This is why the UK has failed for the last 40 years:
Government has not just failed to invest enough - since 1980 it has, for all practical purposes hardly invested at all. And the private sector has not made up the difference. Indeed, it lags behind almost all other countries. So it simply cannot be said that we need not worry about this: we most definitely should, and a lot.
The Green New Deal would address many of these issues: that kine should shoot up as it shows Labour doing. We need more investment in fact than Labour is suggesting, and I have shown it can be funded.
But just increasing investment is not enough. It has to be in valuable things and things that provide the basis for future prosperity.
For that precise reason I welcome this morning's anni9uncement by Labour on nationalising the broadband platform. That's now equivalent to saying we'll have nationalised roads. There is no alternative.
I also think that the water industry has to be in public ownership for that reason.
And the banking platform too - i.e. the structure of clearing.
Others may operate on these platforms but we need to have them right, and the only way to protect essentials from market failure and monopoly abuse is public ownership.
The National Grid clearly fits the same model.
But owning them is not enough. And it's cheap: these assets make a return that will more than cover interest costs. The issue is then investing in them. That's the big deal. Buying them is not investment. Spending on them is. And we need a great deal of that spending to deliver a sustainable future that right now we have no chance of reaching.
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The figure for NuLabour in the 1990s/2000s seems surprisingly low, is that because it excludes PFI ‘investment’?
You don’t mention the railways and you said renationalisation was irrelevant when in the 2017 Labour Manifesto. Is this because you don’t see them making a return? Or have you had a change of heart? Or do you think the current policies have more coherence? I think the railway system absolutely needs Govt investment if we’re to reduce road traffic.
I still think nationalisation of the operating companies not key
I see the management of the infrastructure as vital
I would include the rolling stock in that, mind you
It’s becoming increasingly difficult to see how the UK will evolve (devolve?) over the forthcoming decade. While the progressive parties – and for the sake of argument I’ll reluctantly include Labour – have some sort of GND-orientated vision, the Conservative Party is beset by policy confusion, inner conflict and irrational socio-economic ideologies that have little or no relationship to the future needs of the nation and the planet. It seems to be ever more out of step with both itself and upcoming generations.
What’s so frustrating and troubling is that this dysfunctional political party is the one currently in charge and likely to remain so for the foreseeable future. It’s as though ‘Alice Through the Looking Glass’ & ‘Brave New World’ have been conflated into one psychedelic nightmare. It makes absolutely no sense yet has permeated the subconscious of enough voters to endorse national seppuku.
In a continuing masochistic attempt to make some – any – sense of the prevailing predicament, I found this essay by David Edgderton in today’s NS offers a thoughtful historical lens through which to interpret the current crisis and which has some relevance to your above post: ‘How Britain was sold’ – https://www.newstatesman.com/politics/uk/2019/11/how-britain-was-sold.
I wish I could shake off my pessimism but it’s difficult to see a silver lining.
What an aptly depressing title
Did you not read James Meek’s entertainly depressing Private Island (2014)?
No….sorry….I am finite….
I have read the article and it proves to me that the Tory addiction to foreign (inward) investment which is also a symptom of their inherent anti-statism has a lot to answer for. And yet they wave the flag just like any other supposed patriot.
Taking back control? From what and whom? The Tories and the ERG in particular are either thick and deluded or are the worst sort of fifth-columnists – or both. If this Tory party wants to do more trade with the USA, then we will have to buy more dollars to settle our trade bills with Trump’s America. We will have to hold dollars/a currency controlled by the Fed – not the BoE. And who sets the value of the dollar? How is that taking back control? It leaves us very vulnerable and effectively controlled by the U.S. Treasury.
Keynes said something about it being better that a country keeps the means of production within national borders as much as possible. Once again time – the revelator – has proved him to be right.
Another issue I have with Trump’s America (because I am sure that he will open his cake-hole about it when he next visits) is that the UK leaving the EU and the EU fragmenting will only benefit America economically.
America’s huge post war growth was aided by in the first instance being a major supplier to WWII and then trading largely unopposed as the economies of Japan and mainland Europe rebuilt.
Problems started for the U.S. when the post war reconstruction stopped and Japanese and European industrial and competitive capacity got back on its feet.
The American response? Well, they undermined the Japanese economy by encouraging the use of Western style policies such as issuing money as debt and the cutting of investment – read the book ‘The Princes of the Yen’ and latterly being luke-warm about Europe – especially I feel since the creation of the Euro. Can you imagine what might happen if the Saudi’s decided to trade oil in Euros? There would be a war – manufactured by the Pentagon no doubt. The value of the dollar needs to stay artificially high because of their alleged debt of some trillions of dollars – a debt that would destroy any other economy – like the Japanese or even the UK with our smaller currencies. The globalised dollar props up the Americans.
This is why I wish the Trump worshippers over here would think thrice before backing him. It has always been ‘America First’. The only difference is that Trump does not mind stating it in black and white – but only because he is an arrogant and rather rough businessman – not a world class politician.
