Who owns Britain?

Image: Images Money, CC BY 2.0

The question of public or private ownership has been given a new prominence by recent commitments by the Labour Party to renationalise water, the railways and energy if  they are re-elected. To do so raises issues that have scarcely been discussed since the massive privatisations of public assets undertaken by Mrs Thatcher and subsequent Tory governments since the 1980s. These policies were based largely on the writings of Friedrich Hayek who, in ‘The Road to Serfdom’, argued for a minimalist role for the state in economic activity. This has been the mantra of Tory governments ever since – aided and abetted by Labour when in office under Blair and Brown.

Most countries have polices that restrict foreign ownership on the grounds that there are strategic sectors that need to be kept in domestic ownership. For example, the US refused to allow the Chinese to take over one of their key ports and a small oil company, and has restrictions on foreign ownership of airlines and TV stations as well. This is supposedly the country that is most enthusiastic about free trade and deregulation. Similarly, Germany has passed legislation that protects key areas of technology from takeovers by foreigner firms. This is again aimed at the Chinese who see company acquisitions as a way of acquiring  advanced technologies and market opportunities.

In the UK, not only public utilities but also a significant share of manufacturing is in the hands of foreign companies – most obviously in cars where there is no locally owned producer of any scale. The market for domestic and overseas vehicle sales is dominated by Japanese companies. Alex Brummer in ‘Britain for Sale: British Companies in Foreign Hands’ estimated that no less than half of British companies had been sold to foreigners – uniquely among other countries. The UK witnessed the sale of its premier chemical company, ICI, to Holland without a murmur. After Cadburys was sold off to Kraft, its capacity was closed and production moved elsewhere despite original promises by the new owners that it would continue local production and employment.

ARM Holdings, one the key British companies for research and innovation in electronics, was sold off in 2017 for £24bn to the Japanese company Softbank. The clear aim of the Japanese purchase was to get access to the intellectual property of ARM which is a leading player in mobile technology.

One might have thought that the lessons of an earlier privatisation in 2001 of defence technology contractor Qinetiq, a former British Government agency, would have been learned. A third of the shares in Qinetiq were acquired at knock-down prices by the US private equity group Carlyle and subsequently sold off in 2006 with enormous profits.  Carlyle was established by a former US Secretary of State, James Baker, and has a former British Prime Minister as a member in the form of Sir John Major.

But the British seem to see things differently, despite the clear social, economic and political costs of foreign ownership. Here are just some examples:

