Category Archives: Privatisation

Crisis in British Steel

This week we have seen the Tory government slowly getting engulfed in the crisis caused by Indian company Tata’s threat to close steel works across the UK. As well as meaning that the UK would no longer have a viable steel industry, if this were to happen there would be the awful human cost of 15,000 direct job losses, and potentially 25,000 more in associated industries (with communities in Port Talbot and Scunthorpe being particularly badly affected). The government is desperately trying to get out of this mess, not because they care about the steel industry, or the lives of steel workers, but simply to avoid the political fallout for their own party. The reality is that their belief in ‘Free Markets‘, and their support for business and profit over the lives of ordinary people makes events such as this inevitable.

Britain’s steel industry was privatised by Margaret Thatcher in 1988, and after a succession of business deals was taken over by Indian conglomerate Tata in 2007. Tata, to be fair, haven’t done a bad job of running the company, and have generally retained the support of their workers. However the business environment has changed over the years, and the UK operations are now losing £1m a day, which is clearly unsustainable. Tata have tried to make it work but have now decided to give up.

After 90 years of operation the Port Talbot steel works are now threatened with closure. Picture © Chris Shaw

There are two main reasons for the losses – Britains very high energy costs (partly as a result of Green levies on fossil fuels), and huge amounts of cheap Chinese steel undercutting the market. And this is where Tory (and Blairite Labour’s) belief in the Free Market falls to pieces. It is undoubtedly a good thing to regulate industry for the common good, and things such as employee rights, health and safety, anti-pollution legislation, and Green levies to tackle climate change should all be applauded. However if any company which is burdened with those extra costs then has to compete with companies which are not so tightly regulated, inevitably they will lose out. China has a dreadful record of employee rights, underpays its workers, doesn’t seem to care about pollution at all, certainly doesn’t use Green levies, and as 70% of its industry is nationalised has a very high level of state subsidy. Therefore it is hardly surprising their steel is cheap. The solution to this, even for those who believe in ‘Free Markets’,  is to exclude their dirty industry from our free market until they clean their act up. This can easily be done through punitive tariffs.

Now the problem has been building for some time and the EU, recognising this, and in a bid to protect its steel manufacturers, has already tried to impose such tariffs on cheap Chinese steel imports. The irony is these tariffs were blocked by, among others, Sajid Javid the Tory business minister! The Tories’ belief in ‘Free Markets’ is so strong that they are prepared to sacrifice an entire industry, and ruin the lives of thousands of ordinary people, just to pursue their economic ideology.  They try and justify it by saying cheap steel is good for other parts of the economy – but that shows, yet again, how they believe that profit for business is far more important than the devastating impact on the lives of 40,000 people. It also demonstrates how Free Market ideology leads to short-term thinking – at some point steel prices will rise, and the British steel industry will become financially viable again; however if in the meantime the industry has been completely destroyed, then it will not be able to return, and Britain will be at the mercy of (possibly very expensive) foreign imports. Tory Free Market policy shows a complete lack of strategic thinking, and as well as being awful for the workers directly affected is, in the longer term, awful for the whole country.

Tories (and other Free Market believers) just don’t get this, which is why they are now desperately trying to appear as if they are doing something, when in reality they are quite happy to do nothing at all and let the steel industry collapse.

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The Systematic Destruction of our Public Services

The mainstream media have so far been paying scant attention to a strike in the NHS which has been going on for 7 weeks now, making it one of the longest NHS strikes ever*. However this strike is at the centre of the ideological battle around the policy of privatisating NHS functions, and the dreadful effect it is having on both NHS staff and patients.

In a nutshell, last September Doncaster took the decision to privatise the facility that provides in-home care for people with severe learning difficulties. (This follows a nationwide trend which has seen the private-sector provision of in-home NHS care rise from 5% in 1993 to 89% today).  The contract went to Care UK (whose ex-chairman is now, surprise surprise, a government minister). Existing staff were transfered from the NHS to Care UK, and the first thing that happened was wages were slashed by up to 35%, while at the same time new staff were taken on at the miserly rate of £7/hour. Hourly rates for when staff work weekends, bank holidays and nights were also reduced.

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The systematic privatisation of the NHS is a goldmine for all the private companies winning the contracts. Picture © Gregory Deryckère

Staff are of course appalled at the way they’ve been treated, and it also remains to be seen how long it is before service standards start to drop or the price of the contract increases, as Care UK tries to squeeze as much profit for themselves as they can. What makes the whole thing even more galling though is that Care UK is not even a public company whose profits will at least go back to UK shareholders – they are owned by  Bridgepoint Capital, which is a private equity outfit which uses the tax havens of Luxembourg and the Channel Islands to avoid paying tax. In fact since being taken over by Bridgepoint in 2010, Care UK hasn’t paid any UK corporation tax at all, so the tax payer is getting fleeced every which way by this contract. (On being questioned, a spokesman for Bridgepoint came out with the usual garbage about ‘paying all UK tax that is due’ which roughly translates as – ‘our lawyers have found some loopholes in the law, which means we can quite legally get away without paying any tax, and because we’ve technically broken no rules,  there’s nothing you or anyone else can do about it, so shut up and p**s off’. You can also be quite sure that said loopholes could easily be closed by the government if they wanted to, but companies like Bridgepoint make donations to the main political parties to ensure those loopholes are never closed).

