The financial ignorance of the British left


We shouldn't let these things surprise us but, if we're honest, we have to say that every time it does it surprises us. Such a thing being that we find ourselves in disagreement with someone over some point or policy: that's fine, there's many different ways of looking at the world and we wouldn't claim a monopoly on all of the good ones. But as we examine the disagreement we find that it's not one about morals, or end goals, or a conception of the world that we don't share. It's based upon the sheer deluded ignorance of the person disagreeing with us. As you might imagine this happens when discussing matters economic and financial with the British left. Such a case is here, from Compass:

Key British assets which bring in millions of pounds worth of profit and provide incalculable social benefits are to be sold soon if the chancellor gets his way. Buried within the recent Spending Review are plans to sell off billions of pounds worth of public assets: the Land Registry, National Air Traffic Services (NATS), the Green Investment Bank, bailed out banks RBS and Lloyds, and the student loan book amongst others.

OK, we agree, there can be differences of opinion on such things. You could, for example, be a union leader who thinks that your members will get an easier deal in the public rather than private sectors. And given that that's what you're there for, to get the best deal for your members, we wouldn't blame you for making some sort of argument. Disagree with you, obviously, but not blame you. But that's not the argument that is being made, instead we get this delusion:

The other assets up for grabs are making a profit in public hands and would continue to return money to the public purse for years to come. NATS returned £82 million back to the public last year. Through Britain’s 49% stake in the service, we sell services to airports and airlines in 30 countries, generating £157 million in pre-tax profit in 2014. The Land Registry currently has a 98% customer satisfaction rating, and returned £100 million to the Treasury in 2013. Ordnance Survey made £32 million profit in the past year, and its data underpins £100 billion of the economy.

If these assets are sold, it doesn’t take an economist to realise that future governments will face a significant loss of revenue, thereby making it harder to invest, protect its citizens, plan ahead, and keep to a sustainable economic path.

Perhaps an economist should have been consulted before that statement was made (perhaps a financier too: who would buy Land Registry in order to stop producing the data that underpins £100 billion of the economy?). For of course the government is considering the sale of these assets, not their gifting to someone. And the persons they are sold to will, to introduce a new word, "buy" them from the government. That is, they will hand over a capital sum now in order to be able to enjoy those incomes into the future. And government will gain a capital sum now instead of the income streams off into the future.

And the price at which this bargain is struck will be at or around the net present value of those future income streams. Just because that's how assets are valued in this world of ours.

What worries is not that people differ with us on the advisability of this idea, it's that the people complaining have no clue what the idea is in the first place.

The contention is that we convert a future income stream into a capital asset now, that value being that of the net present value of the future income. Or is that too complicated for the British left to understand?