Monday, 25 April 2016

Decades of sell-offs leave Britain unable to pay its way in the world

Port Talbot Steelworks: photo by Grubb at English Wikipedia
 (Transferred from en.wikipedia to Commons.)
 [Public domain], via Wikimedia Commons
The British government is chucking in some money to rescue UK steel production not as a coherent national investment but to avoid the embarrassment of losing the steel industry on its watch. The moment it gets the chance to sell its new shares it will do so. The labour movement is happy to see thousands of jobs saved by this part-nationalisation, so it won't rock the boat.

The episode illustrates the lack of a political strategy for rebuilding Britain's productive capacity. George Osborne won't tell you this, but the deficit that really matters is not in the government's finances, but those of the nation itself. Last year's balance of payments reveals that Britain spent £100 billion more than it earned. Unless we find a way to pay our way in the world, we're headed into yet more serious trouble.

Nearly forty years of selling off publicly-owned utilities, nationalised industries, national infrastructure and even basic government services means that Britain's capacity to retain its own wealth is severely depleted. Much lauded “foreign investors” come to Britain not out of goodwill but to enrich themselves, buying up customers and income streams that will pay out long into the future. Most UK households now buy their electricity from French, German and Spanish companies. As those profits leave the country they need to be replaced, so the government desperately looks for new things to sell.

Productive activities have, since the 'eighties, been steadily replaced in the UK economy by so-called business services - transactional activities such as  advertising, legal work, insurance, finance, accountancy, investment banking, management consultancy, most of which exist not to create new wealth but to move it around.

Britain is fortunate to be able to sell these services abroad, since they go some way to plugging what would otherwise be an astronomical trade gap, but relying upon them makes us vulnerable. Increasingly the large emerging economies will develop these skills for themselves. If they stop importing our food we can, at least, eat it our selves, while importing less. But financial services - I don't think so!

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