The trend with privatisations is clear enough for all to see. Private companies drive out the existing service providers with contracts which, on the surface, appear to offer big savings. Initially the companies make their profits by cutting back on pay and conditions for existing staff, which is in itself bad enough, but once they’ve done all they can in that area, they then start to cut back on the quality of service they provide to the public, and finally, they go back to the government and say that due to increased costs and other ‘unforeseen circumstances’ they need more money. After a few years, initial savings have transformed into poorer service for increased cost – all so that company owners can make more profit, paid for by the general public.  (This situation is already clearly apparent in the privatised energy market, where after initial savings we are now in the situation where prices only ever go up, and the hardship this is causing to ordinary people is leading to increasing demands for a price freeze.)

We desperately need to get away from this idea that privatisation is the answer to everything, as time has revealed that competition and increased efficiency always get overtaken by corporate greed, with the only winners being company bosses and the losers always being ordinary people.

* http://www.theguardian.com/society/2014/aug/09/former-nhs-carers-intensify-strike-over-pay

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Privatisation – The Next Financial Scandal

This week it was revealed just how lucrative privatisation contracts have become for the private firms which get them, and by the same measure just how much the general public has been ripped-off by them. This time it  relates to the PFI (Private Finance Initiative) method of privatisation, whereby companies in the private sector are paid to build and run large public infrastructure projects (eg schools, hospitals etc). It turns out that the government, in its eagerness to get these projects away, has frequently under-priced them, and then to compound the problem, rising property prices have delivered further massive windfalls to the developers – windfalls which would have gone to the public if the projects had remained government-owned.

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Privatisation means that while the NHS struggles financially, the private companies behind it are making vast profits. Picture © Francis Tyers

The contracts have proved so lucrative that many of the companies have been selling them on without even bothering to complete them, instead just pocketing an instant profit. The numbers involved are huge, running into £100’s of millions* (one company alone, Balfour Beatty, has made profits of £189m on government contracts in just a few years). When the PFI contracts were being set up, one of the arguments in favour of them was that any excessive profits would find their way back to the taxpayer, through increased  tax revenue, but that too is failing as many of the companies now running these projects are based in tax havens, and so as well as making vast profits at public expense, they don’t actually pay any tax at all.

The irony of this of course is that while an essential public service like the NHS is itself under the financial cosh, and struggling to find the money to provide crucial services, the private companies behind it are now awash with public cash.

And now a further problem has been identified. These PFI contracts are being sold on and ‘traded’ on the financial markets, so that essential services in the UK are ‘owned’ by financial entities in far-flung parts of the globe. This is a very peculiar situation, and worryingly similar to what happened with the sub-prime mortgage crisis which led to the financial crash of 2008. One academic has already flagged it up as a potential threat to the entire financial system.*

So yet again we see the general public being ripped-off by the corporate sector through the process of privatisation, and yet again we see the financiers playing their games to produce profit for themselves, with little thought for the long-term consequences for everyone else. How much longer must we be forced to go through this before governments stop making policies which benefit their corporate buddies, and instead act in the interests of the ordinary people they’re supposed to serve?

* Excessive profits:  http://www.independent.co.uk/news/uk/politics/exclusive-how-private-firms-make-quick-killing-from-pfi-9488351.html Financial Risk:  http://www.independent.co.uk/news/business/news/rush-to-buy-big-pfi-contracts-risks-repeat-of-subprime-crisis-9497024.html

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Privatisation – Legalised Theft

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Royal Mail: The latest sale of state assets to the private sector. Picture © Lewis Clarke

The news has been full of stories today as to how the British Government ‘under-priced’ the Royal Mail when it was sold off, costing the taxpayer something between £750m and £1.5bn in lost revenue. The implication being of course that if the sale had been ‘correctly’ priced, then all would have been good. This completely ignores the fact that most privatisations involve a cut-price transfer of assets from the public sector (ordinary people) to the private sector (usually people who are already wealthy), which is therefore, in effect, legalised theft from the poor by the better off.

Those who support privatisation will of course talk about ‘competition’, ‘efficiency’ and ‘cost savings’. However those things, even when they do apply (and they don’t apply to the Royal Mail which was already profitable and operating in a competitive market), are only short term benefits, and in the longer run costs go up and service  standards go down, as the companies seek to keep increasing their profits at the expense of ordinary people.

