“The problem with socialism,” Margaret Thatcher famously said (or perhaps nearly said), “is you always run out of other people’s money”.
Subjecting everything to a merciless cost-benefit analysis was the core Thatcherite credo. ‘Lame Duck’ nationalised industries were privatised and left to sink or swim in the unforgiving waters of private sector, ‘uneconomic’ coal pits were shut down no matter what the cost to the communities dependent on them, and internal markets, pledged to scythe through waste and bureaucracy, introduced into national institutions like the NHS and the BBC.
Therefore, it’s one of history’s great ironies that in the 21st century her party – the Conservatives – are, under the guise of ‘free market’ policies, more profligate with “other people’s money” than any socialist government ever was, or, if one wants to be optimistic, ever could be.
“Socialism”, Thatcher’s mortal enemy, by regulating the private sector, as opposed to throwing money at it, would be immeasurably cheaper.
Let me count the ways.
Energy
The enormity of Liz Truss’s energy price guarantee a huge “state handout” of between £100 billion and £170 billion may have been scaled back by Jeremy Hunt but the principle remains: using taxpayer money to subsidise the profits of energy retail and supply companies because the prospect of public ownership – ‘socialism!!’ – is so horrifying it can never be countenanced.
And the huge cost of heating their homes to the public – the price cap is now at an annual level of £4,279 – has only been exacerbated by the Conservatives’ attempts to head off the idea of public ownership by introducing phony competition into a plainly monopolistic market. The £6.5 billion state bailout of the energy retail company Bulb – one of nearly a hundred new suppliers introduced to give the appearance of competition to the electricity supply system – will cost each household £230.
Despite the fact that, due to sharp falls in the price of wholesale energy, gas and electricity are cheaper than they have been since 2010, the market price will not be reflected in bills for a long time. “The cost of rescuing failed energy firms,” says Rupert Hargreaves of Money Week magazine, “will add hundreds to each bill, offsetting some of the declines in wholesale energy prices.” And of course the shaky finances of the still existing energy firms need to be secured.
It is reassuring to know that the opposition ‘Labour’ party, now safely back in Blairite hands, will continue this prudent use of taxpayer funds. Its stated approach of a six month price cap freeze, now judiciously mirroring Hunt’s policy, will give £29 billion to the energy firms, the mad Corbynite relish to “nationalise everything” at exorbitant cost having been thrown in the dustbin of history where it belongs.
It’s not surprising therefore that there is a singular lack of curiosity in Westminster as to why wholesale energy prices have been on such a rollercoaster in the first place, spiralling skywards and then crashing. It can’t have been solely down to Vladimir Putin , or the gods of supply and demand, because the falls continued, even sped up, after the Nord Stream pipeline, which syphoned gas to Europe, stopped operating and was then sabotaged.
All that Rishi Sunak will say is that it’s impossible to artificially hold energy prices down. But there is nothing natural about the ‘wall of money’ that drives speculation in commodities such as oil and natural gas. “Prices for food, oil and gas are determined independently of both wholesalers and costs,” noted economist Ann Pettifor in the Financial Times last September. “Wall Street and Chicago Mercantile Exchange investors deploy vast sums in speculation on movements in the price of both food and energy prices. It’s a profitable game.”
But rather than cracking down on speculation, the government, unfailingly loyal to a bastardised market fundamentalist ideology, wants to encourage it. The Financial Services and Markets bill, currently being scrutinized by the House of Lords, will give the Prudential Regulation Authority and the Financial Conduct Authority additional objectives of encouraging “economic growth and competitiveness.”
The idea that you should limit speculation in commodities, which drives up wholesale prices thus inflating everyone’s heating bills by thousands of pounds, is beyond the bounds of the thinkable. This is despite the fact that it has been done in the past by an American President who would have bristled with indignation at being called a ‘socialist’.
In 1934, Franklin Roosevelt passed a law that limited speculation in commodities to 20% of the market. Stability reigned until ‘New Democrat’ Bill Clinton – channelling the deregulatory spirit of Reagan and Thatcher – legalised credit default swaps in housing (paving the way for the 2008 financial crisis) and in the same law gave the green light to unlimited speculation in other commodities, such as oil and gas – the root of our current troubles.
But the notion that we might shun this 21st century liberation and return to the benighted ‘socialist’ practices of the past – which kept energy bills low thus obviating the need for huge public subsidies – is clearly just puerile. Like King Canute ordering the tide to stop coming in.
