Private Island - Why Britain Now Belongs To Someone Else
By James Meek
With hindsight, 1991 was a pivotal year. The market belief system, which holds that government is incompetent by default, that state taxation is oppressive, that the desire for wealth is the right * and principal motivator of achievement and that virtually all human wants can best be met by competing private firms, was becoming entrenched in the non-communist world, from Chile to New Zealand.
In Britain, restrictions on how much ordinary people could borrow to finance their everyday needs had been scrapped, and millions had acquired credit cards.
Thatcher’s programme in Britain was an inspiration for the IMF and the World Bank as they experimented with the conditions they attached to bail-out loans to developing countries.
I don't want to absolve the Russians or Ukrainians of responsibility for their handling of the aftermath of communism, but the template they were handed by the fraternity of the Washington Consensus was based on fake history. If this is what the triumphalists of Wall Street and the City of London told the Russians about the way of the capitalist world, I thought when I moved back to Britain in 1999, what have they been telling us? And what came of it?
When Margaret Thatcher’s Conservatives came to power in Britain in 1979, much of the economy, and almost all its infrastructure, was in state hands.
In the past thirty-five years, this commonly owned economy, this people’s portion of the * island, has to a greater or lesser degree become private.
For Thatcher, privatisation, in the beginning at least, was simply one of many weapons to use in her battle against the unions, which was, in turn, a single episode in her war to exterminate socialism.
Her great political inspiration, apart from her father, was the Austrian economist Friedrich Hayek’s 1944 book, The Road to Serfdom.
The Road to Serfdom claims that socialism inevitably leads to communism, and that communism and Nazi-style fascism are one and the same. The tie that links Stalin’s USSR and Hitler’s Germany, in Hayek’s view, is the centrally planned economy .
Even to try to make socialism work, according to Hayek, is dangerous.
Hayek was proven wrong. As in other western European countries, socialists came and went from power in Britain, introduced a welfare state and took control of large swathes of the economy without democracy and individual freedoms being threatened.
Thatcher and her allies have promoted the notion that greed on the part of a private executive elite is the chief and sufficient engine of prosperity for all. The result has been thirty-five years of denigration of the concept of duty and public service and a squalid ideal of all work as something that shouldn't be cared about for its own sake, but only for the money it brings.
Not only are the privatised utilities big, remote corporations; most of them are no longer British, and no longer owned by small shareholders. Indeed electricity and water privatisation could not have failed more absolutely to foster the emergence of world-beating, innovative British companies.
The selling off of Britain’s municipal housing without replacing it, was supposed to be a triumphant coming together of the individual and free market principles. It actually ended up as one of the most glaring examples of market failure in postwar history.
By moving from a system where public services are supported by progressive general taxation to a system where they are supported exclusively by the flat fees people pay to use them, they move from a system where the rich are obliged to help the poor to a system where the less well-off enable services that the rich get for what is, to them, a trifling sum. *
The commodity that makes water and power cables and airports valuable to an investor, foreign or otherwise, is the people who have no choice but to use them.
We are human revenue stream; we are being made tenants in our own land, defined by the string of private fees we pay to exist here.
Without a political and ethical breakthrough of the kind that was eventually forced on Holland’s post companies – ‘we underpaid’ – the story of the Royal Mail becomes a paradigm of how technological progress, privatisation and a willingness by the majority to accept minority poverty goes to recreate a past phenomenon, the pool of desperate, hungry labour, mobbing the depot gates, fighting each other for paid hours.
The year was 2004, and the men were engaged in the single most expensive non-military task ever undertaken by Britain alone: the modernisation of the national rail network’s west coast main line.
A project that was supposed to cost roughly £1.5 billion had, by the time a version was finished two years late in 2008, consumed £9 billion, much of it from the taxpayer. *
It is a tale of incompetence, greed and delusion, driven by the conviction that profit and share value is the only true measure of success, and that the ability to chair a meeting or read a balance sheet is always worth more than the ability to understand how machines and materials will best serve human needs.
It is a story, too, with wider implications about the kind of country that Britain has become: a country that has lost faith in its ability to design, make and build useful things, a country where the few who do still have that ability are underpaid, unrecognised, and unadmired.
By the spring of 2001, the railways were in chaos and the estimated cost of the WCML project had gone up to 拢8 billion. In October, after a last attempt by Railtrack to go behind the backs of the other users of the line and renegotiate the Virgin deal, the government pulled the plug.
One of the disturbing facets of the west coast saga is the failure of democratic government that it represents. Not just of a particular party, but the whole system of government.
No one has answered the question of how governments with five-year terms can be held to account for their stewardship of projects whose lifespan is measured in generations.
Members of parliament had done what they were elected to do, conscientiously and thoroughly scrutinising a big plan by an unelected organisation with power over the lives and purses of the public. It had pointed out its weaknesses. And nobody paid any attention.
