One of the most astonishing things about right-wing politicians is how bad they are at managing money. Especially when it is public money. They have a very long track record at being very good at selling off valuable assets well below the proper market price. They have an extraordinarily bad one at building up resources on behalf of the public and handing them on to future generations.
Water privatisation: a failed experiment in public service
You might wish to reflect on that when your next water bill arrives. Anyone who lived through the Thatcherite experiment should be able to recall how frequently the public was told that the water companies had to be privatised because only the private sector was able to provide the managerial skills and the investment that was necessary to transform our Victorian sewage and water systems. It was also going to democratise share ownership.
What happened instead is that a few large shareholders took control of companies that sat on valuable licences to supply customers who could do nothing to switch their supplier. The directors of those companies loaded the businesses with enormous debts and used the money not to invest in improving ancient equipment but to pay out exorbitant dividends and those directors pocketed enormous salaries for this act of asset stripping cynicism. Instead of building up high quality businesses with modern facilities they succeeded in running the network into the ground, crippling the businesses with unpayable interest obligations and fleecing the customers.
Now they are telling those same long suffering customers that if they want their sewage to be processed before it is dumped into once clean rivers they must pay through the nose to service those debts and to make the long delayed investments that have now become urgent. Privatisation of the water industry has failed so comprehensively that it is not even wise to nationalise the companies because that would amount to the state buying up debt. The only logical way out of the mess is to regulate the companies to death and then to buy up the distressed asset on the cheap debt free.
The housing crisis: Thatcher’s legacy and its long-term fallout
Another much trumpeted piece of economic genius that Margaret Thatcher is credited with is the sale of council houses to tenants. If this had just been a case of letting people buy the home they rented at a fair market price this could have been a sensible move. Instead she insisted on a hefty discount and effectively banned local councils from building any replacements for the homes that had been sold off on the cheap. Instead of paving the way to a homeowner democracy what this achieved was the wiping out of a vital part of the network of home provision in the UK.
Between 2008 and 2020 over half a million homes were lost from the not for profit rental market despite the population increasing. Council housing used to provide good quality homes at cheap rents without crippling the public purse. Now housing benefits cost over 30% more to provide in real terms with much of the extra expenditure going on paying private landlords exorbitant rents for low quality properties.
The economics of this have been a disaster both in terms of capital and revenue. The asset the public owned has gone and the money has been frittered away with nothing to show for it. The running costs of trying to provide a lower quality alternative are through the roof. Yet astonishingly even a new Labour government with a huge majority dare not fully reverse this policy and completely remove the discount on buying a council house.
The City of London: Big Bang to Big Bust
One of the other proud boasts of those Thatcherite governments was that they had freed up the City of London from bureaucratic controls and empowered it to earn large amounts of money for the UK. For a while this worked – after the ‘Big Bang’ the city roared ahead and chalked up record profits as new kinds of obscure financial derivatives were developed and marketed as creative ways to ensure high earnings and low risk. Any economist worth their salt will tell you that this is a very rare combination and if something sounds too good to be true it probably is.
Instead of recognising the danger signs Labour kept the bubble going and it turned into a huge bust only a few weeks after Gordon Brown assured us that his government was so good at encouraging innovation that they had put an end to ‘boom and bust’. The 2007–08 crash doubled the national debt and drove major companies into bankruptcy – a very strange, not to say disastrous, outcome of being ‘good with money’.
North Sea oil: a wasted opportunity for national prosperity
Then there is the rather important issue of North Sea Oil. When this was discovered off the coast of Britain we were told that it would lead to wonderful improvements to Britain’s economy. It was thought that all that cheap energy would preserve our industry and provide us with plenty of spare money to invest in the future of the country. Oil and gas have been pouring out for over five decades. Over that period the national debt has ballooned horribly. It has never gone up more drastically in peace time.
Instead of preserving our industry, the oil and gas artificially inflated the value of the pound and thereby helped to tilt the economy toward a reliance on financial trading instead of manufacturing. London has become the prime location for money laundering and squirrelling away assets earned or stolen abroad. Large parts of the north have become hollowed out, neglected and levelled down with a vengeance while London house prices have accelerated beyond reach for most. What has this country actually got to show for all those years of over reliance on oil and gas other than an imbalanced economy, a pile of debt and an increasingly unstable climate?
Brexit and Farage: broken promises and new threats
The final cherry on this cake of utter financial incompetence is Brexit. Financially, it is proving to be the steady slow drag on the UK economy that many of us predicted. Already the best economists think it has wiped 4% off the value of the entire British economy and driven lots of small businesses to the wall. Those who told us there would be no downsides to a Brexit deal have shuffled off the scene leaving Britain weak and isolated to face incoming President Donald Trump’s tariff crusade without a big enough market to threaten meaningful retaliation.
Reform UK Ltd leader, Nigel Farage, who campaigned for so long to remove us from the EU in order to ‘regain our sovereignty’, is now encouraging a US billionaire to buy influence over a British election. The white South African he is sucking up to is an immigrant promoting the supposed merits of anti-immigrant policies.
Breaking the cycle of failure
What is astonishing about this record of consistent failure is the inability of much of the left to articulate a powerful enough case against it to stop the rot. The soft left seems to delight in adopting a slightly more moderate version of daft policies like Brexit in the hope that somehow the turd can be polished into a diamond. It can’t. The longer we stay out of the EU the weaker we get. The longer we depend on fossil fuels the weaker this nation will be in the next era of technology. The more we over depend on financial services and one small part of the country the weaker our economy will be. The longer we fail to provide good quality homes and assets to serve public need the stronger public resentment will become.
The entire intellectual foundations of the modern right are flawed. Again and again they have led us to economic and social failure. It is time for people of good will to be brave enough to articulate the alternative without fear. There is such a thing as society. Short term pursuit of profit and the idea that markets are always right has failed us badly in the past and will do so again until it is replaced by an old truth. Investing for the long-term good of the country and building good quality reliable public services is the most effective way to put the economy on a secure and stable footing.
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