Comment: Hidden away in the spending review – a plan to sell off Britain’s assets
On Wednesday Osborne delivered the spending review. He spoke in parliament for an hour and a half. In all that time he barely mentioned assets. But when you dig down into the spending review documents, assets are mentioned a lot. And it's all about disposing of them.
Although he didn't draw attention to it, Osborne's plans to run a surplus this year rely on his decision to sell off our assets. As the Office for Budget Responsibility puts it: "As in July, asset sales make the difference between debt rising and falling as a share of GDP in 2015-16."
But selling off profitable assets doesn’t actually reduce indebtedness. Carl Emmerson, deputy director at the Institute of Fiscal Studies (IFS) has said that selling assets "does reduce cash debt but you're not really improving the indebtedness of the country". The Office of Budget Responsibility (OBR) itself says: "Financial asset sales typically bring forward cash that would otherwise have been received in future revenues, in the shape of mortgage repayments and dividends, so they only temporarily reduce the debt-to-GDP ratio. In broad terms, financial asset sales leave the public sector's net worth unchanged". Or put simply (OBR again), sales "only reduce net debt temporarily".
So in the context of 'long term economic plans', selling off assets doesn't make sense. But never mind – once public assets have been privatised, once the value and public wealth have been transferred, it'll be almost impossible to reverse. That's the real objective. This year will be the biggest privatisation ever, dwarfing anything in Thatcher's time.
You'd think from the language used in the review documents that having an asset was a bad thing. Something to be got rid of as soon as possible. But by definition, assets are things of value that provide an ongoing benefit – whether that's profit that can be reinvested or an important service to the community. Assets are wealth – and so according to Osborne, they belong in the private sector, not the public.
Osborne’s gameplan is comprehensive and frightening. Here it is, in three parts.
1) Push local authorities to sell off our assets
The spending review says: "Local authorities in England hold £225 billion of assets, including over £60 billion in property not used for schools or housing. The spending review therefore encourages and empowers local authorities to dispose of potentially surplus assets."
Of course local authorities across the country have land and property. These assets are our parks, swimming pools, community centres, libraries, public spaces and facilities that make life liveable. As the chancellor decimates local authority budgets, he's encouraging councils to make one-off assets sales to plug the gap. He's offering them a bribe – if they sell off our local assets they are allowed to keep 100% of the proceeds.
This is the opposite of devolution. Hard-hitting cuts, followed by pressure to sell off local public spaces and services to soften the blow.
There will be knock-on effects to all this. For instance, selling parks or leisure centres is likely to have long term effects on the public's physical and mental health. This will have to be provided for, often by the same councils that are being bribed into selling these assets off in the first place.
Meanwhile, the government is also forcing local authorities to sell off valuable social housing through the housing and planning bill.
2) Push government departments to sell off our assets
At the same time as selling off our national assets, government departments are all being told to look at their own land and property and flog off as much as possible.
Departments have agreed to 'release' £4.5 billion worth of 'surplus' land and property by 2020. The Department of Health will sell off assets worth nearly £2 billion. The Ministry of Defence will raise £1 billion from asset sales.
The Government Property Unit is being introduced to 'centralise ownership' of the government estate and will charge departments market-level rents for freehold assets they currently own. The government plans for the new model to be in place by March 2017 and wants all government land and property to transfer to the new body by the end of this parliament. Let's watch this space for the legislation.
3) Sell off our national assets
In June this year Osborne announced the merger of UK Financial Investments and the Shareholder Executive into one organisation, with the explicit aim of transferring our public assets into the private sector.
This new organisation is responsible for managing the sales of everything from Ordnance Survey and the Land Registry, to RBS and Lloyds Bank. We Own It launched the Top Trumps campaign in response, to draw attention to the value of these national treasures. The spending review gives us an update on which of them are up for grabs now:
The review confirms that RBS, Lloyds and the mortgage assets from Northern Rock and Bradford & Bingley (managed by UK Asset Resolution) will all be reprivatised. The New Economics Foundation argues that instead of selling RBS at a loss of around £13 billion, we could use the opportunity to turn it into a new network of local, accountable banks across the country. Check out their campaign with Move Your Money and Sum of Us.
Green Investment Bank
The review confirms that the government will press ahead with the privatisation of the Green Investment Bank. The bank provides a crucial role in supporting the low carbon economy and building green infrastructure. Privatisation would undermine this role.
The government now plans to start selling off the pre-2012 student loan book from 2016-17. (They wanted to do it this year, but appear to be having difficulty finding a buyer). Interest rates could rise if this happens and the terms and conditions of a sell off mean the public would likely lose out while the companies involved take very little risk. Martin Wolf from the Financial Times described earlier privatisation of student loans as "economic illiteracy". The sell off plans were stopped under the coalition government and will need to be stopped again.
The review revealed that the government wants to "explore" selling off its 49% share in National Air Traffic Services (NATS). NATS keeps 220 million passengers safe and handles 2.2 million flights in UK airspace every year. If you take a flight, you're likely using the services of NATS. NATS sells its services to airports and airlines in 30 countries around the world. This helped it bring in £157 million in pre-tax profit last year, £82 million of which went straight back to us. Government needs to keep its public interest share in NATS.
The spending review announced that the government wants to privatise the Land Registry from 2017. The Land Registry has a 98% customer satisfaction rate, doesn't cost taxpayers a penny and has returned money to the Treasury in 19 of the last 20 years. If it is privatised, this may threaten its neutrality, drive up the cost of buying a house and force small, local high-street solicitors out of business. A successful campaign stopped it from being privatised last year and Vince Cable did a U turn. Sign the PCS petition to keep it public.
The spending review also reveals plans to "develop options to bring private capital into the Ordnance Survey before 2020". We don’t know yet if that means an equity sale or new private partnerships. Ordnance Survey makes £32 million profit a year for the public purse. Its data has saved the government tens of millions of pounds, and underpins an estimated £100 billion of the UK economy. Ordnance Survey is a much-loved public institution at the cutting edge of data technology and it needs to stay that way.
Privatised rail has failed, yet the government seems keen to add more chaos to our already fragmented rail network. Privately owned Railtrack was held responsible for the tragic rail crashes in the late 1990s, and publicly owned Network Rail was created to replace it. The government is currently consulting on "full privatisation" and the spending review mentioned allowing Network Rail to sell off its assets. Sign the petition to stop Network Rail being privatised.
All of these things are called assets for a reason. Osborne is putting at risk our future communities and the resources they will have available, and covering it up with a simple story. He's talking about the need to cut debt and increase housing but refusing to acknowledge the huge benefits public assets bring, and never mentioning the role the private sector could play in responding to these issues. If he succeeds, the impact of the sell offs will be devastating: loss of future revenue for government and a damaging effect on all of our public services. There will be very little left to save.
It's not too late. We can throw obstacles across the chancellor's path every step of the way. Public assets need to be used and enjoyed now and held in trust for the future – that's what they're there for.
Cat Hobbs is the founder and director of We Own It, an organisation which aims to shift the debate on public ownership. She ran a successful local rail campaign in Bristol before working at Campaign for Better Transport for three years where she lobbied nationally on behalf of bus and train passengers. She has also worked for a credit union and a sustainability consultancy.
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