Friday, 20 November 2015

excuse my polemic interlude


Now that we have power without proper ideas running the UK we'll get more destruction on Wednesday when Osborne opens his mouth. Between him and Cameron we are witnessing a spin-doctored accelerating reduction of the United Kingdom. Notwithstanding what could happen to Scotland and the European question, we're also seeing Osborne merrily chopping away via various ill-advised spreadsheets.

He wants to reduce public debt to below 80% of GDP without adding to income and property tax. Don't mention the Googles, Vodafones, Starbucks and Amazons that need somewhere for a tax-efficient base, nor the still in business casino bankers who have gained £375bn of bail-out from the money printed as a consequence of quantitative easing. It's jolly fun for this wunch of bankers to all swap jobs around every so often and that way to pick up even more golden handshakes and payoffs.

Even when Osborne provides advocacy, like with the northern powerhouse, he is hiding behind half truths in his statistics. The amount to spend is much less than the headlines after the share of the funding that goes to -er- London and other southern projects.

His dogma is about cuts to state spending and which which ultimately lead to private sector takeovers for his mates. Instead he could declare the cost of borrowing is at one of the lowest levels for centuries (it is) and use that to justify coherent spending on the services that need it. Health and education are the notable examples.

He's also playing a shell game with the money, one minute everything must be cut and he needs to find an extra £10 billion. Then he slows down the cuts. Then he finds an extra £2 billion to spend on security. I get that he is trying to balance the public sector spending over the current election cycle. But why? Perhaps a fanaticism to reduce the number of state-run systems.

Some of this looks like disposal at any price. Most people don't see or care enough as the big state or semi-state organisations go back into private ownership. It is not like the golden days of BT sell-offs where everyone is a winner. Oh no, it's selected organisations that get first dibs now. And Osborne is largely doing this all on the cheap - flogging most things at knock-down prices.

His spin on it all is clever enough. Most of the time he'll use the headline grabbing figure which sounds like a lot of money to show that he's done something. Selling a power station deal to the Chinese with another £2bn subsidy - not drawing undue attention to the highly hiked costs of the resultant power, perhaps at least double their current level and also index linked to rise.

Or maybe RBS? In August a small chunk was sold off, the majority to hedge funds, and around £3bn worth of the £45bn total amount we taxpayers put into it. In this case the loss during the sale was only £1bn. Osborne-math would call this a gain of £2bn. By the same logic if the rest is sold at the same 1/3 markdown George can call it a £28bn gain instead of a total £15bn loss.

Flogging the £3bn investment of Eurostar for £750m (i.e. a £2.25bn loss), when it would generate around the same £750m in dividends alone in the next ten years. Then there's that almost secretive sale of a remaining chunk of the Royal Mail to a group of institutional investors. Sure, it raised £750m but the investors were all smiling at their effective discounts.

Another one is the the weird fundraiser sale of the old Northern Rock UKAR book to the multi headed Cerberus private equity firm based in the USA. Look at the deal and it appears that Cerberus have had to pay £280m extra on just about one third of the book value. Then they get to offload another third to the now Spanish owned also re-privitised TSB. It's a fund sale at a knock-down price. Expect the dog guarding hell to start turning up in surprised UK mortgage holders' letterboxes, together with that American word "foreclosure".

There's a bundle of other things on the yard sale table too - housing associations and Channel 4 spring to mind. The main criteria seems to be be that there's a big-looking number that can be used in a headline; it doesn't really matter if the number is way less than the real value. Paraphrasing, he wants to know a discounted price for everything but the value of nothing.

Even with all the noises and protest, we'll expect the real effect of the protected spending on NHS, schools and defence to be just enough to keep the buying power the same as around ten years ago.

An effectively unopposed Osborne doesn't care. He can make the one-year figures look better by mortgaging the future. I should say 'our' future.

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