But richard says debt doesn't matter. Load it all up on the tax payer's credit card. But he does admit it results in future taxation. He doesn't admit that its taxation with no services. ie. Austerity.
@adenwellsmith6908 I'm afraid your argument is rather thin being based on political and economic fashion rather than an examination of recent events. If we look at the debts incurred by some of the water companies they have resulted from the businesses borrowing to pay their shareholders dividends, surely is not a form of capitalist austerity, ie cost without service? In terms of taxation vs higher utility bills the consumer will still always end up paying. However, if examine the scheme of nationalisation described by Richard the costs are defined and the consumer is to an extent protected, unlike the free market where costs have increased without checks and balances and the consumer carries the risk. Remember that in some cases the utilities have local monopolies.
@@adenwellsmith6908 Richard never says debt doesn't matter. I think you're confusing an individual's debt with the National Debt, which ironically he's talking about here, as those bonds would increase it. And you have to be trolling with the phrase "tax payer's credit card" on a Richard J Murphy video. You must know how empty and useless that lying phrase is.
@@iwantagoodnameplease National Debt I'm talking about national debts. Plural. On the its not a household, that doesn't work when the debts are inflation linked. All Richard is proposing a wealth transfer from the unborn and young to pay for the mistakes of politicians. The credit card is correct.
@@davidmcintyre8145 And Northern Ireland where it also wouldn't accept changing from rates to council tax and where Westminster had been interfering and trying to force privatisation of everything.
The European Union railways are also partly privatised. EU regulations require every public service to be open to tender i.e. privatisation. This is the reason the RMY is anti EU.
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Richard conveniently forgets to mention issuing bonds increases govt debt which would be inflationary He also forgets to mention most of it is in foreign ownership and under investor treaty protection But hey you are welcome to fall for his oversimplified arguments
The problem was that the subsequent Tory governments refused to fund these industries adequately, instead they harped on and on that these industries were a drag on the economy. Thatcher !
Totally wong. Without even thinking you have just described why the government should not be involved in nationalising those industries when you said about them being a drag the economy which the Tory government would not fund. They were making losses very year and those industries were being propped up by the taxpayer. The government does not and cannot fund anything without a cost to the taxpayer so why should any industry be funded by the taxpayer rather than the buyers of the product that the industry is producing at competitive cost ? If the cost is not competitive then that indicates inefficiencies in that industry so how far should that propping up of the industry actually go ?
@@badgoogle9938 You do in the form of effficiencies that the government run businesses dod not produce because there was no incentive to do so. When industries are nationalised there is no competition and the operators have no method of comparing prices or care about it because politics take the place of those financial incentives.
@@malcky630 Yes. - Of course from taxes. But Richard Murphy either does not understand this or does not want to. Private investors get the money to invest from doing valued work that others have need or desire for and then have investment money they saved some of that income which they have gotten by not spending all of it. Private investment comes from producing and saving but government investment comes from taxing without having done any associated work or created anything to do so.
Privatising services such that they give a monopoly to a for-profit business always was IDIOTIC. But in lieu of direct nationalisation, the government could simply cap the charges e.g. water companies can levy on the public, and fine them for every breach of regulations, until they go bankrupt. As a bonus, prosecute all the managers of these companies for mismanagement. Funneling off billions in dividends while not doing necessary maintenance most certainly is mismanagement.
@@adenwellsmith6908 It is. But the Tories have created a situation that is untenable. And your point is? It would be an outrage if The People have to bail out these water companies, after all the billions they sluiced off to share holders. Considering the current situation, I believe the government would have the right to prosecute these companies for endangering public health, to terminate their right to do business and to seize their infrastructure outright. That might be a third possible solution.
@@TheEvertw You are hung up on labels. The question is what are the policies that have gone wrong? Here its just the same as the banking "crisis". The regulation has failed.
@@adenwellsmith6908 The usual Tory (neo-liberal, really) ploy to squander national services is to first massively under-fund them, and/or impose burdens on them that massively waste resources. Then they claim this is inherent to them being public services, and that privatization will lead to better and cheaper service. A few decades later, the opposite turns out to be the truth. Whenever a for-profit company is given a monopoly position, its service will decline and prices will increase. That has been known for more than a century. They are currently doing it with the NHS.
I have said for some time that if Atlee's government could afford nationalisation when the country's economy was in a dire state due to the war, Starmer can certainly afford it now.
The only people who "can't afford it", are the denizens of The City of London. I find it funny and terrifying that the UK has an exclusive tax haven that is not subject to the laws of the UK, carved out of right in its capital city.
Reeves understands exactly how money and the oligarchs work. She like all mainstream politicians in the uk is lying to us to keep the gravy train going for her city of London bankers and hedge fund chums on side. We are many they are few.
Labour or whoever would have to make it happen; ie there has to be a will. You can be sure a huge backlash would be generated against the move from the usual forces of Capital and its media, including a “neutral” BBC. It must be done anyway.
Whether a service is nationalised or not, it's the same workers doing the actual jobs, The big difference is that a privatised service sends money to external - often overseas - businesses, rather than keeping it all for maintenance and development.
Nothing costs us anything. they just add naughts to a computer and Print the vouchers. They do not BORROW MONEY. That is the MYTH that we suffer to get robbed.
Richard - What you have said is a great surprise to me as it will be to many others. Why have the Conservatives never mentioned this? Surely the annual interest paid to bond holders by the Government comes from the pot of money gathered in taxes?
Sadly, should the water companies and transport bere- privatised it would only be the English taxpayers who would have to pay any costs and for that reason UK government bonds would not be appropriate. or the three smaller UK countries would somehow have to be seriously compensated for sharing a burden they are not part of. Scotland, Northern Ireland and Wales own their own water and should not have to accept a share of an English debt. With Scotland and Northern Ireland still owning its own transport as well it sort of adds to the independence argument.
If by owning your own transport you mean ScotRail, then all of the infrastructure is owned and maintained by network rail so the costs are born just as much by English and other taxpayers as those of Scotland. That is one subject I have never seen raised in the indy debate. If Scotland went independent, it would have to fund all of its railways itself. Much of that railway outside the central belt is a public service and not highly used so maybe not profitable enough to survive without heavy subsidy IE taxpayer funding
The video says that the interest payments would be payable probably from the profits of the company, if run to make profits. If you run it to not make profit then that's a choice. Basically it's a leveraged buyout, but by the government. Whether they make enough profit to cover the interest cost is a different matter.
@@user-it7lf7kk8m You have a valid point. Network Rail publication claims it invested £400 million over 5 years (£80 million per year) on track outside the central belt. Some of that will have been recuperated from the charges for use invoiced to the State owned Scots Rail, ie fares collected within Scotland. So how much of that comes from government subsidy (UK taxpayers) is never published. However, Scotland pays taxes (of all types) to Westminster. There is quite a difference between the taxes it remits (the larger) than the block grant it receives from Westminster. (the lesser). So let's say whatever Network Rail funding of the rail infrastructure that occurs, one could say that it's coming from Scottish fares and Scottish taxes retained by Westminster for central expenditure including subsidies. Whether or not huge Scottish State subsidies would be required is debatable (£80 million is less than £15 per capita). Northern Ireland, which owns both the service and the track and rolling stock, manages without Westminster rail subsidy and it survives from rail fare receipts which is not subject to the profit demands of private operating companies, and a small NI Transport Dept grant of £14 per capita.
@@lonyo5377 The current £1.3 billion grants/subsidy to water in England is away in excess of the 3% interest on Government Bonds with some giving a£25 billion market value to the water sector. Even that's probably excessive given the level of corporate debt(£80 billion) and the investment obligations (£100 billion) over the next 25 years. Nationalisation is a no-brainer.
I am not surprised by Labour's policy. I listened to Rachel Reeves being interviewed by Rory Stewart and Alistair Campbell. Rory asked if Labour would invest heavily out of new money as the US did under Biden through their Inflation Reduction Act. Reeves said that unlike the US dollar, sterling was not a reserve currency so couldn't. Both Stewart and Campbell remained silent, but this was news to me and probably almost everyone including the IMF which regards sterling as a reserve currency. The $ may be the most important reserve currency but Reeves didn't say that. Did she not know or is there something else going on?
If the Jocks are being subsidised, why isn't the English electorate not demanding to get rid of the subsidy junkies. Europe, don't want to be with another 27 countries. Scotland can't get them go. I wonder why
@@adenwellsmith6908so you’re comparing a country with a council? Why don’t we compare London transport with the rest of the country . Transport in London fantastic,transport in the rest of the Country pure expensive Sh#te. Why is that ? Could it be to do with the fact that the rest of the country isrun by private companies.what about the water,gas etc all run by private companies! Wake up,smell the coffee infrastructure is better run by the state.
It is tax payers money that is used, even if these companies are bought using bonds as the government has to pay the interest on them Currently the government is paying about £90bn a year in debt interest payments, all which have to be funded by tax
But - if your name is Richard Murphy then you turn your back on facts and put across a false narrative about what happened. He even gets the facts about government bonds wrong. There were 15 Billion of UK war bonds sold in WW2 and now only something less than 1.9 Billion remain. So he is grossly wrong by almost ten fold about the bonds being paid out - Most of them have.
