Giving away the family silver
When the Thatcher Government began privatising the nationalised industries, the former prime minister Harold MacMillan is erroneously alleged to have likened the policy to selling the family silver. Whether or not one believes that the commanding heights of the economy should be in public or private ownership, however, one would hope that a decision by a government to dispose of something would at least see them receiving a return on their investment.
So a recent story in The Mirror leaves me at a bit of a loss. Apparently,
Gordon Brown could turn Britain’s nationalised banks back into building societies.
The Government wants to offload the two banks it wholly owns – Northern Rock and Bradford & Bingley – once the market conditions are right.
But ministers may insist any sale is conditional on them being turned into mutually-owned societies.
The plan has the backing of Labour MP John McFall, chairman of the Treasury select committee and a close Brown ally, and 29 more who are also Cooperative Party members.
They cite mutually owned societies as a “safer business model” who have been the main survivors of the credit crunch as they are owned by customers and so took fewer risks.
Now a mutual like the Nationwide could be given first refusal if and when Northern Rock goes on sale.
Forgive me if I am missing something, but are not building societies owned by investors, with their deposits and withdrawals technically being purchases and sales of shares in a company that inter alia provides a free share-dealing service in its own equity?
If this is true, I am not clear how the government can “turn Britain’s nationalised banks back into building societies” without giving them away. Shares would have to be given to all the depositors in proportion to their deposits. Nationwide could not buy Bradford & Bingley unless they effectively turned the B&B deposits/shares into Nationwide deposits/shares.
In theory, the Government could also hold an IPO in which further shares were sold, but who would buy into this IPO when all they were getting was a building society account?
This suggestion has all the marks of a daft idea cobbled together by mutualists who have not thought through what they are proposing. Either that or the Labour government is so sure that it is doomed that it is planning to rob its successor of any assets to privatise, thus exacerbating the crisis in the public finances to the point where it destroys the next government.
July 28th, 2009 at 7:30 am
Not sure the Cooperative Party are mutualists – do they advocate the abolishment of legal impediment to banking? What are their views on property? Not much like Proudhon or Tucker/Ingalls and more state capitalist given their association with Labour.
Frankly, given the manner in which banking rests so heavily upon state privilege I don’t see how this is any different to any other way of doing things.
I also fail to see why those who hold accounts with these banks should not receive ownership – they have the best claim to ownership (although announcing it in advance like this is not the best plan). Its also far more equitable than selling it to your favoured banking interest.
July 28th, 2009 at 11:44 am
“Forgive me if I am missing something, but are not building societies owned by investors, with their deposits and withdrawals technically being purchases and sales of shares in a company that inter alia provides a free share-dealing service in its own equity?”
Though savings accounts are referred to as “shares”, the accounts always show savings balances as liabilities – which is what they are given that they are withdrawable. The only equity on the accounts of building societies are the reserves.
July 28th, 2009 at 12:05 pm
Tristan,
The only reason that the state owns these banks in the first place is that it forced the banks to transfer part- or whole-ownership from shareholders to the state.
As well as being a seizure of private property by the state, this injected taxpayers money into the banks for which taxpayers should expect a return.
If the state now transfers ownership to depositors, it will effectively have taken private property from the original shareholders and given it to a new set of shareholders (the current depositors) at the expense of taxpayers.
I fail to understand how you can justify that.
July 29th, 2009 at 7:46 pm
the former prime minister Harold MacMillan is erroneously alleged to have likened the policy to selling the family silver.
There is no “erroneously” about it. He may not have used those exact words (I think it was something like: “First the Georgian silver goes … finally the Canalettos”), but there is no doubt that Macmillan devoted his speech to an attack on a disposal of national assets at knock-down prices.
July 30th, 2009 at 3:25 pm
Thank you, Frank.
However, MacMillan later said “I was, I am afraid, misunderstood. As a Conservative, I am naturally in favour of returning into private ownership and private management all those means of production and distribution which are now controlled by state capitalism. I am sure they will be more efficient. What I ventured to question was the using of these huge sums as if they were income.” (Hansard, House of Lords, 5th series, vol. 468, cols. 390-1)
So I think his complaint was that the money was spent by government as revenue rather than being returned to the public. Somewhat different from “an attack on a disposal of national (sic.) assets”, which is how it is often portrayed.