At least the Royal Mail  isn’t an ‘essential’ public service. A similar debate was had last week when the government announced an enquiry into the energy market, after allegations it isn’t operating ‘properly’.* This of course pre-supposes that a ‘market’ is the right way to provide energy to people at all, which of course it isn’t. Prices for essential services (like water, electricity, gas, healthcare) should be set by need and on ability to pay, not how much ‘profit margin’ a private company thinks it deserves, or how big a bonus the fat-cat boss wants to pay himself. It is criminal that in the 7th richest country in the world people still die of cold in the winter, or have to decide between cooking their food or heating their home as energy costs are so high. Currently health care is provided on a needs basis by the NHS, but with some ministers already suggesting  a £10/month ‘health insurance’ fee, and constant government statements about how the NHS in its current form is financially ‘unsustainable’, you can be sure NHS privatisation is the next thing on their list.

The population has been misled into believing that because some public sector functions have a history of mismanagement and waste, therefore the solution is to privatise everything. This has turned into a cash-cow for the financial sector which therefore supports this policy vehemently. People need to understand that what’s actually happening is we are now all becoming the victims of daylight robbery. For more on the inherent faults in privatisation click here.

* http://www.dailymail.co.uk/news/article-2590501/Energy-firms-face-investigation.html

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A Sick Society

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Nurses: Not as valuable to society as bankers apparently. Picture © goodcatmum

So today it has been announced that because of continued ‘Austerity’, public sector workers will this year only get a 1% pay-rise – a cut in real terms with inflation at 2% – and because of particular financial problems at the NHS, 600,000 nurses and other essential NHS staff will not even be given that.* It’s funny isn’t it, how the government places little value on essential public services, and does its best to run them down, while at the same time, and in thrall to the City of London, George Osbourne fights tooth-and-nail to oppose EU legislation that may curtail bankers’ bonuses. So bankers are more valuable to this country than nurses? Really? Never mind they only make money for themselves, and never mind they were the cause of this huge financial mess in the first place (necessitating a tax-payer funded bailout that’s cost this country £1.3tr – that would have paid for a lot of nurses!)

No, with more than half its funding coming from the City of London, the Tory Party’s allegiances lie with the bankers; while being idealogically opposed to public services, they are doing everything they can to run down the NHS and convince us it’s no longer financially viable. However the NHS is only in financial difficulties because the Tories made it that way, due to the creation of Trusts and the insanity of PFI financing*. Vast amounts of cash are also getting lost in the privatisation of NHS services (often going to companies that are providing financial support for the Tories), while it’s also worth noting that due to the belief in ‘free-market’ economics, yet more NHS money gets wasted paying the salaries of ‘fat-cat’ administrators, with no fewer than 2,400 of them earning more than the Prime Minister!

The fabric of our society is being destroyed while we watch, and unless we can get  ourselves a government not corrupted by the power of money it can only get worse.

For more on how Party Funding is corrupting the political process, including NHS policy, click here.

* References:

NHS Pay: http://www.mirror.co.uk/news/uk-news/nhs-refused-paltry-1-pay-3239888

The Insanity of NHS Financing: http://radicalsoapbox.com/hospitals-in-intensive-care/

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British Gas – The Privatisation Con

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Gas – a basic resource which has now become a profit centre for fat-cat utilities. Picture © George Shuklin

Today the flagrant profiteering by Britain’s privatised utility companies was laid bare when Centrica, the owner of British Gas, announced its results, along with a threat to consumers that there would be blackouts if they weren’t allowed to make enough profits. Despite making £2.7bn  last year, Centrica’s Chairman, Rick Haythornthwaite said that if attacks on their business practices continued, they may decide to cut investment in power supplies which could lead to blackouts within 2 years*.

Blackmail? Surely not. The principle of privatisation was sold to us on the basis that competition, and the greater efficiencies of private industry, would lead to better services and reduced prices – not that we would all be held to ransom by fat-cat bosses. Apparently British Gas don’t even like the idea of competition now, and have complained about politicians encouraging consumers to switch supplier in the pursuit of cheaper prices. And to add insult to injury, Centrica Chief-Exec Sam Laidlaw said that criticism of the industry would justify pay-increases for him and his buddies – to make up for their jobs now being less pleasant! (He’s already due to get a £4.6m share bonus this year, and last year the top 5 earners at Centrica took home £16.4m between them.)

Privatisation of public services has been one big con, with the bosses simply using it as a cash-cow for themselves, while we all pay the price.

For more on everything that’s wrong with privatisation click here.

* http://www.dailymail.co.uk/news/article-2564328/Stop-bashing-lights-says-British-Gas-owner-Fury-warning-firm-posts-2-7bn-profit.html

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