@@Rob-fx2dw war bonds were different to the bonds that Richard is talking about. War bonds were literally to fund the war effort, they were made available during the war. Government bonds from 1948 were used to fund infrastructure projects. Two completely different reasons and times for issuing them. At no point did Richard mention war bonds.
@@kevbrown2532 O.K. People buy bonds for investment purposes. Governemnt sell them to fund spending. So who would believe except Richard Murphy and others who are frighfuly unable to analyse financial situations that bonds sold in 1948 or shortly after are not paid out by government despite the fact that their initial purchase was an investement that expected a return and interest as well. Also where would the interest come from to pay purchasers apart from government which funds them with taxes.
@@kevbrown2532 Thank you for educating me on that one, I might have let @Rob throw the issue into some doubt there if you hadn't been able to correct his claim.
@@kevbrown2532 A bond is a bond is a bond. It's an I.O.U. that has to be paid for when it matures, or before. And the taxpayer does the paying - who else?
You've conveniently omitted the the additional layer of management (Mismanagement) that the government would impose and that would be paid for by the taxpayer. A new controlling board with local offices and employees for each industry.
@@juliantheapostate8295 No, they’re not. We pay more to subsidise the rail companies than we ever did under nationalisation. All to protect the shareholders profits. Water companies are pumping raw sewage into our rivers and telling us we’ll have to pay double to sort it out, again, all to protect shareholder profits. It’s a literal sh*t show.
Why not? Perhaps the repercussions from the most powerful asset owners who would resist bonds, along with the oligarch client media. Labour should grow sone cajones and work in the national interest. In short, the new government should listen to you, Richard, and a few others, like Gary Stevenson and the patriotic millionaires.
That might work for railways with their franchising structure but not for the other utilities.. the franchising structure is controlled by government, so the whole railway structure is quasi governmental anyway.
He said the businesses produced that money, which covered the interest and the bonds just got replaced with new ones. This is similar to how most countries never pay off debt but just the interest, as they agreed with the bank. The bonds I believe start at a current ceremony value set eg. £10,000. With inflation that is less and less valuable (ie can buy less). Like how having £5 was a months wages many years ago but most people have that just lying around
You didn't even listen to his explanation, did you? The bonds never have to be paid back. If the owners want their cash value, they just sell them on the open market - where everyone involved knows that, at term, they'll be redeemed with new bonds.
@@AlecBrady You have never looked at a bond market. The only time a bond realises its face value is when it it paid off by the government/tax-payer. Other than that bonds sold to market normally only realise a percentage of the face value depending upon what the national interest rates are at the time.
Give over Richard. The Government should bring the role of Ofwat in-house, instruct the Water companies to reduce prices by 50%, they instantly go bust, we the people heroically buy them out of Administration for £1, and the debts are ignored because they belong to a deceased company. Simples
Want to know why our debt to GDP ratio is 104%? Because people like Murphy think there's no downside to continually loading debt - which are what bonds are - onto the system. You can't pay everything on the never never forever. In 2022/23 we spent £111.5 bn [4% of GDP] in loan interest. That's more than we are slated to spend this year on Education [£84.9bn] and approaching our big ticket item Health [£179.6bn]. There is a thing called opportunity cost - every penny we spend on interest is a penny we don't have to spend on anything else. As for nationalised industries paying for themselves, British Rail - "the jewel in the crown" - was loss making . it always required subsidy, just under £4bn immediately before privatisation. Paper profits were generated by counting Government subsidy as "income" - creative accounting at it's finest - but as a business it would have gone bust.
My experience over the years working in nationalised industries was they are badly manage, too many employees for the available work and an excess cost to the taxpayer. In an 8 hour day only about 4 hours was actually worked. Investment was poor as whoever was chancellor of the exchequer was reluctant to spend taxes on them. Successive governments also used them to hide unemployment figures so they were massively overstaffed.
They also provided short term positive cash flow that could be diverted to other pet projects rather than long term investment back into the business that would not see positive results until well past the next election.
and what changed? 30% of money income straight to shareholders abroad, no investment in the company. Many national industries were overstaffed because govt kept killing orders at last minute, or putting orders on hold.
This is a massive bugbear of mine when debating people. Frequently, they will resort to the "what's the cost to the taxpayer?" argument, which makes no sense. Nationalised assets create wellbeing in and of themselves. Too many at least claim to know the price of everything, but few know the value of anything.
The very idea of rewarding with bonds the spivs who ran up huge debts, eg Thames Water £11 billion debt and ran off with the dividends, bonuses and other benefits, or to the predatory bankers sticks in the craw.
Better regulation needed to stop these activities, even in private companies like boots etc . The companies get nothing out of the parasitism of the hedge funds. Regulators have been very poor for decades, hence sewage discharges just to name one.
@@pbainbridge5 Those pension funds seem to have been fine with asset-stripping the water companies (or, at least, managed decline while taking dividends that should have been invested in making the service better). They should certainly be paid market value for their shares, but they have allowed that market value to fall to a quarter of what they paid for them. When the true size of their debts is included, and they are required to do their jobs, eg processing sewage rather than dumping it in our waterways, those shares may fall even further, and the compensation they can expect will fall likewise. Isn't that how markets are supposed to work? So, isn't it the pension funds that are the robbers here?
This video ignores the fact that if the water industry was nationalised then a large proportion of the profits would be required to pay the interest on the government bonds used to buy the shareholders out. It wouldn't cover the investment required to fix the problems that have accumulated since privatisation. There would be two ways to fix the shortfall - put in taxpayers money, or put the water bills up. And the government would get the blame, rather than being able to blame the water companies.
Not necessarily an argument against privatisation, just the way it has progressed. Some eg the water utilities were supposed to use their freedoms to borrow money to invest in their infrastructure. What some did was buy foreign utilities while using our regulated industry to subsidise their overseas ventures. They were also allowed to close reservoirs(Thames water) for a quick housing profit and then expect other people to be compulsory purchased to build new ones when they find out they haven't enough water years later. In general it is lax regulation of utilities that is the problem and all governments are guilty. The regulators deserve a good kicking, as they have allowed a lot of this stuff , and allowed the consumer to be abused. The regulators need to be customer oriented not industry oriented as is the case now. It is their lax regulation that has allowed such things as illegal sewage discharge, by not being hard enough all of the time. Utilities know they can get away with it because the regulators are soft.
I agree but additionally: 1) Abolish Trusts (except for genuine cases of incapacity). 2) Abolish all UK tax havens and secrecy jurisdictions. 3) Institute a Land Value Tax + rent controls. You can't hide land and its not an illiquid market. Land accounts for much of the wealth extraction of the 1% from the 99%. LVT is the truly the only tax they really fear.
Essential services should never be run 'for profit ' I.e privatised. But they were, because the Right saw the value in these industries/ services and profits for themselves. Profits were taken at the expense of necessary investment. Don't delay, Labour, pull these essential services back under national ownership and use the 'profits' to make the necessary investments that these services will always need.
You are just plain wrong in your thinking. As wrong as Richard Murphy when he says the war bonds have not been paid out. The reality is there were 15 billion of war bonds sold and now only 1.9 billion exist . So he is ten fold wrong which is no surprise because he doesn't like mathematics which show he is wrong. You are wrong when you say profits were taken at the expense of necessary expenditure. The reality is there were very few profits but huge losses paid for by the taxpayer. Government does not have any income unless they collect taxes. There no magic tree that government gets tax from . They only have taxes in the short term and dond sales and in the long term only taxes to pay out bonds sold earlier to get the shortfall of money from earlier taxes. Without profits there would be no private investment and that would be a disaster. Thre would also be no money for government from those profits.
Essentially, a government bond is a loan, usually long term, on which interest is paid. Politicians don’t like to talk about “borrowing” because economists like Milton Friedman said borrowing is always bad for the economy. That is of course a falsehood. Loans are not always bad. It depends what you borrow for and what the terms of the loan are. I don’t like using analogies with the household budget, but in this case, there is a useful one. If you borrow money to buy a house, it delivers an asset in which you can live and which, historically, the value has increased. If you borrow money to have two weeks in Barbados, it delivers joy for two weeks and misery for however long it takes to pay off the loan. I am a supporter of modern economic theory and I believe that we should borrow money through bond issues to nationalise water, energy, public transport. We should also borrow to increase the housing supply, not only through building new houses but by buying up the thousands of privately owned empty houses on our streets. We must invest in research and development, education, care and the NHS and ensure that we never have hungry children or poverty stricken pensioners. Borrowing is OK as long as you borrow to INVEST, not to fund day to day running costs.
Replay the video. He gives a very clear explanation that taxpayer's money is not involved. The interest is paid out of the surpluses (i.e. profits) from the business.
@@TheDaftPuddock Our rail operators don't make a profit. Thames water only generates enough income to cover its current bond payments - it has not paid any dividends for 5 years, beyond moving money around to make bond payments. Most other nationalised companies make profits by being run by ruthless business people - how much do you think they would generate when run by MPs, civil servants and the unions?
