The FT includes an article this morning that suggests:
Ownership of UK water companies has long been the preserve of specialist infrastructure investors attracted to stable assets with predictable cash flows that promise a regular cash return. Quite astonishingly, however, it seems that the key ingredient missing in the infrastructure investors' approach to Thames Water has been to invest enough in the infrastructure.
With all due respect to the articles' author, this paragraph very clearly suggest that they have missed the whole point as to why supposed private equity infrastructure investors actually acquire the assets previously owned by the state sector.
No one bought English water assets for their own sake. They did, instead, purchase a right to undertake what is, in effect, tax farming. That is because they acquired an enforceable right to impose a charge on people who have no choice but to pay it.
Because water is an essential for life, the option of not acquiring it is not available. And, in no part of England is there a choice of water suppler: the option is to take it or leave it, and there is no opportunity to leave it. Water charges are, therefore, pretty close to taxation in their nature, and are almost as legally enforceable.
The appeal of infrastructure investment to private equity owners has nothing to do with their interest in sewage farms, clean water supply, or anything else to do with the underlying industry. It has everything to do with the enforceable nature of an income stream which they have presumed they can receive in perpetuity.
Why note this now? Firstly because Labour does, of course, need to sort out the mess in the water industry, about which it has had remarkably little to say.
Secondly, and at least as importantly, as I have noted over the last day or so, it would appear that Labour is intent on creating many more opportunities for the private sector to profit in this way over the next five years. The suggestion that they plan to rebuild Britain on the back of private equity finance, which for reasons that make absolutely no economic sense whatsoever they prefer to the option of increasing government borrowing, seems to be soundly based.
In that case, I offer this warning. Those who acquire the private sector right to manage assets on behalf of this supposedly left-of-centre government will not be doing so because they have any interest of any sort in meeting the needs of the people of the UK. Their sole purpose in entering into these contracts will be to acquire an enforceable property right at cost to future governments and generations of people in this country who will suffer the financially penal consequences of what Labour propose to do now.
Amongst those watching tonight's election results with the greatest interest will be private equity capitalists. No one has more to make out of a Labour victory than they do, and they will be laughing themselves all the way to the bank if Rachael Reeves helps Keir Starmer deliver a massive majority that will be used to sell England by the pound.
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I read the links Colonel Smithers provided on your blog about Starmer and Reeves ushering in a new era of PFI, and his narrative of Bliar being the puppet master. I wish it was the conspiracy theory it sounds like – because it also sounds utterly feasible. If we thought what has happened to English water was bad – imagine that lack of investment in every aspect of our infrastructure. Its like a Thatcher government on steroids.
Starmer has said that the City has nothing to fear from him. Which means the rest of us should be very afraid, because unless you have deep pockets you’ll have to go without. All our incomes will be taken in serving our rentier masters in banking and private equity. It is beyond depressing and distressing.
The irony is people are going to vote today in this sham democracy. Frankly, what is the point? The whole thing is a stitch up between being mega – shafted or ultra – shafted.
I don’t think there are many conspiracies as such. But there are a lot of loose alliances between people with similar interests where the participants get to know instinctively what can and cannot be said to outsiders; they may even not be fully aware they are doing it. These may work better than actual conspiracies since the participants police themselves.
Thank you, Vicky.
I have taken part in these discussions.
Much to agree with. That said, & as Col Smithers has noted: in this respect Starmer & Reeves are Sooty & Sweep to B.Liar’s Harry Corbett, each is an automaton with barely an original thought in their two heads, following orders, in this case from PE, which smell rich pickings from UK serfs.
Those voting LINO today are voting for a financial punishment beating by PE and one can be fairly sure that B.Liar is also benefiting (well he ain’t organising all this for charity is he?). UK serfs groomed by their betters to keep self harming.
This, as previous blogs have predicted, is going to end very very badly.
Agreed
If Reeves is hell-bent on using private finance, the only way out of this mess would be to impose swingeing penalties for non-performance. Such a dose of reality would likely make the investment completely unattractive, which is why it won’t happen. Instead when problem arise we’re going to see the government blackmailed into pumping more money into water companies — effectively as free gifts. The trajectory is as predictable as it is depressing.
Aye, but oversight and contractual disputes insulate the contractor.