‘It takes twenty years to wreck the infrastructure, and nearly as long to set it right.’
Tony Wray, who took over as Severn Trent’s chief executive after the emergency ended, told MPs: ‘We were absolutely inundated with the sheer scale of this.’ Ofwat, the quango regulating the private water industry in England and Wales, accepted Severn Trent’s argument that it should be excused the normal compensation rule – which would have given £110 to a household cut off for ten days – on the basis that the floods were an exceptional event, outside the company’s control.
Yet, like all England’s private water companies, Severn Trent would have more money to invest in rebuilding and improving the water system if it didn't pay out such hefty sums in dividends each year to the shareholders who own it. In 2007, the year Severn Trent failed its customers catastrophically for the lack of a £25 million pipeline, then declined to compensate them, it handed over the equivalent of £38.65 per customer to its shareholders in dividends. Its biggest shareholder, Barclays Bank, got £5.2 million. That year, Barclays’ profits were £7.08 billion.
The most striking contradiction between water privatisation and Thatcherite free-market romanticism was the monopoly nature of the water companies: millions of customers who have no choice of supplier, no choice but to take the water, and no choice but to pay for it. Millions of captive monthly payments in perpetuity: an investor’s dream.
The simplest way to understand the way the water set-up works in England is to think of it as a form of buy-to-let scheme, with us, the customers, as the tenants, paying water bills, like rent; the shareholders as landlords, owning the water companies; and the company staff, like a property management agency, collecting the rent and maintaining the property. Every so often a government inspector – Ofwat – comes round, sets a limit on how much rent the property managers can charge, and tells them they should get a move on with the renovation. But if we don't like the property, the management agency or the landlords, or if we think the rent is too high, we don't have any choice. We can't move to a cheaper property, or a better-run one; we’re stuck.
Water privatisation has thrust international generosity on the English public. Popular discontent with the supposed impositions of the European Union is mainstream, yet this discontent finds its strange opposite in the calmness with which English water customers hand billions of pounds over to their monopoly water providers each year, only to see them transmit chunks of it overseas. Anglian Water, for instance, is owned, through a chain of companies registered in Jersey and the Cayman Islands, by a mainly overseas consortium. *
Southern Water (Sussex and Hampshire) is owned by a Jersey-registered consortium called Greensand Holdings, bringing together various Australian pension funds and the Swiss bank UBS.
Ownership of Yorkshire Water is split between various institutional rentiers, including Citibank and the government of Singapore.
If you were a resident of London, unhappy with Thames’ service, and wanted to stage a protest against its owners,you’d face a long, expensive trip. Truly, the empire of Thames Water investors is one on which the sun never sets.
Where does this leave Thames Water’s fourteen million customers? Paying more for their water than they should, with a large share of that payment going to remote, unaccountable bodies over whom they have no control, and whom they have no choice but to accept.
A British political party that has traded since I was a child on its claim to patriotism, its belief in freedom and democracy, and in its contempt for communism, has enabled a system in which I am obliged to pay an annual tax to the world’s biggest communist country in order to exist.
He’s sure that the Thatcher government deliberately starved the water industry of cash to enhance the case for selling it off. After privatisation, more than half the old workforce of 11,000 lost their jobs.
Does it matter that the power Britain relies on to make the country glow and hum no longer belongs to Britain?
Are you an enemy of liberal principles if you question the fact that, when local electrical engineers dig up the roads in London, they’re working for East Asia’s richest man, the Hong Kong-based Li Ka-shing?
In north-east England, they work for Warren Buffett; in Birmingham, Cardiff and Plymouth, the Pennsylvania Power and Light Company; in Edinburgh, Glasgow and Liverpool, Iberdrola; in Manchester, a consortium of the Commonwealth Bank of Australia and a J.P. Morgan investment fund. More than anyone, you’d think, it would matter to the people who made these arrangements possible in the first place. What has happened is not what they promised or intended when they put Britain’s state-owned electricity industry on the block.
Today it’s clear that the result of electricity privatisation was to take power away from the people. Small British shareholders have no influence over the overwhelmingly non-British owners of the firms that generate and distribute power in Britain.
The electricity competition has now been held. It is over, and Britain lost. From the point of view of technology and capital, electric Britain is no longer a centre. It is another centre’s province.
France in effect renationalised the industry its neighbour had so painstakingly privatised. Renationalised it, that is, for France.
‘There’s only one country that’s stupid enough to sell off its electricity industry, and that’s Britain.’
Britain’s private power industry is now, thirty years later, an overwhelmingly foreign-owned oligopoly.
The cumulative effects of two decades’ idealisation of shareholder capitalism have left the electricity system on which Britain relies worn out. A fifth of the British power stations running today are due to close by the 2020s.