I suspect a lot of folk are missing the inherent profit or benefit to renationalising key industries. If you nationalise there is no-one outside the public that scrapes off the profits. It gets reinvested back into the industry instead of lining shareholders pockets. That means infrastructure spending to improve waste water management, cheaper/better rail travel, etc… And you’re still able to fund the interest payments for the bonds. If privatised industries can claim a fiscal profit then nationalised or public ownership versions can claim a societal one instead.
I bet there's some clause in a contract somewhere that precludes the use of govt. bonds to purchase the businesses. It seems sometimes the govts abilities in negotiating contracts is actually quite poor. Look at PFI for example, negotiated under Tony Blair.
You are partly correct. PFIs started under John Major in 1992, were poorly negotiated then and PFI initiatives have been poorly instigated by different Governments, including Blair's and Cameron's, until 2018. That said at least some much needed new infrastructure was built - for example the state secondary school on our side of town had to be rebuilt and was - how many desperately dilapidated schools have been rebuilt in the last 6 years?
@adrianfielding4678 OK so my history let me down, but I think my principle stands. But how much over the odds did we pay for new School infrastructure?
I agree PFI is imperfect and there are many documented instances of business willingly stitching up Government ( thereby society at large). However, can you suggest a better model for the building of infrastructure like schools? (If any one has a better idea it would be great). I know folk who taught at the local school, before and after the PFI build, and they spoke of a dramatic lift in the moral and the motivation of both staff and pupils. How much would society and the economy be diminished in the long term, from neglecting basic education?
@adrianfielding4678 well exactly what sort of message does it send to children about our society if they have to go to school in semi derelict buildings?
Thames Water is insolvent, it has massive debt and it's liabilities are enormous. How much is it worth? If the government capped bills and required them to make adequate investment in the system it's owners couldn't get rid of it fast enough.
It's shares are worth next to nothing so those could be taken over at a near zero cost. With ownership comes £14B of loans that would become the government's problem on day one and a need to make major capital investments well beyond what is already in their long term plans on the same day. Thames currently makes enough profit to cover the cost of the bonds and it's current investment plans, but beyond moving money around to cover bond payments has not paid shareholders for the last 5 years any dividends. So a UK government can nationalise the business for pennies, but will then have to fund the extra improvements and cover the resulting loan costs or put up the price charged to Thames users to cover the loan costs. At no point is this 'free'.
Nationalisation is the reason were in the mess we're in because under the eu industries that we rely on have been nationalised in their home countries because the private investment over here earns so much. 80% of our railways owned by eu nationalisation. Bus companies, water companies, power companies. Soon to be the nhs and soon to be the air we breathe.
Nationalisation was a disaster in Britain and everywhere else it was tried. As for borrowing money - the interest and the principle has to be paid taxpayers.
The principal never has to be paid - as you'd understand if you'd listened to his explanation. And the interest is at a fixed rate on a fixed amount, which is being reduced in value by inflation (exactly the same as if they'd been given cash). The interest being paid, therefore, is a kind of slowly reducing rent paid on the asset, which the water company (say) can't just increase to give their share-holders a bigger pay-day. If the recipient of the bonds doesn't like the deal, and just wants the cash value, they can sell them on the bond market.
@@AlecBrady Mr Brady - you are playing games. In reality nationalisation is a disaster. And borrowing money, whilst saying "I will never have to pay it back", is the road to the breakdown of the financial and monetary system - which, sadly, seems to be inevitable now.
One argument I've seen repeated over the years, is that nationalisation would lead to outside investors becoming afraid of a similar situation happening to those business they would be investing in, which would stifle a lucrative investment channel. We are seeing utilities being bled dry by high level incompetence. The CEO's only task is to drive up share value. The ultimate consequences being over inflation costs being passed onto the end user. In cases such as water there is no "switching capability", so you are stuck with the local water/sewage supplier and whatever price hike they can get the utterly useless regulator to agree to .....
Nationalisation paid for by 30year/30year/30year . . . government bonds. - After that explanation why am I suddenly thinking of the Monty Python 'Never Pay' insurance policy? 🤔🤑
The private sector is more efficient than the public sector. Always. When you nationalize an industry, they have no competition and therefore no need to perform well so they don't. Who pays then?
Could it be that politicians and the media which is run by those who generally support privatisation hold these bonds so would lose out financially if they were nationalised?
So how does government pay the interest payments on the loans / bonds? UK general government gross debt is over £2.2 Trillion, equivalent to more than 104% of GDP. Cost: *£110bn* in debt interest payments in 2023. We might want to recall what a cock-up the Truss era made of uncosted borrowing too.
I was working at the Stock Exchange when the steel industry was nationalised in the sixties. All the government did was pay the shareholders the value of their shares in gilt edged loans, due for repayment in 30 years or more. I didn't cost the tax payer a penny. The share holders could hold onto their gilt edged stocks or sell them on the open market. If the Labour party say they can't afford to nationalise the water companies or the power companies because they don't have the cash, it's rubbish. They never paid in cash but in bonds dated years ahead.
When the state sells a bond it is borrowing money. Hence to pay the principle and the interest. Why don't you sell of your mortgage? Does that mean you don't have to pay the debt? Who would buy your debt from you?
Surely this is essentially the same as running up more national debt? Although it is arguably worth it if we're getting something valuable in return. It's certainly more reasonable than the numerous suggestions I've seen to simply expropriate the companies and default on the bonds. That would scare off anyone from investing in British infrastructure ever again.
It should be even cheaper than you think. The water companies can be regulated and fined out of profit and made worthless. Trains are easy, just don’t renew contracts.
This is the shell-game that sovereign currency nations have played for hundreds of years, and it works right up until the owner-class is allowed, by the government that is supposed to represent all the people, to extract excessive profits beyond what the service can generate. Every Pound, Euro, or USD in existence today began began as a promise to pay that, through inflation, is reduced to nothing. The recipients get paid every year or quarter for decades in exchange for holding the bond as the value of the original principle is eaten away to nothing over time. Two essential services I rarely ever hear mentioned as candidates for nationalization are banking and insurance, which are 2/3 of the foundation (protection/defense is the third and generates no direct revenue) that any civilization is built on.
The problem comes afterwards for investment and running costs, hence the railway system became run down, similarly the water industry etc. The nationalised industries are never given enough funds to keep developing and even adequate. It’s not about the initial costs.
@@redf7209 Yes but they were always were, and will always be, underfunded. Politics often got in the way of the requirements for these industries as the chancellor will only allocate what they feel they can justify, not really looking at what the industry requires. We have forgotten what these nationalised industries used to be like. Many people who worked in them just didn’t do a decent job, they seemed to feel they were secure and who needs to make a profit - normally the large nationalised industries used to be in the red as far as I can remember, possibly with the exception of telecoms. I used to feel we should have nationalised industries, but I had to face the facts that governments cannot run companies and many workers in those get disillusioned with how they are run and then are no longer conscientious. I have not heard anything that makes me believe lessons have been learned and they will be ran any better. Just to say that we will fund them is short sighted and, frankly, unbelievable.
Good point. If the water industry goes broke as they have failed the government could buy them out if administration for pence. There would be a huge burden to pay to remedy the damage done by the previous owners but that would be our choice.
The Tory privatisation mantra guarantees profits for private train operating companies no matter how poor the services. These train operating companies are usually owned by European nationalised rail companies so the taxpayer is giving them money to invest in their own railways. E.g Italian railways ( Avanti )
I have been saying this all along. Force the water companies as an example to provide clean water and stop pumping sewage into the sea, rivers and lakes. If they can't then fine them the real amount it costs to fix the problems. This will force the real value of these companies down to where they should be then buy the companies using bonds at this vale
No more than paying for pensions of any employees, its all just part of the wage bill. It works slightly different for the state employees because instead of gambling funds ( that are boosted by taxpayer money) on stocks and bonds to crate a pension income, the funds are used to avoid state borrowing so there is a definite return based on interest rates that have been saved by the state. The state saves more money than it pays out so it actually short changes the employees. The pensions of state employees are based on incomes that do not increase in line with inflation so they are small
@@abody499 It's called 'producer capture' - those that work in the nationalised industry use the State to alter their own terms of trade in their own favour. At the expense of the rest of us.
Thank you so much for that explanation why haven’t I heard that anywhere else? I’m now even crosser that my water is owned by the French government and my Metro by the German government and my gas by god alone knows who. Are our government so incompetent that every other EU government can make utilities pay but the UK government can’t.
1. That's not how bonds work. 2. That's not how credit ratings work. 3. That's not the fiscal picture in 1976. 4. That's not the context now - on book and OBS liabilities are 200% of GDP. 5. Nationalisation is certainly a matter of political economy. It's also one of capacity to deliver, institutions and quality. The UK would struggle to deliver the services under government ownership that are currently in private ownership.
The markets own the country. Nationalisation runs the risk of kicking off a wider response from the markets. Look what happened to Truss. She wasn't brought down by the tories she was brought down by market movement. Starmer won't do anything that spooks investors. This sadly is the state of our democracy. Having said that, however, I believe there is scope for selective nationalisation like water and rail simply because they are operating outside their licence conditions on performance.