Public service goals always come second, even turd….
Many a truth is told in a typo!
Will the recent court decision against United Utilities make private equity less likely to want to invest in water companies?
I sincerely hope so, but there may be an appeal
There cannot be an appeal. It was a Supreme Court decision.
Thanks
So many voters in the Great Backward pretending they live in a democracy whilst insisting on their right not to take much interest in economic and monetary matters!
It’s to be noted that none of the other parties are pointing out the inequities of “tax farming” in the various contexts they are occurring. For them to do so would of course involve them in seriously grappling with how the country’s monetary system and how its regulation should really work for the benefit of the many as as opposed to the few.
Even MMT has a conundrum. How can you regulate by keeping base rate at or near zero yet use tax as one of your main regulators (spending regulation being the other both government and licenced banks creation of money ex nihilio) when predictably of taxes is also a requirement?
Careful reading between the lines of Eric Tymoigne’s paper “Modern Money Theory and Interrelations between the Treasury and the Central Bank: The Case of the United States” reveals the connundrum:-
https://www.levyinstitute.org/pubs/wp_788.pdf
So for example if you give up using base rate as a regulator then you can give up issuing government bonds including government backed Green bonds which can be regarded as a form of “tax farming” like regular treasury bonds. If you don’t give up base rate manipulation as a regulator then how do you ensure the rich “tax farmers” don’t get to control it in their greed for money?
I am not sure I agree with much of that
But I also have not got the time to discuss it now….
Tymoigne is pointing out that if a government wishes to manipulate the amount of money in an economy the two principal methods outside of directly targetting spending are base rate and tax changes. He points out that the issue of government bonds enables reserves to be reduced and base rate increased. If, however, you want to keep the cost of money permanently low you abandon base rate changing and rely on tax changes yet there’s also a need to make taxes predictable to enable citizens to predict their budgets. This would appear initially to suggest that targetting spending has an important role to play in regulating an economy yet uncertainty means private sector spending in the marketplace is itself uncertain. All of this creates a connundrum in regard to government regulation of the economy. It begs the question whether a government can tax variably without upsetting citizens’ budgeting.
He’s wrong
You can borrow at 0% because people want a safe place to save
A very basic error not to appreciate that
When corrected bonds remain very firmly in play
In fact, borrowing at negative interest us safer than stashing your cash under the bed.
Precisely
I think the next 5 years will be a (continued) disaster for tens of millions in so many ways. The promise of a “fundamentally different” country (Starmer’s own words) along with changes he thinks “the people of the UK deserve” (his own words again) are chilling. What sickens me most is that we permit such a tiny number of people to wield that amount of power, to be able to enact what you so well describe. I cannot see a peaceful way to stop the worsening of millions of people’s lives (and billions if you include the climate and ecological crises) for the sake of channeling even more money to people who already have so much that they will meaningfully spend virtually none of it. Their greed seems limitless. I note that the richest 10 people have $1.66 trillion ($207.50 for every living human), and an increase of $76 billion in just a month. (The world’s billionaires have over $14.2 trillion in total.) And the Labour party is siding ultimately with them against the vast majority, creating, as you say, absolutely guaranteed returns on life’s essentials via “enforceable property rights”. It’s hard to find the words to describe how utterly venal and subservient the Labour Party now is. As with PFI, they will hide the true cost until well after their futures are guaranteed and they’re reaping their share of the spoils. This all sounds a lot like feudalism.
The ancient Greeks understood the greed of the wealthy well, they called it hubris. It’s an addiction – wealth addiction.
Alas, in our society, you try to point out the dangers of an oligarchic system, and you hear some guff along the lines of ‘politics of envy’ thrown back.
The goal of private equity capitalists is to make a profit.
That’s it. Everything else is of no consequence.
There is no requirement to provide a better service, lower customer costs, or protect the environment.
Evidence:
The NHS now offers a broken service.
Energy companies and the railways charge the highest prices in Europe.
Raw sewage continues to be pumped into our rivers.
And private equity is the model that Labour wants to expand.
The aim is to make a quick and guaranteed profit.
Isn’t 24mts the standard equity bandits timeframe ?
@ Ian Tresman. “The goal of private equity capitalists is to make a profit. That’s it. Everything else is of no consequence.”
