Friday, February 10, 2006


Another Labour Bung to Big Business

While everyone is naturally watching Labour’s electoral disaster this morning, it’s worth keeping an eye on the markets too. A Labour privatisation has just floated, and the real question isn’t ‘why has it been privatised’ but ‘why is a Labour privatisation so much more of a bung to big business than a Tory one?’ The Conservatives famously undervalued many public companies they sold off (getting taxpayers to subsidise private trading), but at least they attempted to get a few more people to buy shares. With Qinetiq, Labour only offered shares to ordinary people at the last minute, under protest.

It’s difficult not to conclude that New Labour’s starry-eyed attachment to big business is responsible for their intention to pass off these shares just to the few, not the many (to coin a phrase). First they sold off part of the military research group Qinetiq to the private equity firm Carlyle, famously good for John Major and the Bin Laden family (as seen in Fahrenheit 911). According to the BBC this morning, they stand to make a 780% profit, and astoundingly John Reid thinks the National Audit Office shouldn’t be concerned that taxpayers may not necessarily have got the best deal. I’m all in favour of competition – but subsidised knock-down prices to assist large companies are surely the opposite of that.

I wouldn’t be in the least surprised if a private company did more impressive and innovative things with Qinetiq than the Ministry of Defence managed, though the government has glossed over any issues of putting defence into extragovernmental hands. But it’s simply laughable when Dr Reid talks up the ‘high risk’ of this sort of defence company in a post 9/11 world. It’s difficult to think of better bets from government sell-offs in a time of war and paranoia. That makes the fact that Labour attempted to restrict the flotation to big institutions and only allowed the stockbrokers for small investors a look in about a week before the deadline all the more shocking. Wouldn’t it have been simpler to just say to big business, “Please have some money,” and cut out all the fuss of running a privatisation?

I think there is a grain of truth in the claim that Carlyle have added value to Qinetiq. How much value is of course the $6million question.

For defence companies to make money they need to sell to the US government, and to do that the need to be 'American' companies with friends in the Whitehouse.

This is the value added - not hard work, innovation or efficiency, but getting round US protectionism.

This windfall gain for Carlyle is therefore actually a cost to the US taxpayer, paying the price of US mercantilism. They should be even more angry about it than we are.
Post a Comment

Links to this post:

Create a Link

<< Home
Newer›  ‹Older

This page is powered by Blogger. Isn't yours?