@@johnpritchard9753 Issuing govt bonds is same as QE, it would raise interest rates And most of the ownership is in foreign hands and subject to investor treaty protections, so there would be legal challenges. Richard Murphy makes lots of false arguments, he is a tax advisor he should be ashamed
the issue here is, that you COULD say, that the government intented to pay the owners after 30 years then, but you plan now blatantly has absolutely no intention of ever paying them. can you spot the difference? ...and why should the government stop there? in three years time - after nationalising rail, water etc. - they decide that now that they are going to nationalise it companies.. giving the owners a worthless piece of paper in return... and then they nationalise supermarkets...why shouldnt they? it doesnt cost anything, does it?
The privatised utilities have been underinvesting and charging higher bills or fares in the case of rail franchises. The Regulators should do their job properly and strictly enforce the dismal performance measures of the privatised utilities and infrastructure providers with substantial fines failing to performance. They will then be unable to pay dividends and/or will have to borrow to bring the services up to scratch and the value of the shares will reduce as a consequence. Then the government should nationalise at true market value not an inflated one of an asset stripped company.
Firstly, paying them on bonds is still costing money, even if it's in the form of bonds. Secondly, why would the current owners, who are making more than 3% by loading up those industries with debt and paying themselves huge dividends, and via sale leaseback schemes? Thirdly, the value of government bonds varies as lot, depending on the confidence in the government which issues them.
I can remember when lots of stuff was owned by the government in the 1970s. Absolute bloody disaster. However the government should be in charge of stategic assests like water and energy, it just needs to be run properly. Not sure if this would be possible considering how well they run the NHS.
The NHS was very well-run when I worked there - well, until about 2010. After that there was a definite down-turn in investment, previous improvement plans were shelved, community facilities started to be sold-off because we no longer had the funds to keep them open. This was not caused by poor money-management or immigration or anything like that: it was caused by austerity. And health care is a strategic asset. We see how reduced access to care leads to longer waiting lists, people unable to return to work - or unable to work as effectively - leading to steadily falling average productivity. A similar dynamic applies to water and railways. We need them to operate well for the economy as a whole to benefit. We should nationalise, yes; but we should also ensure that the experts in those industries - the doctors, nurses, pharmacists, cleaners, builders and many others in the NHS, and comparable positions in other services - have real influence over how the services are delivered and developed, rather than letting professional managers, parachuted in from outside, trim and adjust something they don't properly understand.
Thank you Professor Murphy for that explanation, I was unaware that was how post-war nationalisation was undertaken, although I fear the, "armchair economists", in these comments will no doubt be selective in their listening and criticism of the points you raised.
@@joeegg90 Murphy is being selective. You can’t compare nationalisation post war where A) the businesses being nationalised weren’t making money B) the businesses were mostly British owned, not foreign sovereign wealth funds like they are now C) he doesn’t mention the inevitable legal challenges due to,Investor Treaty Protection contracts D) he doesn’t mention the impact on public finance raising huge amounts of bonds E) he doesn’t mention that shares in these public funds are held in pension funds held by millions of voters
@@RobinHarris-nf4yv I am not comparing anything. Professor Murphy described how, "taxpayers money", was not used in post-war nationalisation and that bonds were used to pay for the industries nationalised.
@@RobinHarris-nf4yv So shares are held in pension funds. So what? They will be properly compensated for the compulsory purchase of their shares. They won't lose out. They just won't be able to asset-strip a key infrastructure any more.
The answer is Mrs Thatcher. She said that the state cannot spend more than it gets in revenue (taxes etc). She was wrong, but as the daughter of a shop keeper, what do you expect. If it’s good enough for daddies shop it must be good enough for the nation, right? Wrong. She adopted a simple answer to a complex problem which of course was wrong. I have often wondered how bankrupt Britain (1946) was able to do so much. Now I know. Thanks.
Maggie was cleverly setting up essential industries for her mates to profit from. As always, the Tories look to make money from national services that have been paid for by our taxes. Reaganism/Thatcherism 101
British steel was losing half a million a day , which is why Maggie opted to get it off the books. That is half a million a day that can't be spent on anything else like the NHS or other services. So unless you get some special benefit from spending that extra money, you chop whatever is causing the money leak. Many of the other public services such as the NCB (coal) had similar problems and were bedevilled by union led strike action which further eroded profitability. Eventually you have to decide whether you are going to keep paying for those losses with taxpayers money. You may have a reason to do it eg strategic industries, but you have to be clear as to why you are doing it and be prepared to actively control those costs
Excellent suggestion. Also you will be surprised to know that some utility companies have small or even no shareholders and these shareholders are also working as managers hence paid three times: salaries, dividends and pension. What a ripoff. Time to get rid of them
So, present person-in-the-street shareholders - including pension funds on their behalf - have to wait for the full capital value of the stock taken from them for thirty years, when many may be dead? Is that correct?
What happened after WW1 then? Industry was in just as parlous a state, as it was after the second one. The owners and shareholders were left to their devices, and rebuilt their industries to the point where they were healthy enough to stand up to the demands of WW2! What you seem to be saying is, buy these industries with empty promises, in full knowledge that you’re going to renege on the deal - that my friend, is criminal! And what happened to ALL the 1945 nationalised industries? Ruined, every one, because the people who knew how to run industry, and had done a brilliant job through six years of vicious war, were replaced by government boneheads, who did not! Nationalisation = no profit, it’s given to the workers - yay! No profit = no capital, the workers have got it - yay! No capital = no money for investment (turn to the taxpayer maybe?), who cares, we’re rich - yay! No investment = stagnation - err? Stagnation = ruin - oo er! That’s what happened to British industry the last time the government ran it, and you want to do it again?
Why not nationalise them and give the current board of directors a golden hand shake of all the debt they created when they were in charge
But richard says debt doesn't matter. Load it all up on the tax payer's credit card. But he does admit it results in future taxation. He doesn't admit that its taxation with no services. ie. Austerity.
@@adenwellsmith6908 credit card?
@adenwellsmith6908 I'm afraid your argument is rather thin being based on political and economic fashion rather than an examination of recent events.
If we look at the debts incurred by some of the water companies they have resulted from the businesses borrowing to pay their shareholders dividends, surely is not a form of capitalist austerity, ie cost without service?
In terms of taxation vs higher utility bills the consumer will still always end up paying. However, if examine the scheme of nationalisation described by Richard the costs are defined and the consumer is to an extent protected, unlike the free market where costs have increased without checks and balances and the consumer carries the risk. Remember that in some cases the utilities have local monopolies.
@@adenwellsmith6908 Richard never says debt doesn't matter. I think you're confusing an individual's debt with the National Debt, which ironically he's talking about here, as those bonds would increase it.
And you have to be trolling with the phrase "tax payer's credit card" on a Richard J Murphy video. You must know how empty and useless that lying phrase is.
@@iwantagoodnameplease National Debt
I'm talking about national debts. Plural.
On the its not a household, that doesn't work when the debts are inflation linked.
All Richard is proposing a wealth transfer from the unborn and young to pay for the mistakes of politicians.
The credit card is correct.
We should nationalise Rail just like in France, Italy, Spain and Germany.
Urgently nationalise Water.
Then turn to Gas and Electric.
Water and rail are already nationalised in Scotland
@@davidmcintyre8145 And Northern Ireland where it also wouldn't accept changing from rates to council tax and where Westminster had been interfering and trying to force privatisation of everything.
So how does that result in them not making a loss?
The European Union railways are also partly privatised. EU regulations require every public service to be open to tender i.e. privatisation. This is the reason the RMY is anti EU.
@@johnwright9372You are partly correct, but many EU governments still have a majority stake in the companies that run the ‘privatised’ railways.
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Thank you once again Richard for clarifying how the refusal to consider nationalisation is a political choice of the two major parties❤️👏
It’s not a political choice.
Labour can’t win power on a renationalisation ticket.
Richard conveniently forgets to mention issuing bonds increases govt debt which would be inflationary
He also forgets to mention most of it is in foreign ownership and under investor treaty protection
But hey you are welcome to fall for his oversimplified arguments
The problem was that the subsequent Tory governments refused to fund these industries adequately, instead they harped on and on that these industries were a drag on the economy. Thatcher !
Totally wong. Without even thinking you have just described why the government should not be involved in nationalising those industries when you said about them being a drag the economy which the Tory government would not fund. They were making losses very year and those industries were being propped up by the taxpayer.
The government does not and cannot fund anything without a cost to the taxpayer so why should any industry be funded by the taxpayer rather than the buyers of the product that the industry is producing at competitive cost ? If the cost is not competitive then that indicates inefficiencies in that industry so how far should that propping up of the industry actually go ?
@@Rob-fx2dwI agree with most of what you say but why can't we as a country benefit from the profits that the utilities are currently making?
@@badgoogle9938 You do in the form of effficiencies that the government run businesses dod not produce because there was no incentive to do so. When industries are nationalised there is no competition and the operators have no method of comparing prices or care about it because politics take the place of those financial incentives.
