Tuesday 2 September 2014

Privatisation, Taxation and Monopoly

Returning to the Grauniad Privatisation piece and our discussion of a couple of weeks ago: one of our commenters, Andrew, picked up on the writer's summation, which revolved around a point about taxation.  Here's a key extract from the end of the essay. 
A tax is generally thought of as something that only a government can levy, but this is a semantic distortion that favours the free market belief system. If a payment to an authority, public or private, is compulsory, it's a tax. We can't do without electricity; the electricity bill is an electricity tax. We can't do without water; the water bill is a water tax. Some people can get by without railways, and some can't; they pay the rail tax. Students pay the university tax. The meta-privatisation is the privatisation of the tax system itself ...  The commodity that makes water and power cables and airports valuable to an investor, foreign or otherwise, is the people who have no choice but to use them. We have no choice but to pay the price the toll-keepers charge. We are a human revenue stream; we are being made tenants in our own land, defined by the string of private fees we pay to exist here. 
Well.  Firstly, his list is silly, mixing categories that should be kept separate. If can't do without it is to be a criterion, what about food then ?  From first-hand experience, the public bakeries in Russia were pretty awful: everyone tried to get their bread elsewhere.  The only tax involved in food provision is VAT (if any, generally not) and perhaps a payroll tax if it hits supermarkets particularly.  The margin extracted by Mr Tesco is subject to competitive pressure.  So can't do without it isn't right; and to include electricity in with the rest is only fair if you've proved or decided that competition is impossible in that sector.  I say it's entirely possible - though also entirely fair to debate (as we often do) the regulatory shortcomings we currently suffer from.  Is he proposing 'electricity-free-at-the-point-of-use', like health services ?  We know where that leads.  Airports shouldn't be included either: his list only makes sense if it sticks to genuine 'natural monopolies'.  

Secondly, we all agree that monopolies need toughing-up rigorously on all occasions (see earlier post).  Everyone knows that monopolies are what every evil rent-seeker desires above all else - they have changed hands for large sums of money or other consideration at every point in history. What's that got to do with privatisation?  Again, it's a debate about regulation (and perhaps social subsidies for impoverished energy users etc), not private ownership.  Any 'authority' in charge of a true monopoly service, however 'owned', is prone to charging too much - call it tax, rent or whatever you like.  Why does the writer assume publicly-owned monopolies will be the more likely to act 'progressively'?  It  might be true if they are state-subsidised, or have a 'progressive' pricing policy - but again, this has little to do with the main thrust.  More significantly, experience - see that earlier post again - is that they charge wildly too much in absolute terms because they are so staggeringly inefficient.

(Historical note: British Gas had its de jure monopoly taken away some years before it was privatised.  this altered precisely nothing.  It was then sold off with its de facto monopoly intact: again, this achieved nothing - at first.  It was only when the regulator took the gloves off that the glacier started to melt - with very striking and highly beneficial consequences for consumers.  By the way, the old BG did indeed have a 'progressive' pricing policy, entirely of its own devising and with no statutory mandate.  It decided that medium-sized industrial customers would subsidise both the very largest industrials, and the residential customers.  But it charged everyone more than was necessary, as eventually became evident.)

So - we will be 'taxed' by monopoly services however they are owned.  Minimising the tax is the name of the game.  If you want some examples of really outrageous 'taxes' on which no-one ever gave me any choice, how about:
  • the extra amount on my home insurance to cover the activities of burglars
  • the extra on my car insurance to finance the 'crash-for-cash' and 'imaginary whiplash' brigade
  • the extra on my general tax bill to pay for treating pie-munchers on the NHS 
  • [ ... your favourite example here ... ]
The taxation argument is entirely spurious.  The essential services will get paid for anyhow, and the primary issue is to find whatever keeps the costs lowest.  All empirical evidence points to nationalisation being a very poor approach.



Lord Blagger said...

The real evil one is the state pension.

Monopoly - well its forced on you.

Assets zero. Liabilities 7,200 bn. Annual rate of increase, 640 bn a year. That's a 240,000 debt per tax payer. Median income, 26,500 a year. The annual increase in the pension debt exceeds total taxation

So what is happening is that people are being extorted to keep it afloat, and there is zero chance they will be paid in full.