  • Amazon, a US corporation, now dominates retail in the UK. Through cost cutting and other non-competitive activities, Amazon has caused significant reductions in retail capacity in all town centres. It pays no taxes in the UK despite billions in sales, and working conditions for staff are deplorable. It is worth noting that the former Director of John Lewis spoke of the impossibility of competing with companies that do not pay tax.
  • Rupert Murdoch, an Australian/American, was permitted by Mrs Thatcher to take over the Times illegally despite owning the Sun and Sky, further increasing levels of media concentration with all of the costs that this has entailed . Other formerly British owned newspapers have been acquired including the Financial Times (bought by Nikkei Corp) and the Evening Standard (bought by a Russian oligarch). It is worth noting also that Waterstones, the only surviving national book chain in UK, is also Russian owned.
  • Google dominates the browser market and pays derisory UK taxes, and Facebook is now the main source of news for most British people despite its biases and its inadequate constraints on the dissemination of fake news. Both of these companies are effectively unregulated despite their critical social media roles, and both make enormous sums of money from advertising that goes untaxed.
  • Starbucks has effectively out-sourced their UK tax liabilities through various off-shore arrangements and scandalous high internal charges for management fees and inputs (purchases of coffee from subsidiaries overseas). These tax avoidance mechanisms make it difficult for independent companies to compete and survive.
  • Apple has shifted its tax liability in the UK to Ireland. The EU has rejected Irish claims that corporate taxation is a national matter and have instructed Ireland to impose some 13bn euros of unpaid taxes on Apple – so far uncollected.
  • The key national airports in the UK – Heathrow and Gatwick – are both in foreign ownership despite their strategic role in the national and international transport system Similarly, UK ports are now more or less all in foreign ownership having been privatised. Liverpool, Glasgow and Great Yarmouth ports are owned by Deutsche Bank and a family trust, Whitiker, registered offshore in the Isle of Man who according to the Public Accounts Committee ‘do not pay their fair share of tax’.  Britain’s busiest port, Felixstowe, is owned by one of Asia’s richest men and incorporated in the Cayman Islands. Even Associated British Ports, which manages many UK ports, is owned by the Singapore foreign reserve fund and Kuwait’s sovereign wealth fund and registered offshore in Jersey.
  • The BBC estimates that there are currently no less than 97,000 properties owned by foreign firms in England and Wales. Of this total about half are in London (of which 10% are in Westminster) with a total value of £33.9bn. A quarter of all foreign owned property in England and Wales is registered to companies in a British tax haven, the British Virgin Islands, and the rest in other off-shore tax havens such as the Isle of Man and the Channel Island].
  • Until April 2017 non-residents owning property in UK through offshore companies were exempt from inheritance tax – a nice arrangement for avoiding UK taxation and further concentrating inherited wealth. Foreign demand for property simply bids up the costs to residents in a housing market where prices are among the highest globally, and helps to increase already high levels of rents.
  • The NHS, which is thought of as the great British innovation, is also increasingly being infiltrated by American health providers. Indeed, the government seems to welcome the possibility of further growth of US health providers as part of any free trade arrangements with the US post Brexit. This is something that most commentators see as highly undesirable given the generally poor performance of the US health care system, with its unjustifiably high administrative and other costs. Fee for service is not a route the UK should pursue and is alien to the whole concept of the NHS.
  • Blackstone, a US company, purchased social care provider Southern Cross and then loaded it up with debt and made large payments to the parent company. This is a common strategy with foreign buyers of UK companies – to engage in asset stripping and then leave the company saddled with debt at interest rates that drive the company into insolvency with losses of employment. Along the way the company pension fund will also have been raided. Another example of this strategy is Boots, which has 2,500 shops in the UK. Boots was acquired by private equity in 2007, asset stripped and saw its HQ moved to Switzerland to avoid UK taxes. It is now wholly owned by the giant US pharmacy chain Walgreens – another key part of the health infrastructure in foreign ownership.
  • The major public utilities – energy, railways and water – are all to a significant degree foreign owned and have been exceptionally poorly managed, while at the same time making large distributions of dividends to their owners. Their prices as well as inflated salaries have in all cases increased much faster than the general rate of inflation, and they have clearly abused their quasi-monopoly power to fleece consumers. In all cases the regulatory systems have proven to be totally ineffective. It is remarkable that nuclear power stations are owned and managed by the French company EDF (something the French would never allow in their own country) and that Hinckley Point C is a joint French/Chinese project.

What are the common elements in the above? The regulatory regime post Thatcher in the 1980s seems not to have had any interest in questions of ownership despite the mounting evidence of the costs of foreign acquisitions. It is clear that some at least of the purchasers of domestic assets have used the opportunity to launder illegally acquired money, and Britain has become the global centre of such transactions. This is most evident in foreign purchases of property, especially in London, where the scale of purchases has massively raised prices but without generating any sizeable tax revenues for the British Government.

What seems to have driven UK policy are the interests of the banking and financial sector including all the companies, estate agents and law firms that have benefited from the massive growth of the City. There have been some direct employment gains and government has been a beneficiary through increased tax revenues. But there have also been negative consequences and losses of employment and taxation elsewhere in the economy caused by what is called ‘the Dutch disease’ – the negative effects of a rising exchange rate.

The bidding up of the exchange rate caused by capital inflows associated with the increase in the size of the City to something like 10% of GDP has dramatically reduced the competitiveness of other producing sectors – especially of manufacturing. Hence the collapse of employment, exports and output in manufacturing post 1980 which have had strong regional impacts. It is precisely these regions that voted to leave in the EU referendum and which it is predicted will suffer most of the adverse impacts of Brexit.

Because of weak regulatory systems, especially in respect of privatised utilities, there has been price gouging at the expense of consumers in the UK. This has in many cases led also to the transfer to foreign owners of capital through the medium of excessive dividend distributions. Thus UK consumers have indirectly supported France and Germany, amongst others,  both of whom are major owners of UK energy and rail and where British prices have increased enormously.