Public Services in general
You might think that no-one in their right mind would want to copy our dog’s breakfast of an energy supply system in other public services. But then again you (probably) don’t live in the mind of a Thatcher-besotted British Conservative.
The roll out of broadband installation in the UK is (prepare for a shock) heavily subsidised by the public purse. Under the £5 billion “Project Gigabit” programme, the government is gifting most of this money to BT and BT Openreach, its broadband division. However, stung by the lack of progress, it has augmented this with the fake competition model pioneered in the energy distribution system, encouraging other suppliers, so-called “altnets”, to start laying fibre-optic cable. Unfortunately, reports the Times, these paragons of efficiency are – much like private medical firms cherry-picking the simplest procedures – concentrating on the easiest areas. So “we’ve ended up with hundreds of fibre companies all building in the same areas.”
There is also the clear and present danger in the current climate that some of these “altnets” could go bust. So, as with the energy supply ‘market’, the government is setting up a Supplier of Last Resort system, naturally at the public’s expense. Unavoidable bail-outs, in the manner of Bulb, are on the cards. According to investigative journalist Solomon Hughes:
Customers of failed broadband firms will be shunted back to the old monopolistic firm, BT. The cost of these bailouts will be borne by the customer or the government. Just as in energy, trying to break [up] monopolistic firms by encouraging new entrants might end in costly failure.
The ‘socialist’ alternative, outlined by Corbyn at the 2019 General Election, would have been far more effective and cheaper. He wanted to entrust broadband rollout to a new public firm, called British Broadband, created partly by nationalising BT Openreach, and funded by taxing trillion dollar tech monsters like Facebook and Google. But this “crazed communist scheme”, to quote Boris Johnson, was too much for freedom-loving Brits so we’re back to gifting private firms public money to dig up the same stretch of road.
It has dawned on some right-wingers that the privatisation pioneered by Margaret Thatcher at the start of the 1980s has morphed into something else without many people noticing. Initially the Conservatives did simply divest themselves of state-owned companies (that had often been nationalised in the 1970s because they were at risk of bankruptcy). Firms like Cable & Wireless, British Steel, Rolls-Royce, British Airways, Jaguar and even Thomas Cook, were sold and had to make their own way in the private sector. Sometimes they survived and often, as in the case of Jaguar, British Steel and Thomas Cook for example, they didn’t.
But from the Tell Sid era of the break-up of British Gas in the mid-1980s, so-called ‘privatisation’ changed its nature. It became synonymous with contracting out monopoly services from the state to the private sector on the dubious grounds that this would be more efficient. This process is now so ubiquitous, encompassing services like water, gas and electricity, the railways, academy schools, NHS services, air traffic control, and care homes, that its uniqueness, and crucial difference with authentic privatisation, is often overlooked. These services were funded – and continued to be funded – by the government and, most importantly, could not be allowed to cease to exist.
After British Rail ‘privatisation’ in 1996, for example, the operation of lines was subject to a franchise system companies could bid to run. At the same time, the public subsidy awarded to this allegedly privatised system has increased by over 200%. And when the train operating companies are faced with a strike by their employees, they are reimbursed by the government for lost revenue.
In the words of a journalist for the right-wing Spectator magazine:
The rail industry hasn’t really been privatised at all. It remains underwritten by the taxpayer. Nor is there much in the way of competition: local monopolies are guaranteed by the franchising system. The only difference is that the system is rigged so as to allow the private companies owning the franchises to make a profit, even if their underlying operation is making a thumping loss.
Predictably, faced with this “rigged” system, the writer wants to return to the original spirit of Thatcherism and genuinely privatise the railways, abolishing state subsidies and forcing “the industry” to stand on its own two feet. But this solution would simply result in a system of free market anarchy that laid the ground for Thatcher’s bête noire of ‘socialism’ in the first place. Fares would be hiked into the stratosphere and ‘uneconomic’ lines shut down. What is socially necessary is not always profitable – in fact the two are often in conflict – and the fear of this realisation is why this country lives under the sway of bastardized Thatcherism.
Where did it all go wrong?
In part two, I will continue to list the myriad ways that 21st century conservatism props up the ‘free market’ system with public funds, in addition to asking why.
The answer, in my opinion, lies in both a putatively realistic but flawed vision of human nature and the unacknowledged economic failure of Thatcherism. She told herself, and everyone else, that releasing the forces of enterprise and beating back trade unions and socialism would result in a future of unending prosperity for all.
However, it hasn’t turned out that way and all they can do, to tweak a well-known phrase, is ‘throw [other people’s] money at the problem”.
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