting that Jones doesn’t make more of privatisation in the utilities sector which is the clearest example of giving away state assets to private interests.  He tilts at the privatised railway, but train operator franchises can be revoked and much of the infrastructure is already back in public ownership by another name (Network Rail).

More worrying is the outright sale of the energy and telecoms sectors, where the infrastructure itself has been sold.  My local telephone network is old and has disrupted our phone and broadband service twice this year.  But it is owned by BT Openreach, an organisation seemingly beyond public influence.  BT Group as a whole has lashings of funds to promote sports and other optional digital services but clearly sees no profit in spending money to modernise the Openreach-owned cabling.

Similarly the failure of successive governments – yes, when the decisions are hard ones they’re for the government, not the private sector – to renew our energy infrastructure has led to panic measures such as the new nuclear generator in north Somerset to be built by the French in exchange for a guaranteed energy price of twice what would be expected in a “free market”.  Where is the investment risk in such a deal?

Of course with those corporations running what used to be public services, risk no longer plays a serious part. There will always be a demand for energy, transport and telecoms.  If the going gets tough, the company just walks away, as National Express did when it found it couldn’t make enough money out of the East Coast rail franchise.  Contracts are drawn up so that the private sector contractor is guaranteed a minimum level of income irrespective of the state of the “market”.  Ever wondered why there are so many unnecessary minor road schemes – a new traffic island here, a crossroads redesign there – even though your local council is cutting essential services?  Have a look (if you can) at the contract between the council and its highways consultants.

All these are profoundly serious issues.  But what is even worse is that the people running these risk-free companies have grown richer and the people who work for them have grown poorer. Recent studies have demonstrated this growing gulf beyond any reasonable doubt.  Yet instead of acting as a fair-minded distributor of wealth-generated public funds, government has become a means of channelling taxpayers’ money to its chosen “partners” in the private sector who retain it for their own bosses and shareholders rather than their workforce.

Much, much more could be said.  What is needed is action, to start rescuing this country from the moral sink it is drowning in. Jones comes up with some old die-hards such as a greater role for trade unions, or the Peoples’ Assembly movement that he is helping to set up.  The trouble with the unions is that when they did have power they abused it – remember the 1970s? – and the Peoples’ Assembly, however worthy, is destined to bring out the usual collection of lefty activists who fail to connect with the essentially conservative (small “c”) majority. In other words, with people like me.

So what to do?  A revolution, yes. But of what sort and how to achieve it?  I’ll post some ideas in a future blog. Meanwhile, read Jones’s book (and no, I don’t know him and this isn’t a plug) and get angry.  It helps.