The taxpayer’s £19bn private sector bill

9 06 2010

Listen to the average right-wing headbanger, and you’d think that the entire £650 billion national government spending went on a Brazilian dance troupe in Hackney.

Examples of dubious public sector initiatives are widely reported. But how much public money is handed straight to private companies?

I’m not talking about straightforward purchasing of paperclips and the like, necessities which can only and have only ever been provided by the private sector.

But how much do we spend on subsidies for private companies that are supposed to be profitable by themselves? How much is spent on PFI deals that used to be handled in-house? How much are we blowing on management consultants that we managed to do without in the past?

Last week’s publication of the COINS database of government spending for 2009/10 has some of the answers.

First, let’s take a look at government subsidies for the private sector. The first thing that sticks out is the £1.44bn the Department for Transport dished out last year, almost all of it on rail franchising and the ‘Bus Service Operators Grant’, which covers some of the fuel excise duty incurred by local bus operators.

That’s not all that went on transport – large chunks of the £880m handed out by the Scottish government and the £285m from the Welsh Assembly government were also spent on rail, air and bus services.

Beyond that, we had HMRC spending £885m on R&D tax credits and ‘tax relief on contaminated land’; the business department doling out £400m, mainly on the car scrappage scheme; and £200m from Defra on ‘Sustainable Land and Soils’.

All told, the public spent £4.16bn subsidising private companies last year.

Then there are grants to the private sector – £444m from the Department for Transport (I’ve excluded the £3bn spent on the not-really-private Network Rail), £1.75bn from the devolved governments, £600m from the business department (mainly through Regional Development Agencies).

Oh, and there’s £3.44bn from the EU, mostly under the Common Agricultural Policy.

And then there’s good old PFI – supposed to make public services cheaper to run. Can I tell you exactly how much this stuff would have cost to do in-house? No. What I can tell you is that the taxpayer forked out well over £6bn on PFI deals last year – £2bn alone on PFI service costs under Ministry of Defence contracts.

£6bn? Don’t tell me the public sector couldn’t do it cheaper. Imelda Marcos could do it cheaper.

And to top it all off, there’s the £1.8bn spent on hiring private sector consultants, as reported by the Guardian last week.

Tot it all up and what do you have?

£18,890,466,000. That’s almost £19bn doled out last year, by the taxpayer, to the private sector.

And that’s a conservative estimate. I’ve left out the £970m spent on contract and agency staff – much of this will have gone on hiring agency staff who are often more costly than payroll staff. I’ve left out the hard-to-quantify arms trade subsidies. And I’ve left out the eye-watering sums HM Treasury spent on ‘financial stability’ – that’s the bank bailout to you and me.

What COINS tells us is what the government spent. What it doesn’t tell us is how well it spent it – whether this spending was good or bad. And let me be clear – not all the above spending is in any sense ‘bad’. We should support state investment in industry during the recession to help stimulate growth – frankly we didn’t do this enough, and it seems the new government will look to do it even less.

But there are lessons we can draw, even from the not-always-explanatory COINS data:

  1. If the government really wants to save money, it shouldn’t sign a single new PFI contract – especially the Ministry of Defence
  2. Paying private transport firms to perform a public service is costing a fortune – and I don’t just mean rail privatisation. £450m on private bus companies’ fuel costs? Come off it
  3. The Common Agricultural Policy. We’ve known it stinks for years. Hurry up and sort it out

Perhaps the main lesson, though, is that if you want private sector firms to perform a public service, you have to pay them handsomely to do it. Shareholders don’t really get the Big Society thing. The new government’s taste for getting private firms to take over public services could get very costly very quickly.

None of these sums compare, of course, with the cost of public sector pensions or payroll. But those right-wing Friedman fetishists who rage about the evil crypto-Stalinist public sector crowding them out should bear in mind what would happen to their private sector chums if Whitehall pulled the plug.




One response

13 08 2010
The ultimate right-wing guide to Outrageous Government Waste! | Liberal Conspiracy

[…] that £54m – in fact, the entire £314m – is utterly dwarfed by some real public spending stinkers: – Common Agricultural Policy – £3bn. – Privatised rail subsidies – £820m. – Service […]

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