It’s not quite it because it’s also the goal to make a profit without risk. For example, outside of a payments settlement service what’s the point of having a private banking system that doesn’t want to really involve itself in assessing risk when it makes a loan? This of course is why banks have concentrated on blowing a humongous house price inflationary bubble for over five decades now, they can always repossess the home if there’s payment default. Tony Blair has made himself a small fortune as a Buy2Let landord by not stopping this skewing of bank investment behaviour when he was prime-minister!
And here we go “tax-farming on steroids”:-
https://www.theguardian.com/society/article/2024/jul/04/nhs-leader-calls-for-partnership-with-private-sector-to-build-new-hospitals
British economically and monetarily illiterate voters being conned yet again!
Correct
In the Guardian article on Julian Hartley’s support for private equity tax-farming he is reported as saying the following:-
“We need to think outside the box when it comes to solving this double whammy of under-strain public finances and an NHS estate in desperate need of renewal.”
We can either say that Hartley is a snake-in-the-grass, a shill for private equity, or just yet another monetarily illiterate individual. We can, of course, make the same statements about Starmer if he pursues an expansion of PFI on Steroids using the same argument of “under-strain public finances.”
Of course again it can be said why is the Guardian behaving like an out-post of the Daily Mail and not challenging the “under-strain public finances” argument as a central policy of its paper. It’s very wearisome reading its bleating about how unfair things are in the UK with no clarity about how this can be remedied!
https://www.theguardian.com/society/article/2024/jul/04/nhs-leader-calls-for-partnership-with-private-sector-to-build-new-hospitals
Labour has close links with the Tufton Street mob.
For example Open Democracy on their site reports “that in late 2022 the Policy Exchange report calling for widespread reform in the NHS was launched by Wes Streeting”.
Every chance that Labour will only survive one term.
Then what?
An alliance of Tories and Reform fronted by a “clean skin” to bounce back by 2029.
Labour’s honeymoon is likely to last no more than 18 months, after which they will be in serious difficulties.
Thank you.
+ 1.
If by trouble you mean the populace growing deeply upset with the way Labour are governing as LINO, then perhaps that will be a good thing. Assuming Starmer is all about being in power, then perhaps that will be the wakeup call that he needs to fire his red-Tories and BoE useful idiots, and change to proper Labour values. After all, 18 months still leaves over 3 years before the next election so he would have time to change tack.
@Richard Kirby. That presupposes he has the nous to do so.
There is no need for the non-solution of private equity securitizing the income stream from a public necessity without even providing the infrastructure. Scotland has managed to avoid most of that disaster by repudiating both Conservative and Labour. Labour has already failed on energy, another necessity where the public is being plundered by the private sector. GB Energy deliberately begs the question. In Scotland a very large wind turbine array, capable of supplying half Scotland’s domestic electricity is plugging in to the grid today. Scotland produces large amounts of energy from renewables, yet Scottish domestic consumers pay world market prices for energy produced at a fraction of world price costs – under the duress of both Conservative and Starmer-Sarwar Labour. That is a fact.
To clarify – Scottish Water is a publicly owned utility supplying most of Scotland’s needs, although the tentacles of the British corporate dogma always encroaches.
@ John S Warren. “Scotland produces large amounts of energy from renewables, yet Scottish domestic consumers pay world market prices for energy produced at a fraction of world price costs – under the duress of both Conservative and Starmer-Sarwar Labour.”
Yet here’s this numptie, or shill-for-the-rich, Keir Starmer stating Britain must grow its economy before government can increase its spending yet lower-priced renewable energy would encourage inward investors from abroad! Does he not know that the UK has relied heavily on foreign investment for decades now!
Knowing what you are talking about is not a required qualification for being leader of the Labour party.
PE Dividends are taxed at 28% only, not at 40% income tax rates. This may change though.
It is Peter Mandelson who has been schmoozing Palantir, who have already infiltrated the NHS, and have their eyes on Defence. With friends like that, who needs Tufton Street?
https://corporatewatch.org/palantir-in-the-uk/
Thank you, Helen.
That Palantir / Peter Thiel connection was facilitated by Epstein.
When Mandelson was tormenting Corbyn, insider sympathisers, who are also on Wall Street and in DC, got word to Corbyn, but he and his leadership team did not want to fight fire with fire, which would have left Mandelson with some serious explaining to do. As I say, which you have disagreed with, socialists need a Lee Atwater and Karl Rove.
