Why not nationalise to cut the deficit?
The national deficit isn’t really a problem. Well, at least, certainly not in the short or medium term. The UK government is borrowing less per unit GDP than most other Western countries. And 80% of this money is borrowed from UK citizens – largely pension funds. This means, in the unlikely event that interest rates do go up, the money will go into our pension coffers, and, if they want, the government could take it back in tax.
But the Conservatives have never let the truth get in the way of a good scare story. So, just to humour them, let’s play along.
Lefties have been using three arguments:
1) In the short term, we shouldn’t cut spending as this will take money out of the economy – or, “you don’t solve unemployment by cutting jobs” as I like to put it.
2) In the medium term, if we still have a deficit problem, we should raise taxes on big corporations on multi-millionare tax dodgers.
3) In the medium term, if we do have to cut things, we should cut spending which is socially useless/destructive, like trident, or keeping people locked up in prison.
But there are things governments can do to raise revenue along-side raising taxes, and so my question here is, why don’t we have a fourth item on this list?: Why aren’t we proposing state owned companies earning cash to pay off the deficit?
Historically, many of the UK’s industries were owned by the state, and all of their profits went straight into funding public services. In fact, presumably, when the welfare state was founded, tax was only one of many revenue streams which funded it.
We have, of course, begun this process.
In 2008 the government nationalised RBS, Lloyds Banking Group (including HBOS), Bradford & Bingley, and Northern Rock. They were on the brink of collapse, and risked taking the rest of the country with them. As these banks have started to grow again, we have seen shareholder dividends begin to re-plenish the public purse. If we are being forced to bear the burden of the mistakes of these monopolies, why doesn’t it work the other way round? Why can’t we nationalise the profits of other monopolies?
To put it another way, if paying off the deficit is really our number one national priority, then why doesn’t the state broaden it’s earning capacity?
There are some obvious places to start – in particular, the more recently privitised monopolistic services. For example, BT recently reported profits of £375 million pounds. Why can’t we re-nationalise, and take this money into public coffers? It’s not like BT’s customer service quality has soared under the rigour of competition to run our phone lines from, erm, no one.
Obviously we wouldn’t want a re-nationalised BT to behave as badly as it has since privatisation. While privatised industries get away with externalising massive costs onto society, nationalised industries – particularly if they are monopolies and so customers have no choice – are run with broader aims than profits alone. But that doesn’t mean they can’t make profits.
With some of these services, there are contracts which will, one day, need to be renewed. The deficit, if it is a problem, is a long term one. So we can wait. For other industries – again, BT is an example – there are no contracts to renew. But there are ombudsmen/women. Is there a good reason why Ofcom can’t begin to place sufficient conditions on BT that the private company would fold, then take them into government ownership and remove the conditions? The EU would squeek, sure, but they have bigger fish to fry at the moment.
Along with national monopolies, there are also some companies Local Authorities could be running – not necessarily as monopolies, but in competition with the market. For example, the Norwich Green Party manifesto proposes that, if they take control of the council next month they may set up their own Energy Services Company. Such a company would not preclude private sector competition, but would likely deliver a decent earner for the council, and a good service for local people who wished to use it.
So, is there a reason why we aren’t arguing that nationalisation – or municipalisation – is a way to prevent cuts to public services?