In practice, its worse. Work out what people could have got from investing NI, and its over 800K. Enough to provide 5 times the state pension, and leave the fund intact. Plus that 240,000 debt wouldn't exist

BE said...

ND I think you hit the nail on the head here. Most people excluding zealots on either extreme would probably aim for a pragmatic approach under which different industries were regulated according to their characteristics. A regulatory regime which keeps the retail gas industry keen may not be the best approach in healthcare, say. It sounds obvious when stated like that but our friends in the EU have been trying for decades to legislate in this area, and have so far come up with simplistic overarching statutes followed by exemptions, which seem odd from an Anglo perspective.

Our current set of politicos, including "opinion-formers", seems uninterested in thorough analysis, meaning we are stuck in a rut of evil banksters, naughty gas companies, black-and-white debate about healthcare reform, et al.

CityUnslicker said...

Not sure about the NHS thing. the real cost to the NHS is not fat people but the buggers who live to be old.

Fatties don't, smokers don't. A cynical approach to NHS funding would encourage all to live very unhealthy lifestyles and die in our mid fifties to early sixties.

This would also solve the looming pension crisis.

andrew said...

au contraire - morbidly obese people cost a fortune (diabetes, cancer, hip replacements, heart problems bla bla)

you need to popularise something that kills you quickly and reliably.

Looking at the fount of all knowledge, Diarrhea diseases seem to be a good start.

Sebastian Weetabix said...

Well, Ebola's on its way. We'll know it is really serious when the usual suspects accuse the CIA/Mossad etc. of introducing it deliberately.

Nick Drew said...

apoplexy from forced reading of Guradian articles

swift, certain, not much mess on the carpet

Electro-Kevin said...

"All empirical evidence points to nationalisation being a very poor approach."

And all instincts point to inter-nationalisation being a very poor approach when it comes to strategically important things such as water and energy.

We have got privatisation max. Whereby we have lost our innovative prowess and will be dependent on the Chinese and French to provide our power.

Electro-Kevin said...

BTW Sebastian. I think I have Ebola lite right now. Just taken a day off sick. Thank goodness computers aren't prone to viruses - oh.

Sebastian Weetabix said...

@E-K: what has been internationalised, can be re-nationalised. The Chinese et al can certainly buy airports and reservoirs and what have you but they can't really ship them off somewhere else!

Electro-Kevin said...

Sebastian - They can shut them down or charge unpatriotic prices, though.

Electro-Kevin said...

I call Political Correctness on CU.

"Not sure about the NHS thing. the real cost to the NHS is not fat people but the buggers who live to be old."


Sadly white men, Jews and old people are the only ones it is legitimate to hate in modern Britain.

Of old people. It would be funny were it not for the abuses and neglect we are hearing about these days. Jokes are manifesting themselves in outright nasty behaviour.

I have a sense of humour, but the fact is you wouldn't have said "immigrants - the buggers are everywhere."

Bill Quango MP said...

Not sure owning the means of production is that important - re French supplied power.

We have had to get our oil from the Middle east since the invention of the combustion engine.

UK hasn't been self sufficient in food since around 1830, when the population was a 1/4 of what it is today.

There have been various crises about strategic resources and supply in our history.

Charcoal in the Tudor times.
Wood in Napoleonic
Grain in colonial

components for our UK manufactured cars have come from the USA since the 1920s.

As Mr Drew is always reminding us -- it really doesn't matter who supplies you with what. its having plenty of choice and plenty of alternatives that is important.

So- we can't build a nuclear reactor anymore. As long as there are several other who can, we can go to them.
France supplies us with electricity. They aren't going to stop doing that, are they?

And on the other point, one that deserves a post on its own really, but its a far from our remit here, euphemisms.

I hope you saw Dan Hodges piece in the Telegraph. He came out and said some pretty anti-PC, straight talking, no prisoners truths. Redresses that anti-white/old/male/Jewish bias a little.

"When the media say Asian men, its a code word for Muslim men.."


He won't be invited to any more Islington diner parties for a while.

Elby the Beserk said...

The various excellent books on the post-war period in Britain (David Kyneston, Paul Hennessey, Dominic Sandford for starters) are all agreed on one thing, being that the industries nationalised post-war were all very inefficient.

And that they they became even more inefficient after nationalisation.

Electro-Kevin said...

"So- we can't build a nuclear reactor anymore"

But once upon a time we could.

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