How do you think the government gets the money to fund these industries, Tax maybe,
@@malcky630 Yes. - Of course from taxes. But Richard Murphy either does not understand this or does not want to. Private investors get the money to invest from doing valued work that others have need or desire for and then have investment money they saved some of that income which they have gotten by not spending all of it. Private investment comes from producing and saving but government investment comes from taxing without having done any associated work or created anything to do so.
Privatising services such that they give a monopoly to a for-profit business always was IDIOTIC.
But in lieu of direct nationalisation, the government could simply cap the charges e.g. water companies can levy on the public, and fine them for every breach of regulations, until they go bankrupt.
As a bonus, prosecute all the managers of these companies for mismanagement. Funneling off billions in dividends while not doing necessary maintenance most certainly is mismanagement.
Water is a highly regulated industry. What you describe is a failure of the regulator which is the state.
@@adenwellsmith6908 It is. But the Tories have created a situation that is untenable. And your point is?
It would be an outrage if The People have to bail out these water companies, after all the billions they sluiced off to share holders.
Considering the current situation, I believe the government would have the right to prosecute these companies for endangering public health, to terminate their right to do business and to seize their infrastructure outright. That might be a third possible solution.
@@TheEvertw You are hung up on labels.
The question is what are the policies that have gone wrong?
Here its just the same as the banking "crisis". The regulation has failed.
@@TheEvertw So tell me about the Post Office, then we will get back to the water companies.
That's nationalised.
@@adenwellsmith6908 The usual Tory (neo-liberal, really) ploy to squander national services is to first massively under-fund them, and/or impose burdens on them that massively waste resources. Then they claim this is inherent to them being public services, and that privatization will lead to better and cheaper service. A few decades later, the opposite turns out to be the truth.
Whenever a for-profit company is given a monopoly position, its service will decline and prices will increase. That has been known for more than a century.
They are currently doing it with the NHS.
I have said for some time that if Atlee's government could afford nationalisation when the country's economy was in a dire state due to the war, Starmer can certainly afford it now.
Let's just ignore the Marshall Plan aid
Then aint now,
@@juliantheapostate8295 Britain didn't get Marshal plan aid, we were turned down when we asked for it
@@redf7209 Or Lend-LEase, same thing. We just finished paying it off a few years ago.
The only people who "can't afford it", are the denizens of The City of London. I find it funny and terrifying that the UK has an exclusive tax haven that is not subject to the laws of the UK, carved out of right in its capital city.
Pure logic from Richard. I do hope Reeves is watching.
Reeves understands exactly how money and the oligarchs work. She like all mainstream politicians in the uk is lying to us to keep the gravy train going for her city of London bankers and hedge fund chums on side. We are many they are few.
The irony is astounding.
This is why voting Labour is no mugs in the eye to the establishment. Choosing is an illusion, there is no choice right now
Labour or whoever would have to make it happen; ie there has to be a will.
You can be sure a huge backlash would be generated against the move from the usual forces of Capital and its media, including a “neutral” BBC.
It must be done anyway.
Labour are useless at selling ideas to the media.
Whether a service is nationalised or not, it's the same workers doing the actual jobs, The big difference is that a privatised service sends money to external - often overseas - businesses, rather than keeping it all for maintenance and development.
Nothing costs us anything. they just add naughts to a computer and Print the vouchers. They do not BORROW MONEY. That is the MYTH that we suffer to get robbed.
Thanks Richard - one to share!
Richard - What you have said is a great surprise to me as it will be to many others.
Why have the Conservatives never mentioned this?
Surely the annual interest paid to bond holders by the Government comes from the pot of money gathered in taxes?
Sadly, should the water companies and transport bere- privatised it would only be the English taxpayers who would have to pay any costs and for that reason UK government bonds would not be appropriate. or the three smaller UK countries would somehow have to be seriously compensated for sharing a burden they are not part of. Scotland, Northern Ireland and Wales own their own water and should not have to accept a share of an English debt. With Scotland and Northern Ireland still owning its own transport as well it sort of adds to the independence argument.
If by owning your own transport you mean ScotRail, then all of the infrastructure is owned and maintained by network rail so the costs are born just as much by English and other taxpayers as those of Scotland. That is one subject I have never seen raised in the indy debate. If Scotland went independent, it would have to fund all of its railways itself. Much of that railway outside the central belt is a public service and not highly used so maybe not profitable enough to survive without heavy subsidy IE taxpayer funding
The video says that the interest payments would be payable probably from the profits of the company, if run to make profits. If you run it to not make profit then that's a choice.
Basically it's a leveraged buyout, but by the government. Whether they make enough profit to cover the interest cost is a different matter.
@@user-it7lf7kk8m You have a valid point. Network Rail publication claims it invested £400 million over 5 years (£80 million per year) on track outside the central belt. Some of that will have been recuperated from the charges for use invoiced to the State owned Scots Rail, ie fares collected within Scotland. So how much of that comes from government subsidy (UK taxpayers) is never published. However, Scotland pays taxes (of all types) to Westminster. There is quite a difference between the taxes it remits (the larger) than the block grant it receives from Westminster. (the lesser). So let's say whatever Network Rail funding of the rail infrastructure that occurs, one could say that it's coming from Scottish fares and Scottish taxes retained by Westminster for central expenditure including subsidies. Whether or not huge Scottish State subsidies would be required is debatable (£80 million is less than £15 per capita). Northern Ireland, which owns both the service and the track and rolling stock, manages without Westminster rail subsidy and it survives from rail fare receipts which is not subject to the profit demands of private operating companies, and a small NI Transport Dept grant of £14 per capita.
@@lonyo5377 The current £1.3 billion grants/subsidy to water in England is away in excess of the 3% interest on Government Bonds with some giving a£25 billion market value to the water sector. Even that's probably excessive given the level of corporate debt(£80 billion) and the investment obligations (£100 billion) over the next 25 years. Nationalisation is a no-brainer.
I am not surprised by Labour's policy. I listened to Rachel Reeves being interviewed by Rory Stewart and Alistair Campbell. Rory asked if Labour would invest heavily out of new money as the US did under Biden through their Inflation Reduction Act. Reeves said that unlike the US dollar, sterling was not a reserve currency so couldn't. Both Stewart and Campbell remained silent, but this was news to me and probably almost everyone including the IMF which regards sterling as a reserve currency. The $ may be the most important reserve currency but Reeves didn't say that. Did she not know or is there something else going on?
Reeves is genuinely pig ignorant.
Scotland has managed to have some public ownership. Why can the test of the UK not manage this? Because of the Blue Tories and now the Red Tories!
Scotland is heavily subsidised by the English Taxpayer.
If the Jocks are being subsidised, why isn't the English electorate not demanding to get rid of the subsidy junkies.
Europe, don't want to be with another 27 countries. Scotland can't get them go. I wonder why
Croydon council tried it. How did that work? So did Nottingham.
@@adenwellsmith6908so you’re comparing a country with a council? Why don’t we compare London transport with the rest of the country . Transport in London fantastic,transport in the rest of the Country pure expensive Sh#te. Why is that ? Could it be to do with the fact that the rest of the country isrun by private companies.what about the water,gas etc all run by private companies! Wake up,smell the coffee infrastructure is better run by the state.
@@johnmulligan912 But how many times has TFL and Kahn been bailed out and for how much?
Well said!
It is tax payers money that is used, even if these companies are bought using bonds as the government has to pay the interest on them
Currently the government is paying about £90bn a year in debt interest payments, all which have to be funded by tax
Democratise the work place. Remove the owners and allow workers to own, make decisions and share or reinvest profits. Example: Mondragon Corporation.
National health? No tax payers contributions?
But - if your name is Richard Murphy then you turn your back on facts and put across a false narrative about what happened. He even gets the facts about government bonds wrong.
There were 15 Billion of UK war bonds sold in WW2 and now only something less than 1.9 Billion remain. So he is grossly wrong by almost ten fold about the bonds being paid out - Most of them have.
@@Rob-fx2dw war bonds were different to the bonds that Richard is talking about.
War bonds were literally to fund the war effort, they were made available during the war.
Government bonds from 1948 were used to fund infrastructure projects. Two completely different reasons and times for issuing them.
At no point did Richard mention war bonds.
@@kevbrown2532 O.K. People buy bonds for investment purposes. Governemnt sell them to fund spending. So who would believe except Richard Murphy and others who are frighfuly unable to analyse financial situations that bonds sold in 1948 or shortly after are not paid out by government despite the fact that their initial purchase was an investement that expected a return and interest as well.
Also where would the interest come from to pay purchasers apart from government which funds them with taxes.
@@kevbrown2532 Thank you for educating me on that one, I might have let @Rob throw the issue into some doubt there if you hadn't been able to correct his claim.
@@kevbrown2532 A bond is a bond is a bond. It's an I.O.U. that has to be paid for when it matures, or before. And the taxpayer does the paying - who else?
You've conveniently omitted the the additional layer of management (Mismanagement) that the government would impose and that would be paid for by the taxpayer. A new controlling board with local offices and employees for each industry.