Key to much of the overseas acquisitions has been a tax system that is not fit for purpose. It is evident from the Paradise and Panama papers that avoidance of UK taxation has been systematic and that accountancy companies such as PWC and others have been complicit in facilitating tax avoidance. Thus the shifts in ownership plus unnecessary cuts in UK corporation tax under the Tories have been contributory to the underlying structural fiscal deficit of government. This is the real reason for Tory imposed austerity.

Shifts in patterns of ownership and production have been causal in generating changes in working practices and the development of the so-called gig economy. It was an objective of the Thatcher de-regulation both of the City and elsewhere in the economy to undermine trade unions and in this they have been very successful. The result is only too obvious with unstable work, often poorly paid, and increasingly inadequate to support a family. It is unsurprising therefore that there has been a sharp increase in poverty much of it in families in full-time work. Government subsidies to wages that are too low (in the form of rent support and child benefits etc)  have added further to the structural fiscal deficit of government.

Thus the current structure of output and employment in Britain, the problems of inadequate tax revenues to finance public services, and the vast gap in living standards between the precariat and the executive class are all to some extent the result of increased foreign ownership of almost everything we continue to call ‘British’.

  • Howard Green

    So what exactly? I am with Marx and Lenin on this. I see absolutely no reason to prefer British capitalists to foreign. I agree that companies should pay tax. This requires international collaboration (the EU is the critical institution) but it is also about UK political will (lately in short supply). Many institutions you mention (the internet majors for example) are there because they are simply the best at what they do. I see no reason or plausible possibility why there should be a British Amazon or Google. Some of them (energy and water for example) ought to be in public ownership. I think the settlement of Westphalia is long obsolete – no need to keep it on life support.

    • BC

      Well. If we’re about to man the barricades, overthrow bourgeoise democracy, cart off all capitalists to do an honest day’s work and put the whole lot into spontaneously organised public ownership, it doesn’t make much difference. However, in the real world we have to recognise the fact that these people are fighting back – and very effectively too. There is a massive difference between dealing with domestic capitalists who are subject to domestic law, have a stake in all aspects of the domestic economy and might, just might, have some sentimental attachment to place and community and multinational behemoths who can (and often do) just pull the plug and set up somewhere else.

      • Alasdair Macdonald

        To take BC’s cogent argument a bit further, by some examples drawn from the Scottish referendum and the debate regarding the 2018 Scottish budget.

        With regard to the independence referendum Better Together (Project Fear) warned continuously, that the kind of people to whom Howard green refers would leave Scotland for other places where they could continue to make money and so those of us remaining (who, by definition are incapable of innovation of creativity, since we have a ‘dependency culture’ and ‘want something for nothing’) would simply moulder. Therefore, we should reject independence and continue to take what trickled down.

        The recent Scottish budget introduced a range of income tax rates which vary from those set by the Treasury for the rest of the UK. They introduce, amongst others) a lower rate of 19%. The net effect is that those earning less than £33 000 pay the same of less income tax than people on similar taxable incomes in the rest of the UK. Around 700 000 people on higher incomes pay more income tax. The levels have been pretty well judged and the additional amount is relatively small. But that does not prevent the Tories, amplified by most of the media and the BBC, from claiming that Scotland is the ‘highest taxed part of the UK.’ and so, these people will move to England or take their incomes in other ways. Thus, they continue, Scotland will lose the revenue they contribute and Scotland will face further austerity. So, the 70% of the population who pay the same or less are expected to give up the small gains they make so that the highly paid can retain more of their income. Of course, those earning under £33 000 will spend most of the tax gains and so continue to sustain the economy, whereas those who are high earners tend to save it, especially in ways that takes the money out of the economy. This latter, is what ‘austerity’ actual is – transfer of funds from the lower paid to the much higher paid, who take the money out of the economy.

        Since Council Tax in Scotland is much lower than in England and since there are no University fees, those 700 000 higher earners would face a substantial tax hike if they moved to England. A fair number of those 700 000 have no problem with paying a bit more and also have a sense of place and community. So, I think they will stay because this has been a relatively small redistribution.

