Britain fell for a neoliberal con trick – even the IMF says so

Aditya Chakrabortty Aditya Chakrabortty The fund reports that Britain’s finances are weaker than all other nations except Portugal, and says privatisation is to blame @chakrabortty Wed 17 Oct 2018 06.00 BST Last modified on Wed 17 Oct 2018 11.13 BST ‘Pundits will say that neoliberalism is about markets and choice – tell that to any commuter wedged on a Southern rail train.’ Photograph: Alamy Stock Photo Columnists usually proffer answers, but today I want to ask a question, a big one. What price is paid when a promise is broken? Because for much of my life, and probably yours, the political class has made this pledge: that the best way to run an economy is to hack back the public realm as far as possible and let the private sector run free. That way, services operate better, businesses get the resources they need, and our national finances are healthier. It’s why your tax credits keep dropping, and your mum has to wait half a year to see a hospital consultant – because David Cameron slashed public spending, to stop it “crowding out” private money. It’s why water bills are so high and train services can never be counted on – because both industries have been privatised. We let finance rip and flogged our assets. Austerity was bound to follow Will Hutton From the debacle of universal credit to the forced conversion of state schools into corporate-run academies, the ideology of the small state – defined by no less a body than the International Monetary Fund as neoliberalism – is all pervasive. It decides how much money you have left at the end of the week and what kind of future your children will enjoy, and it explains why your elderly relatives can’t get a decent carer. I don’t wish to write about the everyday failings of neoliberalism – that piece would be filed before you could say “east coast mainline”. Instead, I want to address the most stubborn belief of all: that running a small state is the soundest financial arrangement for governments and voters alike. Because 40 years on from the Thatcher revolution, more and more evidence is coming in to the contrary. Let’s start with the IMF itself. Last week it published a report that barely got a mention from the BBC or in Westminster, yet helps reframe the entire debate over austerity. The fund totted up both the public debt and the publicly owned assets of 31 countries, from the US to Australia, Finland to France, and found that the UK had among the weakest public finances of the lot. With less than £3 trillion of assets against £5tn in pensions and other liabilities, the UK is more than £2tn in the red. Of all the other countries examined by researchers, including the Gambia and Kenya, only Portugal’s finances look worse over the long run. So much for fixing the roof. https://www.imf.org/en/Publications/FM/Issues/2018/10/04/fiscal-monitor-october-2018 Royal Mail post box and van. t ‘British governments have flogged nearly everything in the cupboard from airports to the Royal Mail – often at giveaway prices – to friends in the City.’ Photograph: Amer Ghazzal/Rex/Shutterstock Almost as startling are the IMF’s reasons for why Britain is in such a state: one way or another they all come back to neoliberalism. Thatcher loosed finance from its shackles and used our North Sea oil money to pay for swingeing tax cuts. The result is an overfinancialised economy and a government that is £1tn worse off since the banking crash. Norway has similar North Sea wealth and a far smaller population, but also a sovereign wealth fund. Its net worth has soared over the past decade. The other big reason for the UK’s financial precarity is its privatisation programme, described by the IMF as no less than a “fiscal illusion”. British governments have flogged nearly everything in the cupboard, from airports to the Royal Mail – often at giveaway prices – to friends in the City. Such privatisations, judge the fund, “increase revenues and lower deficits but also reduce the government’s asset holdings”. Throughout the austerity decade, ministers and economists have pushed for spending cuts by pointing to the size of the government’s annual overdraft, or budget deficit. Yet there are two sides to a balance sheet, as all accountants know and this IMF work recognises. The same goes for our public realm: if Labour’s John McDonnell gets into No 11 and renationalises the railways, that would cost tens of billions – but it would also leave the country with assets worth tens of billions that provided a regular income. Instead, what this IMF research shows is that the Westminster classes have been asset-stripping Britain for decades – and storing up financial trouble for future generations. Just look at housing to see the true cost of privatisation Dawn Foster Privatisation and austerity have not only weakened the country’s financial position – they have also handed unearned wealth to a select few. Just look at a new report from the University of Greenwich finding that water companies could have funded all their day-to-day running and their long-term investments out of the bills paid by customers. Instead of which, managers have lumbered the firms with £51bn of debt to pay for shareholders’ dividends. Those borrowed billions, and the millions in interest, will be paid by you and me in our water bills. We might as well stuff the cash directly into the pockets of shareholders. Instead of competitively run utilities, record investment by the private sector and sounder public finances, we have natural monopolies handed over to the wealthy, banks that can dump their liabilities on the public when things get tough, and an outsourcing industry that feasts upon the carcass of the public sector. As if all this weren’t enough, neoliberal voices complain that we need to cut taxes and red tape, and further starve our public services. This is a genuine scandal, but it requires us to recognise what neoliberalism promised and what it has failed to deliver. Some of the loudest critics of the ideology have completely misidentified it. Academics will daub the term “neoliberal” on any passing phenomenon. Fitbits are apparently neoliberal, as is Ben & Jerry’s ice-cream and Kanye West. Pundits will say that neoliberalism is about markets and choice – tell that to any commuter wedged on a Southern rail train. And centrist politicians claim that the great failing of neoliberalism is its carelessness about identity and place, which is akin to complaining that the boy on a moped who snatched your smartphone is going too fast. Let us get it straight. Neoliberalism has ripped you off and robbed you blind. The evidence of that is mounting up – in your bills, in your services and in the finances of your country. • Aditya Chakrabortty is a Guardian columnist and senior economics commentator https://www.theguardian.com/commentisfree/2018/oct/17/economic-lies-neoliberalism-taxpayers