In 2012 one government minister said the figure of £110 billion often bandied about for how much this would cost was only the beginning.
Effectively the French and Chinese governments are buying the right to tax British electricity customers through their electricity bills; to use British money and British * sites to finance a world showcase for unproven French nuclear technology. And because the unacknowledged taxes in electricity bills take no account of people’s earnings, the poorer you are,the higher your tax.
Electricity privatisation hasn't been a success in bringing down prices.
It has been a failure in terms of British industry and management; the best measure of the scale of folly and betrayal by politicians of both parties is the simple fact that a reliable, badly run British electricity system was destroyed,rather than being reformed. And it has been a failure in terms of clarity, in the sense that in order to fund investment, governments that boast about not raising taxes, or of taking low-earners out of the tax bracket, permit predominantly foreign-owned electricity companies to collect flat-rate taxes that hit the poor disproportionately.
Martyn Porter, a senior surgeon and the hospital’s clinical chairman. ‘The problem with politicians is they can't be honest,’ he declared. ‘If they said, “We’re going to privatise the NHS,” they’d be kicked out the next day.’
In 2012, the Coalition responded to the clamour against Lansley’s reorganisation by sacking Lansley and keeping the reorganisation.
In 2011, it was announced that a billion pounds’ worth of NHS services were to be opened up to competitive bids from the private sector. The doctor and Daily Telegraph blogger Max Pemberton described it as ‘the day they signed the death warrant for the NHS’.
The first attempt to introduce market competition into the NHS was made by Kenneth Clarke in 1990, in the dying months of Thatcher’s rule.
It was Labour that introduced foundation trusts, allowing hospital managers to borrow money and making it possible for state hospitals to go broke.
It was Labour that brought private firms in to advise regional NHS managers in the new business of commissioning. And it was Labour that began putting a national tariff on each procedure.
The more closely you look at what has happened over the last twenty-five years, the more clearly you can see a consistent programme for commercialising the NHS that is independent of party political platforms.
The post-political careers of the Labour cabinet ministers responsible for marketising the NHS don't make for comfortable reading.
A Harvard-led study found that 62 per cent of all bankruptcies in the United States in 2007 were due to medical bills, an increase of 50 per cent in six years. *
Astonishingly, three-quarters had their finances destroyed by medical costs even though they had insurance.
The NHS used to be no more or less than a health care system; now it’s a health care system into which a whole other system, the system of competitive consumerism, is pushing. *
The more for-profit companies become involved in the NHS, the more public money will leak out of the health system in the form of dividends.
The housing shortage that has been building up for the past thirty years is reaching the point of crisis. The party in power, whose late twentieth-century figurehead, Margaret Thatcher, did so much to create the problem, is responding by separating off the economically least powerful and squeezing them into the smallest, meanest, most insecure possible living space. In effect, if not in explicit intention, it is a let-the-poor-be-poor crusade, a Campaign for Real Poverty. The government has stopped short of openly declaring war on the poor. But how different would the situation be if it had?
Right to Buy was a massive handout to people who weren't supposed to need handouts. In fact, that was why they got the handout – because they were the kind of people who didn't need handouts.
It was Britain’s biggest privatisation by far, worth some £40 billion in its first twenty-five years. But the money earned from selling Britain’s vast national investment in housing – an investment made at the expense of other pressing needs by a poor country recovering from war – was sucked out of housing for ever.
Thatcher and her successors have done all they can to sell off the nation’s bricks and mortar, only to be forced to rent it back, at inflated prices, from the people they sold it to.
As everywhere in the South-East, there is a huge, growing, unsatisfied need for housing that doesn't require you to earn an above average income to afford. With the original council housing stock still dwindling and not being replaced, how is that need going to be met? One possibility is that slums will come back.
When in 2010 the coalition cut by two-thirds the grant it gave to housing associations, it still wanted them to build the same number of houses. The only way the housing associations could do that was by borrowing more money on the market. The only way they could finance that debt was by charging higher rents.
Britain’s established housebuilders,no longer have housebuilding as their primary function. They’ve essentially become dealers in land.
nstead of competing to build the most attractive houses, the firms in the private housebuilding oligopoly compete over who can best use their land-banking skills to anticipate the next housing bubble and survive the last one.
An incredible 76 per cent of all bank loans in Britain go to property, and 64 per cent of that to residential mortgages. That is money that could be spent on lending to other, more productive businesses.
The broader battle is to fight for the idealof social housing supported from general taxation on the better-off, the ideal that it is not only the prosperous who matter.
‘At the turn of the twentieth century, the free market had provided squalid slums. We undoubtedly face the re-creation of slums, the enrichment of bad landlords, the risk of people being destitute. Beveridge had soup kitchens. We have food banks.
The advent of the age of gentrification doesn't preclude the advent of slumification, and nostalgia becomes prophecy.