Thursday, March 22, 2007

Selling The Silver

"First of all the Georgian silver goes. And then all that nice furniture that used to be in the salon. Then the Canalettos go."

Gordo updated us yesterday on the family silver sale. And he's found a whole new way of describing it:

"The focus of this new approach is the development of a unique Asset Management Strategy (AMS) for each department. These will be published following the conclusion of the 2007 Comprehensive Spending Review, increasing transparency and accountability in the management of the Government’s assets.
Departments’ AMS will demonstrate that they have in place an effective management framework, which actively maximises the value of their existing assets and provides a strategic context for future investments."

So much less vulgar than admitting you've blown the lot, and you're now so skint you're flogging grandmama's diamonds.
So what are the numbers?
In the pre-Budget report just three months ago, he was planning to raise £18bn between now and 2011. Now, that's quite literally doubled, to £36bn.
The reason is obvious: he's blown the lot and he's now so skint...
Let's remind ourselves how asset sales help him.
Obviously they raise money. Which he desperately needs because going forward, current expenditure is £5bn pa higher in this Budget compared to last year.
But they also do something else. Although an asset sale reduces the government's net wealth in exactly the same way as borrowing, it doesn't enter into the official calculation of the government's "net indebtedness". Which means that for the purposes of those infamous Golden Rules, they don't count against his "sustainable debt" target.
And yesterday he banged on again about how he is a paragon of fiscal virtue: "This contrasts with a debt level of 44 per cent when we came to power. But we have both kept debt low and at the same time more than doubled capital investment in our schools, hospitals and infrastructure from just £18 billion a year in 1997 to this year £43 billion." etc, etc, etc
But what we need to remember is not only does he have all those undeclared off-balance sheet debts (£100bn PFI debt etc), by selling the Canelettos he's making us just as poor as he would by borrowing more. There is no economically meaningful difference.
And there's another thing. As we know, when he borrows in the gilt market, he's getting money on the cheapest terms available. But when he borrows via PFI he pays a premium to cover the costs of various "intermediaries".
Our experience of asset sales is just as dismal. From the great utilities giveaways of the 1980s, through to the disgraceful loss of £300m on Qinetiq, taxpayers have generally lost out because cash pressed politicos have sold too cheap (it's the exact counterpart of simple shopping).
So we should look very carefully at the price we get for these sale items, such as the £6bn sale from the student loan book. We need to be given chapter and verse.
And yes, I am aware of that famous auction of 3G licences, when some game theoretic prof managed to cream the mobile phone companies on our behalf. But that was at the very height of the bubble: we're unlikely to strike that lucky again.
Indeed, over at the excellent Telebusillis , Keith McMahon points out that the extra spectrum Gordo is now planning to flog may not be nearly as valuable as he fondly imagines:
"Basically this is the refarming of spectrum used predominately by the MOD and other agencies, but the trouble is that this spectrum is not in "internationally" recognised bands and therefore will be worth a lot less than for instance: gsm, 3g, uhf, vhf, l-band spectrum."
Best guess is that to make the sales target Gordo's successor may need to bundle in the Rembrandts as well.
Which does not bode at all well for taxpayer value.

1 comment:

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