Great clarification. I do worry about the Labour Party; what does it stand for and I hope the leadership has some Vision?🙏
Labour can’t win on a renationalisation platform and Richard is lying
The reason Labour don't know why nationalisation is the best thing for the country now is because Rupert Murdoch was only 14 years old in 1945...
How does that apply to Brown's PFI deals?
Of course there's always the small matter of how efficiently nationalised industries have tended to be run!
Yeah, cause they’re so much better now aren’t they?
The Germans are famous for running their railways well. Guess what? Deutsche Bahn is state owned.
@pete1942 yes, generally speaking they are
@@juliantheapostate8295 No, they’re not. We pay more to subsidise the rail companies than we ever did under nationalisation. All to protect the shareholders profits. Water companies are pumping raw sewage into our rivers and telling us we’ll have to pay double to sort it out, again, all to protect shareholder profits. It’s a literal sh*t show.
The railways in Spain are Nationalised. I can travel from Alicante to Madrid by high speed train for 10 Euros.
The Spanish taxpayers are subsidizing your journey. Isn't it obvious that SOMEONE has to paying for your journey?
@@sunshine10005 I think subsidising rail makes a lot of sense.
@@Purple_flower09 Not if you dont use the rail, but on the other hand more people should.
For sure you can, because somebody else pays for you, because its subsidized
Why not? Perhaps the repercussions from the most powerful asset owners who would resist bonds, along with the oligarch client media. Labour should grow sone cajones and work in the national interest. In short, the new government should listen to you, Richard, and a few others, like Gary Stevenson and the patriotic millionaires.
If we don't renew there contracts it would cost us nothing surly
That might work for railways with their franchising structure but not for the other utilities.. the franchising structure is controlled by government, so the whole railway structure is quasi governmental anyway.
What utter bollox. Sooner or later those bonds have to be paid back form the PUBLIC PURSE!
He said the businesses produced that money, which covered the interest and the bonds just got replaced with new ones. This is similar to how most countries never pay off debt but just the interest, as they agreed with the bank. The bonds I believe start at a current ceremony value set eg. £10,000. With inflation that is less and less valuable (ie can buy less). Like how having £5 was a months wages many years ago but most people have that just lying around
You didn't even listen to his explanation, did you? The bonds never have to be paid back. If the owners want their cash value, they just sell them on the open market - where everyone involved knows that, at term, they'll be redeemed with new bonds.
@@AlecBrady You have never looked at a bond market. The only time a bond realises its face value is when it it paid off by the government/tax-payer. Other than that bonds sold to market normally only realise a percentage of the face value depending upon what the national interest rates are at the time.
How much would these companies be worth without Govt. subsidies?
We don't know it now because it's economic gibberish.
Give over Richard. The Government should bring the role of Ofwat in-house, instruct the Water companies to reduce prices by 50%, they instantly go bust, we the people heroically buy them out of Administration for £1, and the debts are ignored because they belong to a deceased company. Simples
Want to know why our debt to GDP ratio is 104%?
Because people like Murphy think there's no downside to continually loading debt - which are what bonds are - onto the system.
You can't pay everything on the never never forever.
In 2022/23 we spent £111.5 bn [4% of GDP] in loan interest.
That's more than we are slated to spend this year on Education [£84.9bn] and approaching our big ticket item Health [£179.6bn].
There is a thing called opportunity cost - every penny we spend on interest is a penny we don't have to spend on anything else.
As for nationalised industries paying for themselves, British Rail - "the jewel in the crown" - was loss making .
it always required subsidy, just under £4bn immediately before privatisation.
Paper profits were generated by counting Government subsidy as "income" - creative accounting at it's finest - but as a business it would have gone bust.
My experience over the years working in nationalised industries was they are badly manage, too many employees for the available work and an excess cost to the taxpayer. In an 8 hour day only about 4 hours was actually worked. Investment was poor as whoever was chancellor of the exchequer was reluctant to spend taxes on them. Successive governments also used them to hide unemployment figures so they were massively overstaffed.
They also provided short term positive cash flow that could be diverted to other pet projects rather than long term investment back into the business that would not see positive results until well past the next election.
and what changed? 30% of money income straight to shareholders abroad, no investment in the company. Many national industries were overstaffed because govt kept killing orders at last minute, or putting orders on hold.
This is a massive bugbear of mine when debating people.
Frequently, they will resort to the "what's the cost to the taxpayer?" argument, which makes no sense. Nationalised assets create wellbeing in and of themselves.
Too many at least claim to know the price of everything, but few know the value of anything.
Tell Starmer! Print it in the Guardian, DEMAND this action as soon as Starmer enters No. 10.
The very idea of rewarding with bonds the spivs who ran up huge debts, eg Thames Water £11 billion debt and ran off with the dividends, bonuses and other benefits, or to the predatory bankers sticks in the craw.
I think you will find the largest shareholders are pension funds, so are you suggesting robbing pensioners is the answer to the nations problems?
Better regulation needed to stop these activities, even in private companies like boots etc . The companies get nothing out of the parasitism of the hedge funds. Regulators have been very poor for decades, hence sewage discharges just to name one.
@@pbainbridge5 Those pension funds seem to have been fine with asset-stripping the water companies (or, at least, managed decline while taking dividends that should have been invested in making the service better). They should certainly be paid market value for their shares, but they have allowed that market value to fall to a quarter of what they paid for them. When the true size of their debts is included, and they are required to do their jobs, eg processing sewage rather than dumping it in our waterways, those shares may fall even further, and the compensation they can expect will fall likewise. Isn't that how markets are supposed to work? So, isn't it the pension funds that are the robbers here?
Surely Kid Starver is not misleading us.
Corbyn Kid starver
@@RobinHarris-nf4yv Sorry what?
🤣🤣🤣
They don't know because they don't want to know.
This video ignores the fact that if the water industry was nationalised then a large proportion of the profits would be required to pay the interest on the government bonds used to buy the shareholders out. It wouldn't cover the investment required to fix the problems that have accumulated since privatisation. There would be two ways to fix the shortfall - put in taxpayers money, or put the water bills up. And the government would get the blame, rather than being able to blame the water companies.
It is quite clear to us that privatisation has not delivered what was promised
Well that depends on what promises and to whom they were made if you get my drift 🤪
Not necessarily an argument against privatisation, just the way it has progressed. Some eg the water utilities were supposed to use their freedoms to borrow money to invest in their infrastructure. What some did was buy foreign utilities while using our regulated industry to subsidise their overseas ventures. They were also allowed to close reservoirs(Thames water) for a quick housing profit and then expect other people to be compulsory purchased to build new ones when they find out they haven't enough water years later.
In general it is lax regulation of utilities that is the problem and all governments are guilty. The regulators deserve a good kicking, as they have allowed a lot of this stuff , and allowed the consumer to be abused. The regulators need to be customer oriented not industry oriented as is the case now. It is their lax regulation that has allowed such things as illegal sewage discharge, by not being hard enough all of the time. Utilities know they can get away with it because the regulators are soft.
You want telecoms to be renationalised? Why?
I agree but additionally:
1) Abolish Trusts (except for genuine cases of incapacity).
2) Abolish all UK tax havens and secrecy jurisdictions.
3) Institute a Land Value Tax + rent controls.
You can't hide land and its not an illiquid market.
Land accounts for much of the wealth extraction of the 1% from the 99%.
LVT is the truly the only tax they really fear.
Essential services should never be run 'for profit ' I.e privatised. But they were, because the Right saw the value in these industries/ services and profits for themselves. Profits were taken at the expense of necessary investment.
Don't delay, Labour, pull these essential services back under national ownership and use the 'profits' to make the necessary investments that these services will always need.
You are just plain wrong in your thinking.
As wrong as Richard Murphy when he says the war bonds have not been paid out. The reality is there were 15 billion of war bonds sold and now only 1.9 billion exist .
So he is ten fold wrong which is no surprise because he doesn't like mathematics which show he is wrong. You are wrong when you say profits were taken at the expense of necessary expenditure. The reality is there were very few profits but huge losses paid for by the taxpayer. Government does not have any income unless they collect taxes. There no magic tree that government gets tax from . They only have taxes in the short term and dond sales and in the long term only taxes to pay out bonds sold earlier to get the shortfall of money from earlier taxes.
Without profits there would be no private investment and that would be a disaster. Thre would also be no money for government from those profits.
Essentially, a government bond is a loan, usually long term, on which interest is paid. Politicians don’t like to talk about “borrowing” because economists like Milton Friedman said borrowing is always bad for the economy. That is of course a falsehood. Loans are not always bad. It depends what you borrow for and what the terms of the loan are. I don’t like using analogies with the household budget, but in this case, there is a useful one. If you borrow money to buy a house, it delivers an asset in which you can live and which, historically, the value has increased. If you borrow money to have two weeks in Barbados, it delivers joy for two weeks and misery for however long it takes to pay off the loan. I am a supporter of modern economic theory and I believe that we should borrow money through bond issues to nationalise water, energy, public transport. We should also borrow to increase the housing supply, not only through building new houses but by buying up the thousands of privately owned empty houses on our streets. We must invest in research and development, education, care and the NHS and ensure that we never have hungry children or poverty stricken pensioners. Borrowing is OK as long as you borrow to INVEST, not to fund day to day running costs.
