It’s time to halt the UK’s great public asset boot sale and build Britain’s first social wealth fund
Just minutes before Parliament shut down for the Easter Holidays the government published its long expected plans to sell-off the Land Registry. Just one part of the great privatisation juggernaut, the government will have raised close to £32bn in revenue from the great sell-off this financial year alone.
Ministers claim privatisation is necessary to help pay down the deficit. Yet it makes little sense to unload long term capital assets to finance a temporary revenue gap. Such sales offer a one-off windfall - the family silver can only be sold once. They mean the permanent loss of collectively owned public assets, many highly profitable, built up over many decades, and the end of the stream of income delivered over time. In recent years, the land registry has achieved annual surpluses of up to £100m, thus delivering regular dividends to the government.
The mass selling of state assets is a classic case of jam-today politics, a short-term strategy that will be paid for over and over again by subsequent generations. Although such sales can reduce the cash debt at a given moment, they aggravate the problem of public indebtedness as the asset base which once helped to balance the debt shrinks away. At the current pace, Britain will soon be all debt and no assets.
Instead of being sold off and the proceeds disappearing into the Treasury black hole, the silver should be kept in the family’s hands. As argued in a new book - A Sharing Economy - all publicly owned commercial assets, land, property and public companies, should be brought together into a single ring-fenced fund to form a giant pool of commonly held wealth.
Such a public ownership fund – Britain’s first social wealth – and managed independently of the state, would provide a third way between nationalization and privatisation. The returns from the better management of such assets could then be used to fund a range of public projects, including social investment, that benefit society as a whole.
If instead of launching the great privatisation programme from the mid-980s, Britain had then created such a fund, it would have grown to represent a significant part of the economy today, providing a powerful balance to the entrenchment of private capital, while making the economy more resilient.
Such an idea is tried and tested. Fifteen nations - in Europe, Asia and the Middle East – have adopted such an approach. Singapore’s public holding company, Temasek, was established in 1974. Managing all state owned commercial assets apart from property, it is worth more than half the country’s GDP, and has achieved a higher annual return than the private sector. Similar funds in Europe, such as the Austrian Fund, ÖIAG, set up in the 1970s, has also performed better than the national stock market, and pays annual dividends to the government.
Social wealth funds - collectively held financial funds, created from the pooling of existing resources and fully owned by the public – are a potentially powerful new tool in the progressive policy armoury. They would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not to serve, as now, the interests of the few. By socialising a proportion of capital ownership, they would tackle the root cause of Britain’s rising inequality – the concentration of private ownership - and ensure a more even spread of national wealth between generations.
Britain could have created such a fund in the 1980s by using some of the gains from the bonanza of North Sea oil, but instead used the proceeds to cut taxes and boost current consumption. It is increasingly accepted that failing to grab this golden and one-off opportunity, as many other countries from Alaska to Norway have done with their own natural resources, was a huge historic policy error.
It is time Britain stopped playing short-sighted politics with its publicly owned assets. We should follow the example set by other nations to establish a social wealth fund using the opportunity offered by what remains of Britain’s still large portfolio of publicly owned national wealth.