        The spectrum of taxes available to the Scottish Government is limited – AS IT WAS MALICIOUSLY INTENDED TO BE BY WESTMINSTER AND, PARTICULARLY, LABOUR – and so its scope for being creative is limited in the short term and leaves openings for the political attack of ‘punitive’ and ‘destructive’ taxation. Providing the full range of taxes, and developing property and land taxes would enable Scotland to do things differently and in a more distributive way. Of course, assigning oil and gas revenues to the place where it is earned would make a huge difference. But, Westminster prefers these to go substantially to international energy companies.

        • Zen9

          Can’t we go further than this?
          Since in say Sweden they have higher taxes so must obviously be denuded of creativity, enterprise, and wealth creation and consequently are utterly dependent on state handouts from a government collapsing under the weight of extravagant borrowing to fund this largesse. Having driven away such wealth creators to the likes of the UK. ……….

          At least that would be the conclusion of such a position.
          But not actually born out by the facts……

          • Alasdair Macdonald


            Yes, I think we can go further than this, both in continuing this thread and in setting out arguments for more equitable and progressive taxation, in addition to refuting the ‘axioms’ about taxation which are just assertions but treated as similar to the laws of electromagnetism or gravitation. You have done that with your paragraph regarding taxation in Sweden and reductio ad absurdum.

            What people in the Nordic countries appear to do is to accept the state provision of high quality public services as a good bargain, both for themselves as individuals but also for society as a whole. They do not see a sharp distinction between individuals and society. In fact, I do not think that they see the distinction as particularly problematic.

  • Keith Parr

    There are some good arguments for the public ownership of, or tight regulation of the private ownership of, common infrastructure, however these are economic arguments rather than political or nationalistic ones. Water, electricity, and telephone distribution, and roads and rail infrastructure come to mind.

    To seriously misuse Churchill’s bon mot: Private ownership is the worst possible way forward, apart from all the others which have already been tried (such as nationalisation!). Governments have proved themselves poor pickers of winners and poor managers of industry / enterprise.

    The piece conflates the principles and the practice of the competitive marketplace we have today. That large multi-nationals take advantage of systems which legally allow them to move taxable profits into low tax jurisdictions, is not per se a criticism of competition or of international ownership. It may however be a criticism of the current rules and their implementations (I note many countries scrambling to adjust their tax regimes).

    Nor does the piece take into account the impact technology has had on the workplace. The decline in the number of jobs available is at least as much because of the increasing application of technology as it is because of asset stripping or moving jobs to low cost environments.

    The benefits to consumers of much of the change which has been wrought are ignored. If it is more cost effective to make parts of mobile phones in China, assemble them in Thailand, and then ship them to market, then that means consumers gain access to products which they might not otherwise be able or willing to afford, which indeed might not otherwise be possible. And yes, major multi-nationals make a tidy profit too, without which they simply would not produce the goods.

    It’s very easy to react emotionally to foreign ownership (noting that we should consider our response to foreign ownership per se, and the possible impacts of foreign ownership on eg work opportunities). It’s hard to see the ownership of British Institutions like Cadburys and ARM falling into foreign hands (does Dairy Milk taste any different?). But that needs to be balanced by an appreciation of British purchases of foreign firms, see http://bit.ly/2DurQx6, and foreign firms building factories in the UK eg Toyota in Derbyshire.

    At the end of the day, it makes economic sense to have work done in the location which can do that work with the best price / quality balance. Repatriating work done overseas in such cases will by definition increase costs and hence prices in both the home and the export market, with the inevitable consequences. Each country, perhaps even each region, with have its strengths and weaknesses, it makes sense to exploit the strengths and minimise the impact of the weaknesses. It’s been a long term “complaint” about the UK that it is excellent, world leading, in innovation, but pretty mediocre at the subsequent exploitation of those innovations. Think of Frank Whittle and the jet engine . Which suggests that we need to focus on what we do well, innovation, and find innovative ways of profiting from the exploitation of those innovations, wherever it may happen.