Surely the annual interest paid on the bonds is paid by taxpayers' money?
Replay the video. He gives a very clear explanation that taxpayer's money is not involved. The interest is paid out of the surpluses (i.e. profits) from the business.
@@TheDaftPuddock Thankyou m'lud
@@TheDaftPuddock Our rail operators don't make a profit. Thames water only generates enough income to cover its current bond payments - it has not paid any dividends for 5 years, beyond moving money around to make bond payments. Most other nationalised companies make profits by being run by ruthless business people - how much do you think they would generate when run by MPs, civil servants and the unions?
I suspect a lot of folk are missing the inherent profit or benefit to renationalising key industries. If you nationalise there is no-one outside the public that scrapes off the profits. It gets reinvested back into the industry instead of lining shareholders pockets. That means infrastructure spending to improve waste water management, cheaper/better rail travel, etc… And you’re still able to fund the interest payments for the bonds.
If privatised industries can claim a fiscal profit then nationalised or public ownership versions can claim a societal one instead.
Just seize them at no cost and pass the debt on to the "owners" who have been treating them like an infinite money glitch rather than a business.
if they were fined and forced to meet standards they agreed, would the value of the business fall by much
I bet there's some clause in a contract somewhere that precludes the use of govt. bonds to purchase the businesses. It seems sometimes the govts abilities in negotiating contracts is actually quite poor. Look at PFI for example, negotiated under Tony Blair.
You are partly correct. PFIs started under John Major in 1992, were poorly negotiated then and PFI initiatives have been poorly instigated by different Governments, including Blair's and Cameron's, until 2018. That said at least some much needed new infrastructure was built - for example the state secondary school on our side of town had to be rebuilt and was - how many desperately dilapidated schools have been rebuilt in the last 6 years?
@adrianfielding4678 OK so my history let me down, but I think my principle stands. But how much over the odds did we pay for new School infrastructure?
I agree PFI is imperfect and there are many documented instances of business willingly stitching up Government ( thereby society at large). However, can you suggest a better model for the building of infrastructure like schools? (If any one has a better idea it would be great). I know folk who taught at the local school, before and after the PFI build, and they spoke of a dramatic lift in the moral and the motivation of both staff and pupils. How much would society and the economy be diminished in the long term, from neglecting basic education?
@adrianfielding4678 well exactly what sort of message does it send to children about our society if they have to go to school in semi derelict buildings?
Typical promises by government. Like the bonds, their word is worthless. Corrupt theives.
Thames Water is insolvent, it has massive debt and it's liabilities are enormous. How much is it worth? If the government capped bills and required them to make adequate investment in the system it's owners couldn't get rid of it fast enough.
It's shares are worth next to nothing so those could be taken over at a near zero cost. With ownership comes £14B of loans that would become the government's problem on day one and a need to make major capital investments well beyond what is already in their long term plans on the same day. Thames currently makes enough profit to cover the cost of the bonds and it's current investment plans, but beyond moving money around to cover bond payments has not paid shareholders for the last 5 years any dividends. So a UK government can nationalise the business for pennies, but will then have to fund the extra improvements and cover the resulting loan costs or put up the price charged to Thames users to cover the loan costs. At no point is this 'free'.
Nationalisation is the reason were in the mess we're in because under the eu industries that we rely on have been nationalised in their home countries because the private investment over here earns so much. 80% of our railways owned by eu nationalisation. Bus companies, water companies, power companies. Soon to be the nhs and soon to be the air we breathe.
Or we could rationalise without compensation because they've been bleeding us dry and letting those companies deteriorate criminally
Nationalisation was a disaster in Britain and everywhere else it was tried. As for borrowing money - the interest and the principle has to be paid taxpayers.
The principal never has to be paid - as you'd understand if you'd listened to his explanation. And the interest is at a fixed rate on a fixed amount, which is being reduced in value by inflation (exactly the same as if they'd been given cash). The interest being paid, therefore, is a kind of slowly reducing rent paid on the asset, which the water company (say) can't just increase to give their share-holders a bigger pay-day. If the recipient of the bonds doesn't like the deal, and just wants the cash value, they can sell them on the bond market.
@@AlecBrady Mr Brady - you are playing games. In reality nationalisation is a disaster. And borrowing money, whilst saying "I will never have to pay it back", is the road to the breakdown of the financial and monetary system - which, sadly, seems to be inevitable now.
You are a brilliant communicator. And that's coming from a teacher.
One argument I've seen repeated over the years, is that nationalisation would lead to outside investors becoming afraid of a similar situation happening to those business they would be investing in, which would stifle a lucrative investment channel. We are seeing utilities being bled dry by high level incompetence. The CEO's only task is to drive up share value. The ultimate consequences being over inflation costs being passed onto the end user. In cases such as water there is no "switching capability", so you are stuck with the local water/sewage supplier and whatever price hike they can get the utterly useless regulator to agree to .....
Nationalisation paid for by 30year/30year/30year . . . government bonds. - After that explanation why am I suddenly thinking of the Monty Python 'Never Pay' insurance policy? 🤔🤑
Considering pretty much everything is owned by foreign companies, I can’t see them going for that.
The private sector is more efficient than the public sector. Always. When you nationalize an industry, they have no competition and therefore no need to perform well so they don't. Who pays then?
We don’t even have to buy them , just set up British water,gas,electric and invite people to switch 😮😊
Could it be that politicians and the media which is run by those who generally support privatisation hold these bonds so would lose out financially if they were nationalised?
How did we sell them again then?
So how does government pay the interest payments on the loans / bonds? UK general government gross debt is over £2.2 Trillion, equivalent to more than 104% of GDP. Cost: *£110bn* in debt interest payments in 2023. We might want to recall what a cock-up the Truss era made of uncosted borrowing too.
I was working at the Stock Exchange when the steel industry was nationalised in the sixties. All the government did was pay the shareholders the value of their shares in gilt edged loans, due for repayment in 30 years or more. I didn't cost the tax payer a penny. The share holders could hold onto their gilt edged stocks or sell them on the open market. If the Labour party say they can't afford to nationalise the water companies or the power companies because they don't have the cash, it's rubbish. They never paid in cash but in bonds dated years ahead.
Thankyou.
This means so much to so many people, if only they knew....
Labour hoisted by their own petard
WRONG
Labour can’t win on a renationalisation ticket
In any case Richard is lying, it can’t be done for free
So money can just appear out of thin air that can be spent consequence free? How exciting
So we’re still paying interest on the original bonds even after we sold them off?
When the state sells a bond it is borrowing money. Hence to pay the principle and the interest.
Why don't you sell of your mortgage? Does that mean you don't have to pay the debt? Who would buy your debt from you?
Surely this is essentially the same as running up more national debt? Although it is arguably worth it if we're getting something valuable in return. It's certainly more reasonable than the numerous suggestions I've seen to simply expropriate the companies and default on the bonds. That would scare off anyone from investing in British infrastructure ever again.
SDP policy for Water.
It should be even cheaper than you think. The water companies can be regulated and fined out of profit and made worthless. Trains are easy, just don’t renew contracts.
This is the shell-game that sovereign currency nations have played for hundreds of years, and it works right up until the owner-class is allowed, by the government that is supposed to represent all the people, to extract excessive profits beyond what the service can generate.
Every Pound, Euro, or USD in existence today began began as a promise to pay that, through inflation, is reduced to nothing. The recipients get paid every year or quarter for decades in exchange for holding the bond as the value of the original principle is eaten away to nothing over time.
Two essential services I rarely ever hear mentioned as candidates for nationalization are banking and insurance, which are 2/3 of the foundation (protection/defense is the third and generates no direct revenue) that any civilization is built on.
The problem comes afterwards for investment and running costs, hence the railway system became run down, similarly the water industry etc. The nationalised industries are never given enough funds to keep developing and even adequate. It’s not about the initial costs.
We still subsidise them anyway
@@redf7209 Yes but they were always were, and will always be, underfunded. Politics often got in the way of the requirements for these industries as the chancellor will only allocate what they feel they can justify, not really looking at what the industry requires. We have forgotten what these nationalised industries used to be like. Many people who worked in them just didn’t do a decent job, they seemed to feel they were secure and who needs to make a profit - normally the large nationalised industries used to be in the red as far as I can remember, possibly with the exception of telecoms. I used to feel we should have nationalised industries, but I had to face the facts that governments cannot run companies and many workers in those get disillusioned with how they are run and then are no longer conscientious. I have not heard anything that makes me believe lessons have been learned and they will be ran any better. Just to say that we will fund them is short sighted and, frankly, unbelievable.
Good point. If the water industry goes broke as they have failed the government could buy them out if administration for pence. There would be a huge burden to pay to remedy the damage done by the previous owners but that would be our choice.
Perhaps they're saying nothing so the shares don't suddenly get artificially inflated.....?
The Tory privatisation mantra guarantees profits for private train operating companies no matter how poor the services.
