First there was “borrowing our way out of debt” which raised the eyebrows of sober-minded accountants. Then there was “printing our way out of debt,” as quantitative easing magically created money out of nowhere. Now the latest round is “selling our way out of debt,” as the Prime Minister announces the sale of £16bn worth of state-owned assets.
First will come the Tote, the Thames Dartford Crossing, the Channel Tunnel rail link, and student loans. The sale of the state’s 33 percent stake in Urenco, the uranium enrichment company, will follow. There are good and bad features of the sale. The good point is that most, if not all, of these will sit happily in private ownership. It has never been clear why the state should be involved in race-course gambling, while transport crossings and loan agencies are often handled elsewhere by private firms.
The disappointing feature is that these are all to be done by private sales. The sale to a single private buyer is the easiest and quickest to implement, but does least to secure public support or to secure improvements to the industry or service.
Many of the 1980s privatisations (now called by the mellower name of “asset sales”) featured public offerings with discounted shares available to workers so they could become part-owners of the new enterprise. Significantly, the Government has already tried a private sale of the Tote, but was rebuffed by the European Court as representing poor value for the public. It would have been bolder (and better) to involve employees and the public in the new round of sales.
Secondly, it is by no means clear that the proposed sales will actually be used to reduce the Britain’s huge debt burden. It is quite legitimate to use capital sales to reduce capital debt, and the sales would deserve support if that were the case. But this looks like the Government’s way of postponing reality until after the election.
Britain has to cut its spending, and that will involve some hard and unpleasant decisions. Asset sales are a one-off. They might be used to fund spending programmes but only for one year. Crucially, that one year will see a general election, and the suspicion arises that the sales revenue will be used to continue with spending that really should be cut until after the election.
The Government has not come up with realistic proposals to cut spending to what can be afforded. Nor has anyone else, to be fair. The budget deficit (£220 billion this year) means that debt is increasing. Asset sales are not, and should not be, a way to sustain high spending; they should be a means of reducing debt.
Published on Telegraph.co.uk here.