10 July 2015
Did you spot it? In Wednesday's budget speech, George Osborne announced: "The sale of government assets this year will deliver the largest privatisation proceeds of all time, higher than the previous record in 1987." This astonishing statement seems to have hardly been noticed. Osborne plans to raise £31 billion this year by selling off publicly owned assets - the most ever raised from privatisation in a single year.
Osborne's statement - and the lack of attention given to it - becomes less astonishing when you consider that mostly, the assets being sold off are banks that were brought into public ownership after the financial crisis. Lloyds, RBS and the mortgage assets from Northern Rock and Bradford & Bingley (managed by UK Asset Resolution) were all in the private sector before the crash, and the government wants to put them back there.
When you look at it this way, the 'biggest privatisation ever' is less of a surprise. But that doesn't mean we should buy into the government's plans.
Firstly, it's not obvious that we should be returning banks and financial assets to the private sector at all. The Office of Budget Responsibility 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'. Carl Emmerson, deputy director at the Institute of Fiscal Studies has said that selling assets 'does reduce cash debt but you're not really improving the indebtedness of the country'. The New Economics Foundation points out 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.
Secondly, selling off another big chunk of the student loan book doesn't make sense. There's a risk that we'll end up paying more interest on our loans and it's also a bad deal for the country. In the late 1990s, the Labour government sold two tranches of student loans for £1 billion each. Today, the government is £240 million worse off than if it had kept those loans in public ownership.
Thirdly, just because we've lost most of our Royal Mail doesn't mean we should lose all of it. We need a public stake in Royal Mail to guarantee that we get the postal service we need. Selling off the remaining 15% of shares would mean no public voice in Royal Mail, threatenening our daily deliveries and service standards.
This biggest privatisation ever shows (if there were any doubt) that the government is ideologically committed to the private sector at all costs. Right now, Osborne is mostly focussed on selling off the banks but we're trying to find out what else is planned. We've put in a Freedom of Information request to find out which of our Top Trumps are up for grabs next. Watch this space - and sign the petition to stop the sell off.