These train operating companies are usually owned by European nationalised rail companies so the taxpayer is giving them money to invest in their own railways. E.g Italian railways ( Avanti )
I have been saying this all along. Force the water companies as an example to provide clean water and stop pumping sewage into the sea, rivers and lakes. If they can't then fine them the real amount it costs to fix the problems. This will force the real value of these companies down to where they should be then buy the companies using bonds at this vale
Problem is the state pensions that have to be paid to state employees
No more than paying for pensions of any employees, its all just part of the wage bill. It works slightly different for the state employees because instead of gambling funds ( that are boosted by taxpayer money) on stocks and bonds to crate a pension income, the funds are used to avoid state borrowing so there is a definite return based on interest rates that have been saved by the state. The state saves more money than it pays out so it actually short changes the employees. The pensions of state employees are based on incomes that do not increase in line with inflation so they are small
that departure point though...meeting the needs of the people of this country, and every other, with everything nationalised for that reason.
Which of course nationalidsation doesn't. It meets the needs of those who work in them.
@@nicks40 go away. learn something before interacting with me
@@abody499 British Rail, British Leyland, National Coal Board ...
@@nicks40 what are ye even talking about yankee oscar uniform delta uniform mike bravo foxtrot uniform charlie kilo
@@abody499 It's called 'producer capture' - those that work in the nationalised industry use the State to alter their own terms of trade in their own favour. At the expense of the rest of us.
Would appreciate your analysis of Reform UKs ideas re public utilities. 50/50 ownership split between public and UK pension funds.
Ask Scotland how their Calmac Ferry Fiasco is getting on and tell me it’s working….
Thank you so much for that explanation why haven’t I heard that anywhere else? I’m now even crosser that my water is owned by the French government and my Metro by the German government and my gas by god alone knows who. Are our government so incompetent that every other EU government can make utilities pay but the UK government can’t.
1. That's not how bonds work.
2. That's not how credit ratings work.
3. That's not the fiscal picture in 1976.
4. That's not the context now - on book and OBS liabilities are 200% of GDP.
5. Nationalisation is certainly a matter of political economy. It's also one of capacity to deliver, institutions and quality. The UK would struggle to deliver the services under government ownership that are currently in private ownership.
The markets own the country. Nationalisation runs the risk of kicking off a wider response from the markets. Look what happened to Truss. She wasn't brought down by the tories she was brought down by market movement. Starmer won't do anything that spooks investors. This sadly is the state of our democracy. Having said that, however, I believe there is scope for selective nationalisation like water and rail simply because they are operating outside their licence conditions on performance.
Thank you for that. I had no idea that was the case.
It isn’t true
@@RobinHarris-nf4yv Can you prove that?
@@johnpritchard9753
Issuing govt bonds is same as QE, it would raise interest rates
And most of the ownership is in foreign hands and subject to investor treaty protections, so there would be legal challenges.
Richard Murphy makes lots of false arguments, he is a tax advisor he should be ashamed
the issue here is, that you COULD say, that the government intented to pay the owners after 30 years then, but you plan now blatantly has absolutely no intention of ever paying them. can you spot the difference? ...and why should the government stop there? in three years time - after nationalising rail, water etc. - they decide that now that they are going to nationalise it companies.. giving the owners a worthless piece of paper in return... and then they nationalise supermarkets...why shouldnt they? it doesnt cost anything, does it?
The privatised utilities have been underinvesting and charging higher bills or fares in the case of rail franchises.
The Regulators should do their job properly and strictly enforce the dismal performance measures of the privatised utilities and infrastructure providers with substantial fines failing to performance. They will then be unable to pay dividends and/or will have to borrow to bring the services up to scratch and the value of the shares will reduce as a consequence.
Then the government should nationalise at true market value not an inflated one of an asset stripped company.
Firstly, paying them on bonds is still costing money, even if it's in the form of bonds. Secondly, why would the current owners, who are making more than 3% by loading up those industries with debt and paying themselves huge dividends, and via sale leaseback schemes? Thirdly, the value of government bonds varies as lot, depending on the confidence in the government which issues them.
I can remember when lots of stuff was owned by the government in the 1970s. Absolute bloody disaster. However the government should be in charge of stategic assests like water and energy, it just needs to be run properly. Not sure if this would be possible considering how well they run the NHS.
The NHS was very well-run when I worked there - well, until about 2010. After that there was a definite down-turn in investment, previous improvement plans were shelved, community facilities started to be sold-off because we no longer had the funds to keep them open. This was not caused by poor money-management or immigration or anything like that: it was caused by austerity.
And health care is a strategic asset. We see how reduced access to care leads to longer waiting lists, people unable to return to work - or unable to work as effectively - leading to steadily falling average productivity.
A similar dynamic applies to water and railways. We need them to operate well for the economy as a whole to benefit. We should nationalise, yes; but we should also ensure that the experts in those industries - the doctors, nurses, pharmacists, cleaners, builders and many others in the NHS, and comparable positions in other services - have real influence over how the services are delivered and developed, rather than letting professional managers, parachuted in from outside, trim and adjust something they don't properly understand.
I agree . An influx of people hasn't helped.
Perpetual free money by issuing bonds, what could possibly go wrong. A funny little rant from Richard.
Well said, let’s hope Starmer watches this!
Thank you Professor Murphy for that explanation, I was unaware that was how post-war nationalisation was undertaken, although I fear the, "armchair economists", in these comments will no doubt be selective in their listening and criticism of the points you raised.
You mean selective like Richard Murphy is being
@@RobinHarris-nf4yv No, not like that at all.
@@joeegg90 Murphy is being selective.
You can’t compare nationalisation post war where
A) the businesses being nationalised weren’t making money
B) the businesses were mostly British owned, not foreign sovereign wealth funds like they are now
C) he doesn’t mention the inevitable legal challenges due to,Investor Treaty Protection contracts
D) he doesn’t mention the impact on public finance raising huge amounts of bonds
E) he doesn’t mention that shares in these public funds are held in pension funds held by millions of voters
@@RobinHarris-nf4yv I am not comparing anything. Professor Murphy described how, "taxpayers money", was not used in post-war nationalisation and that bonds were used to pay for the industries nationalised.
@@RobinHarris-nf4yv So shares are held in pension funds. So what? They will be properly compensated for the compulsory purchase of their shares. They won't lose out. They just won't be able to asset-strip a key infrastructure any more.
The answer is Mrs Thatcher. She said that the state cannot spend more than it gets in revenue (taxes etc). She was wrong, but as the daughter of a shop keeper, what do you expect. If it’s good enough for daddies shop it must be good enough for the nation, right? Wrong. She adopted a simple answer to a complex problem which of course was wrong. I have often wondered how bankrupt Britain (1946) was able to do so much. Now I know. Thanks.
There were years of austerity after the war. The "simplest answer to a complex problem" is the magic money tree.
@@user-xu5vl5th9n Austerity like setting up the NHS?
Maggie was cleverly setting up essential industries for her mates to profit from. As always, the Tories look to make money from national services that have been paid for by our taxes. Reaganism/Thatcherism 101
Thatcher knew perfectly well that she was just deceiving the voters.
British steel was losing half a million a day , which is why Maggie opted to get it off the books. That is half a million a day that can't be spent on anything else like the NHS or other services. So unless you get some special benefit from spending that extra money, you chop whatever is causing the money leak. Many of the other public services such as the NCB (coal) had similar problems and were bedevilled by union led strike action which further eroded profitability.
Eventually you have to decide whether you are going to keep paying for those losses with taxpayers money. You may have a reason to do it eg strategic industries, but you have to be clear as to why you are doing it and be prepared to actively control those costs
Excellent suggestion. Also you will be surprised to know that some utility companies have small or even no shareholders and these shareholders are also working as managers hence paid three times: salaries, dividends and pension. What a ripoff. Time to get rid of them
Been there , done that ,got the ragged tee shirt .
So, present person-in-the-street shareholders - including pension funds on their behalf - have to wait for the full capital value of the stock taken from them for thirty years, when many may be dead? Is that correct?
No.If they want to convert the bond into its value in sterling or dollars or euros, they can go to the bond traders and sell it.
Basic question:
Are we currently being ripped off? (In general)
if so, Would (could) nationalisation stop it?
What happened after WW1 then? Industry was in just as parlous a state, as it was after the second one. The owners and shareholders were left to their devices, and rebuilt their industries to the point where they were healthy enough to stand up to the demands of WW2!
What you seem to be saying is, buy these industries with empty promises, in full knowledge that you’re going to renege on the deal - that my friend, is criminal!
And what happened to ALL the 1945 nationalised industries? Ruined, every one, because the people who knew how to run industry, and had done a brilliant job through six years of vicious war, were replaced by government boneheads, who did not!
Nationalisation = no profit, it’s given to the workers - yay!
No profit = no capital, the workers have got it - yay!
No capital = no money for investment (turn to the taxpayer maybe?), who cares, we’re rich - yay!
No investment = stagnation - err?
Stagnation = ruin - oo er!
That’s what happened to British industry the last time the government ran it, and you want to do it again?