    Similarly, the UK has an enviable reputation for University education (which is where a lot of the innovation comes from btw.), but people worry that we train people from other countries who then return home to use the knowledge that has been gained to the benefit of “foreign powers”. If other countries can make a better fist of using the results of UK education than we can, what should we do? Haul up the drawbridge, or find ways (eg by FDI) to benefit in the longer term from the education we have provided?

    The fact is that we live in the world, not just in our islands. As a country we have to compete with others, it makes sense to compete in areas where we are world class.

    “Who owns Britain” is a call to the emotions, “Make Britain Great Again”, “Take Back Control” even! The issue is far more nuanced than that.

    • Zen9

      Doesn’t bear out under stress. Might be fine under benin conditions of good relations and mutual trust. But under less benign conditions….Hence Lloyds George’s piece about how many processes it takes to make a shell.

      Or the scale of folly in trading Czechoslovakia to Germany, when most of the rolled armour steel was being made in Czech factories.

      Or to put a more modern twist on this. ..it is why the Sweden raided Thyssan Krup’s offices in Sweden as they rightly feared the recent takeover of their local Submarine business by said was being used to illegally export Swedish Submarine technology to Germany.
      And why they have forcebly made Thyssan Krup hand over the yard to SAAB…..

      Or say how the French have acted to prevent an Italian company taking over a France shipyard……

      • Keith Parr

        I think there are two problems with this line of thinking.

        The first is the implication, at least I think it’s the implication, that the UK and in fact all countries need to have an independent defence industry. I wonder whether that it either affordable or practicable? Perhaps for China, the US, and Russia (let’s leave North Korea out of the discussion!!), but for the smaller countries of Europe?

        Then there’s the issue of just what is strategic. Steel and the railways, power generation, all used to be considered strategic, but now?
        Is facebook strategic? Is Android? Cyber attacks seem currently to be more dangerous than nuclear / conventional, asymmetric warfare –
        which is why we have GCHQ I imagine. What’s the next major threat going to be?

        Governments have not shown themselves to be good at picking winners, nor at managing companies. Competition is a greater spur to cost-effective innovation – although I suppose you could argue that we’re competing with Russia, the US, and China!

        • Alasdair Macdonald

          Mr Parr,

          Thank you for your participation.

          In your first post and in this you repeat the statement about ‘governments/civil servants not being good at picking winners’. This is one of the privatisers’ slogans which does not stand up to close examination. For example, Ha-Joon Chang’s “23 Things They Don’t Tell You About Capitalism” deals with this. I notice, too, that the Norwegian Sovereign Fund has just had a $131BILLION return in 2017. Just imagine what Scotland’s fund might have been had it not been for the perfidy of the 1970s Labour Governments and Mrs Thatcher’s use of the revenue to destroy trade unions, substantially destroy manufacturing and to tilt the UK economy grossly towards finance and London and the South East.

          Competition is not the sole driver of innovation.

          • Keith Parr

            I find it interesting that you disagree with the idea that governments are not good at picking winners, and then go on to castigate the British governments for poor management.
            It is instructive to see who manages the Norwegian sovereign wealth fund:
            There are certainly examples where governments have “got it right”, the current situation however provides pause for thought.

          • Alasdair Macdonald

            Mr Parr,

            Thank you for your prompt response and for the link which you have supplied.

            My point was, as you appear to have accepted in your final paragraph, that the soundbite that ‘governments are not god at picking winners’ is just a soundbite with a tangential relationship with reality.

            What you are deploying in the first paragraph is a false dichotomy. You are implying that there are only two options ‘getting everything right’ or ‘getting everything wrong’.

            The decisions by the Wilson/Callaghan and Thatcher governments were political ones, probably motivated by a colonialist mindsets. They were also economic ones intended to benefit particular groups in society at the expense of others. In the case of Mrs Thatcher, she was clearly favouring the financial interests of the City and many of these people benefitted not just financially but also in terms of power to force compliance, by the weakening of trade unions. So, for a very large group of people, Mrs Thatcher’s government did NOT pick a winner, but for another not-as-large group she DID pick a winner.

  • brat673

    Just seems a way a foreign country take patents and brands abroad. Our ultimate loss jobs, future tax etc? No wonder we lag behind! Re promises about Cadbury’s, Rowntrees and ??

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