One thing that I noticed was, when the entirely predictable first question of ‘how are you going to pay for it’ was aired, his answer included how they are going to move to a unitary taxation model. The interviewer glossed over this, but isn’t this a potentially radical shift based on what you and others have been calling for? Have they published details of how they expect to introduce and operate this new model?
They’re basically acknowledging this is the way the OECD is going
We’re winning this one now
Give it 5 years, at most
When are the people of this country going to realise that when you privatise a service, you create another mouth to feed – the investor – who legally comes first before anyone else – including the customer? And the result? Money that could be reinvested going instead into other’s pockets to do what exactly? Even if it is for pensions, is this the right way to fund them?
My train service was cancelled yesterday afternoon and I had to cycle 22 miles home in the rain. It gave me the chance to see the road conditions up close and personal. Many drains seemed blocked by leaves; huge puddles were in fact pot holes; very little has been spent on the antiquated ‘river management’ system up river of the now swollen river that was roaring to my left and then to my right; the river had not been dredged and is is uncommonly close to the railway bridge over it when it is not in spate.
All I could think of was what a poxy, pathetic, pissy-arsed country England had become because we can’t be bothered to spend on quality works and good jobs to deal and cope with conditions like this. We only seem to pay attention to the infrastructure when we have to.
We’ve put up with ‘Best Value’, CCT, told tax payers that it is their money and we’ll spend less of it by politicians in order to get into power and this is the result. Instead we’d rather create credit and enabled people to afford (for example) their SUV’s which all to often went too fast past me and sprayed me with water. A country that cannot cope even now with rain isn’t going to last if the climate worsens.
BTW, despite cold feet and hands, I actually relished by bike ride which took me 2 hrs and 24 min. I am 55 at the end of the year and feel quite proud so I am not angry about having to ride. But the state of roads and the river are a joke and a symptom of a society that just does not value ‘investment’ in anything but personal consumption it seems.
Climate emergency? Yes of course. But we also have a fiscal emergency too because no-one seem to give a shit about that either anymore.
Thanks PSR
I hope you warmed up when back
Oh I did Richard – with a nice hot home made soup for that matter.
That sounds good
I love them
Making them too…..
Hi Richard,
Thanks for the chart – very interesting to see that the difference between the Thatcher/Major and Blair/Brown periods is not a great as I would have thought.
Who knows how the Labour offer will be received by the public – especially once it has had the distorting prism of the media applied to it. However, personally, I have had a few moments of genuine excitement when listening to their policy announcements e.g. this broadband policy, the National Education Service and of course the Green New Deal.
You can argue sometimes about whether Labour are adopting the right ideas, but at least they are adopting some big picture stuff that stand a chance of changing the country for the better.
Although the graph provides an overall picture of public sector investment by UK Governments it does not provide a regional breakdown as to where that money was spent.
My understanding is that it varies from £50 per capita in one region to £2,500 per capita in another, with a bias to south-eastern parts of the UK.
I presume it would also exclude infrastructure investments made by the EU, which may mitigate the impact of this disparity and add to the totals of public sector investment.
You are right
The picture is not true across the whole country – many areas will have seen disinvestment
I was amused by the wails of despair coming from the privatised utilities following a report by Greenwich University’s Public Service International Research Unit that estimated a much lower cost for re-nationalisation. Prof David Hall said his calculations were based on compensating shareholders for the amount they have invested. Water UK director of corporate affairs Rae Stewart bemoaned this because it did not represent the market value. Such a complaint seems a little hypocritical when they only…”paid £7.6 billion for the RWAs [Regional Water Authorities]. At the same time, the government assumed responsibility for the sector’s total debts amounting to £5 billion and granted the WSCs a further £1.5 billion–a so-called “green dowry”–of public funds.” Financial Times 6/6/17. Following this Thames Water went on to strip the assets of the company, paid little tax by banking offshore and paid up to £30 million in fines for over a 100 episodes of polluting rivers. This included releasing 1.5billion litres of sewage into the Thames. During one trial they tried to hide this situation by falsifying records and the trial judge noted “continual failure to report” and “a history of non-compliance”. Thames has also run its debts up from zero to £10bn and has presided over the growth of a £260m hole in its pension funds. Presumably those are costs we will have adopt post-nationalisation.
With examples like this I fail to see any credible defence of continued privatisation of essential services. We should ignore any claims of unfairness, the corporations had their chance and cocked it up.
https://www.independent.co.uk/news/uk/politics/nationalise-royal-mail-energy-water-savings-bills-national-grid-a9203636.html
Just feeling my way through this nationalisation stuff. I can see lots of good reasons for re-nationalising essential services. However, much is being made about the impact on ‘ordinary’ pensioners (assuming acquisition at cost or below market price) and so far I’ve been unable to find out a) what the size of that impact might be or b) what mitigation might be put in place. Thoughts appreciated.
