Eurostar sell-off is another example of short-term gain over long-term security

It is a reckless and short-sighted decision which, yet once more, puts short-term gain over long-term economic security

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The Independent Online

On Monday, George Osborne announced that the government is to sell off its 40 per cent stake in Eurostar before the General Election, raising up to £300m.

This must be wrong. It is a reckless and short-sighted decision which, yet once more, puts short-term gain over long-term income and national economic security.

Successive UK governments in recent decades have made it their goal to sell off as many British assets as possible. They have sold airports, sea ports and power stations, rail franchises and water companies.

The Coalition recently tried to sell off the Land Registry and in 2012 they toyed with the idea of selling off our forests. Both of these ideas were ditched after huge public outcries.

 They thought about selling the Royal Mint but decided it would not bring in enough money. In addition, many great British businesses have been sold into foreign hands.

Chemical, engineering and electronic companies, merchant banks, an iconic chocolate company – Cadbury – wind farms, huge swathes of expensive housing and thousands of other high-value assets have all disappeared into foreign ownership.

 

No other country in the world has allowed this sort of thing to happen on this scale. So why has it occurred in Britain? First, until 1999, when it was abolished, the Monopolies and Mergers Commission was required to consider whether takeovers satisfied a general public interest test.

The organisation which replaced it after 1999, the Competition Commission, had no such remit. It was only concerned with whether acquisitions would weaken competition.

This left the UK with no process for reviewing whether the wider interests of the British economy were likely to be compromised by the purchase by foreign interests of UK companies and other assets.

In addition, we had a blind faith in the market. If there were buyers for British companies why not sell to them? Did it matter who owned UK companies provided they were well run?

Third, there were vast sums of money to be made arranging the takeover deals. It seems that 3 per cent was about the average fees and commissions charged on all the take-overs which have taken place recently.

The City – for most of the early years of the current century at the zenith of its political influence – must have earned about £40bn from the sale of UK assets during the 2000s alone.

Does it matter that we continue to lose ownership and control of such a large proportion of our national assets? Yes, it makes a huge difference.  Selling off assets creates a massive flow of capital receipts into the country.

This keeps sterling much too strong for our manufacturers to compete in world markets, while ensuring that the UK loses control over swathes of the companies operating here.

No wonder that the size of our manufacturing base as a percentage of our national income has fallen so catastrophically and our trade deficit has risen exponentially. We are a country paying our way by selling the family silver.

Between 2000 and 2010, our total trade deficit was £286bn, but during the same decade the value of our net sales of portfolio assets was much larger than this – at £615bn.

None of this money was spent on direct investment in plant, machinery and industrial buildings, which would have strengthened our economy.

Portfolio assets are no more than titles to ownership – mostly shares - so selling these to foreign owners involved no physical investment in the UK, just loss of ownership and control on a grand scale.

When a British company is sold to a foreign owner, the flow of future profits goes to the new owner. Yes, of course there is a temporary influx of funds into the UK as the assets are sold but we automatically lose the right both to future profitability and to any growth in value of assets.

There is a very unfortunate parallel here between the way we treated North Sea oil from the 1970s onwards and the huge sale of UK portfolio assets in the 2000s. In both cases the proceeds were used to pay for imports we could not otherwise have afforded while the opportunities for alternative future benefits, had the proceeds been used more sensibly, were lost.

Eurostar is a company in profit. Its sale will only make a small dent in the £1,435bn public sector net debt and it will not reduce the rate at which this debt is accumulating.

Eurostar is an important national asset and one which we should cherish. If we do sell off our shareholding in the company, along with so much else, this will be yet another step towards our inability to control our future which I believe future generations will live to regret.  

John Mills is Chairman and founder of JML, the consumer goods brand and TV shopping channel. A Labour Party activist and donor, he chairs The Pound Campaign and Labour for a Referendum, and co-chairs Business for Britain.

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