I have seen Epstein mentioned in a surprising number of contexts recently.
My business partner has extensive dealings with PE. As he remarked to me:” I usually take a long shower after a meeting since I usually feel soiled.”
PE coming soon in the form of a bill on your doormat (with B.Liar obvs taking a small cut – remember – every little helps).
To all bankers, equity capitalists and shill politicians please don’t steal our government money with scams like PFI on Steroids. We need it to survive so we can clean out your swimming pools, etc!
Yup. I’d recommend to those interested to learn more to read Brett Christophers ‘Our Lives in Their Portfolios: Why Asset Managers Own the World’ and ‘Rentier Capitalism: Who Owns the Economy, and Who Pays for It?’ to get a view on how this relates to modern Britain.
For a more historical view, Michael Hudson is excellent. His books ‘… and forgive them their debts: Lending, Foreclosure and Redemption – From Bronze Age Finance to the Jubilee Year’ and ‘The Collapse of Antiquity: Greece and Rome as Civilization’s Oligarchic Turning Point’ cover from the ancient near east to the fall of the Western Roman empire.
That was caused by the economy being hollowed out, as the oligarchs took over. After the collapse this led to the feudal system, which is where we can end up if all this rentierism isn’t held in check.
At least the great British public is very aware of the sewage in rivers disaster and that it has been caused by the failed privatisation of water.
And it is widely understood that PFI has also been a disaster – with head teachers unable to manage their buildings – and the huge long term cost to the public sector.
Such widespread public awareness ought to make it more difficult for Labour to hand over and/or create private equity owned ‘public assets’ with the excuse that ‘we’ dont have enough money.
I have always thought the real fight will begin once Labour gets in. If they do get a big majority there may be a critical mass of Labour back benchers who will never have preferrment – and who may begin to think for themselves and be the ‘Opposition’.
But what a hopeless system we are in .
Of course on day one Starmer could set up a commission to clean up politics – which he sort of said he would a few days ago . It wouldnt cost the Treasury anything. It could outlaw money in politics, recommend fair votes, implent the Nolan principles for public officials, clean up goveremtn contracting , the honours system etc. But of course he wont.
Thank you, Andrew.
The nepotism and corruption in Starmer’s Labour is breathtaking.
I had my usual 2 hour dog walk in sunshine this morning and returned feeling elated and recognising what a wonderful part of the country I’m privileged to live in here in the Scottish Borders. Then I read this thread……I’ll go and chop some wood for the winter and maybe I’ll feel better.
🙂
Thank you to Richard Kirby and Mike Parr.
@ Richard K: I think Blair and Mandelson have that covered with their candidate Streeting and back up Darren Jones. Their preference is to get Streeting in even before 2029.
Starmer’s preference is for his confidante Reeves. He is wary of the cuckoos in the nest.
There are no left wing candidates. None will be allowed to stand / succeed, hence why I think what’s left of the Labour left should defect to the Greens.
@ Mike: I live near the Blair family estates in Buckinghamshire. It’s not just Blair, but the children, too. That new and rural seat, Mid-Buckinghamshire, is likely to stay Tory.
Why are they called private equity firms when they’re demonstrably inequitable?
It’s deliberate
Doublespeak!
Not so much a reply more a question/discussion point. In a hypothetical newly independent Scotland, would it be possible for our new government to demand that all contracts – PFI, Oil licences et al – signed by a Westminster government with no powers over a new nation and would require renegotiation? Do you think this would be dangerous/popular or unworkable? Asking for a friend.
In principle, yes
In reality, that’s another issue
Thanks, Richard. I thought the ‘principle’ might be correct, I’m glad you believe it is so. The ‘reality’ will need some serious consideration. For instance would it drive away investment? Would that necessarily be a bad thing to inhibit future PFI deals and sale of oil and gas licences. Questions for another day I think.
Thanks for you truly prodigious output – I don’t know how you do it!
I will address that
But then, I already have in chapter 15 of the Taxing Wealth Report
And fir the record, I had a pretty heavy week with the day job last week too
Thanks – downloaded Summary for a starter. Will get reading today so that I don’t ask already answered questions.