This utopian vision of free universal highspeed broadband – pushed by idealistic thinktankers in a way that resonates with ageing Marxists – inevitably will become snarled up in the crooked timber of humanity. But it is clear that this proposal, probably more than any other, is shifting the Overton window and pushing out the frames of this window. Irrespective of the hazy details of the proposal, that shifting and widening of the Overton window is a hugely significant development. And the beauty of it is that the greedy corporate capitalists and high net worth individuals – plus their armies of professionaly functionaries and flunkies and suborned politicians – have created the opportunity for Labour to seize this opportunity. They have no one to blame but themselves.
However, key features of the proposal are a tad worrying. You, quite rightly, indicate that securing assets of this nature does not impose a cost as they generate ample returns to cover interest costs. But Labour is proposing to provide this brodband service for free and to fund any recurrent costs from hypothecated taxation on the technology behemoths. Presumably all this will come in the eash.
However, now that Labour is shifting and widening the Overton window, it could be time to tackle the deeply flawed system of national accounts and the damaging policies they encourage and facilitate. If it were proposed as a new idea to relate an ill-defined and badly measured stock – the amount of public debt – to a flow – GDP – it would be laughed out of court. Yet this is what much of the complex moithering of macroeconomists and policy-makers reduces to.
As a first step, public investment in assets financed by borrowing that generates a return at or above the cost of capital should be netted out of the stock of public debt. And that should lead to a much more sensible approach to address the obsessive concerns of so many macroeconomists and policy-makers about debt sustainability. It would be wondeful if Labour could rise to the challenge.
I refer you to Table 2 of this analysis from the ONS and the analysis in general.
https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/aninternationalcomparisonofgrossfixedcapitalformation/2017-11-02
“The UK has had historically low investment as a percentage of gross domestic product (GDP) and has the lowest proportions of any nation examined in this comparison between 1997 and 2017. This was found to be as a result of weaker non-government sector investment which, on average, has a 14.3% share of GDP.”
Note that the claim is not made that governmental investment was insufficient.
Thanks
@ Peter Hunt,
Thank you for this link, but I’m not sure what point you are trying to make. I’m long enough in the tooth to remember continuous moithering about the Public Sector Borrowing Requirement (PSBR) in both the pre-Thatcher and Thatcher eras. Pre-Thatcher governments tried to reduce the PSBR by reducing investment in state-owned activities. Thatcher governments went down the privatisation route to transfer the responsibility to finance investment to the private sector. New Labour followed on using PFI to take the financing of investment off the government’s books. The Tories then sought to shrink the public realm even further.
The point surely is that there been under-investment by both the public and private sectors and that what investment has taken place has been financed inefficiently and promoted rent capture – to the detriment of the vast majority of citizens and businesses.
I’m simply following on from the valid point Richard has made that, if nationalisation is deemed necessary, the value of the assets acquired would be matched by the increase in the issue of bonds to acquire them and there would be no net increase in public debt. The focus is then on the financing of new investment and precisely the same process would apply. However, the services provided by the re-nationalised assets would have to generate a return at or above the marginal cost of public funds. That seems to be what is envisaged for the water, rail and energy networks, but not, apparently, for universal broadband delivery.
At a practical level I remain unconvinced by the need to re-nationalise these assets. All of the firms in these sectors operate subject to licences issued by government through parliament. The terms and conditions of these licences can be changed in a relatively straight-forward manner. If the licensees asesss that they will not be able to continue capturing their usual rents under revised terms and conditions they can relinquish the licences and other parties or the state can undertake the licence responsibilities.
But at a politicial level I recognise the impact of Labour’s bold and apparently popular initiatives in terms of opening up vistas of what is possible.
Paul is it an oversight or deliberate that you phrase it as free rather than free at the point of use?
@ Alastair,
Apologies for lack of clarity. It is “free” to the consumers because there are no direct service charges, but obviously it’s not free in so far as the economic costs of service provision will have to be recovered by some means or other.
I think you have been trolled Paul
As for trolling…
Fame! Fame! Lord Almighty! Fame at last!
I hate that word ‘Utopian’. It implies something that is an objective is unrealistic. It is an insulting word.
The only utopian thing I know of in this country BTW is BREXIT. Yes it is! But that is the way of world in this backward country of ours – stuff that helps everyone is utopian; stuff that helps a narrow band of the population with their aims and objectives is Government policy and valid. Well, bollocks to that.
In terms of broadband, I understand that Slovenia is another country that invested heavily in its broadband infrastructure and has reaped the benefits. Aiming your investment at certain sectors of the economy and not just the private banks is good policy – period.
The only issue I have with it is (1) How it will be delivered and (2) the proposals for funding it which have fallen into the trap of what is seen as ‘tax and spend’. All Labour has to say that just as we did with the bank bailouts and the DUP, they are going to get the money printed by the BoE. Then they could mess around with high tax rates later.