The Uber Effeciency Of The Private Sector

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Golly, that’s thinking out of the box.

“Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the dynamic vitality’ of free enterprise”. So says Andrei Shleifer in his his 1998 paper for National Bureau of Economic Research and this is relevant today what with Brexit in the news and Labour’s ambivalent response to it. We are now into silly season and any politician with a grain of sense keeps his or her head down as the papers scour for something, anything, to fill space. Normally these stories will involve scantily clad celebrities on a beach with skimpy bikinis on (it took me a long time to research that) and of course our good friends, the unemployed and immigration. Sometimes though the spotlight is turned on the private sector.

The Daily Telegraph is Very Cross Indeed with motor insurance companies who, to the surprise of no-one at all, are allegedly involved in one or two dodgy practices (£  therefore no link). “Insurers are routinely inflating repair costs by as much as 100 per cent, while receiving undisclosed kickbacks for the difference, it can be revealed.The system is used by insurers representing drivers involved in accidents which were not their fault to rip off rival firms representing the “at fault drivers” for repair work”. Now I know that the fact insurance companies get ripped off will come as a surprise to no-one because the general rule is get your revenge in first. Insurance is great when it’s done well but they have a richly deserved reputation for ripping us off in return, a vicious circle really. It will also come as no surprise to read that “Motor insurance premiums reached a record high this year” as they usually do.

Meanwhile the Daily Mail is Extremely Miffed with car rental companies, what have they been up to? OK I know it’s a bit hard to tell when it’s silly season there but they have this. “The French-owned firm, Europe’s biggest vehicle rental operator, is under investigation for overcharging as many as half a million customers for repairs by as much as 300 per cent, resulting in a potential fraud that the company itself values at £30million”. Good work if you can get it and they continue “The people at the desk use fear sales techniques,’ says Martin Lewis of MoneySavingExpert.com. And I see customers panic all the time”. Fear is of course any salesman’s ultimate weapon in this case scare the customer with possible excess charges of thousands then offer insurance which sounds cheap in comparison. All in a days work.

I don’t for a moment suggest the state steps in to run such services but it would be nice to see the regulators take some action. LOBO loans are a different matter and I will write about them in depth in another blog but here’s the gist. The Lender Option Borrower Option looked favourable back in the noughties when council treasurers were under press to become profit centres as Ron Carver reports “councils are able to borrow from central government via the Public Works Loan Board (PWLB) at rates only slightly higher than the spread on UK government bonds”. Enter the financial alchemists with too good to be true deals and the cost is in the hundreds of millions nationwide because we all know that if things are too good to be true they aren’t, hope you click Rob’s link. I could also go on about yet more bank corruption and further PPI repayments, there seems to be a pattern here.

It wasn’t supposed to be like this, whatever happened to the home owning, share holding democracy envisaged as part of Thatcherism? You remember the wonderous stories told that Neo-liberalism was our shared destiny well at the risk of mixing my RickRolls, Rick over at FlipChartFairyTales is certainly on a roll the bast… I mean very good writer. There you can read chapter and verse on how the property owning democracy was a one off, as it had to be thethe usual suspects to end up with all the loot. Yes there were winners (including me) but “The rise in home ownership exacerbated the rise in inequality. Until the 1990s, the cost of housing only made a slight difference to the inequality figures but from the 1990s, housing tenure became a significant factor in the make up of people’s disposable income and the divide between owners and renters widened”.

To bring us up to date we have outsourcing in the NHS which Richard Branson is in the process of suing for compensation over the loss of contracts, chaos on the railways especially for long suffering southern rail commuters, water companies getting fined for environmental damage and pollution, a “confusopoly” of gas, electric, phone and broadband suppliers is this seriously the fit lean efficient machine of private enterprise?

Then we have the Uberisation of jobs on the one hand and price gouging by private enterprise. Companies like Uber aim to make a profit by regulatory arbitrage and loss leading market capture. Absolutely all risk of doing business is placed on the employee who basically has bogus self employment status. Holiday pay, sickness payments and pensions are there none. Then take, for example, NHS cleaners how can the private sector do that so much more cheaply? By gouging wages of course, gone are the regular hours, job security and pension again and hello zero hour contract work. Then we demonise these workers as unproductive and too stupid to make provision for their old age, I wonder why that is?

Richard Branson’s Virgin Care pays virtually no UK taxes it’s registered in Bermuda and this happens everywhere you see outsourcing. All the costs and risks transferred to the individual or state and all the so called “efficiency savings” off shored to avoid tax. I can see how this enriches certain individuals but it’s no way to run a nation’s economy. I shall leave the last words to Pink Floyd.

what have we done Maggie what have we done

what have we done to England
should we shout should we scream
“what happened to the post war dream?”
oh Maggie Maggie what have we done?

Lyrics: Pink Floyd, writer Roger Waters.

NB. First draft, not proofread and some links to be added.

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3 thoughts on “The Uber Effeciency Of The Private Sector

  1. Richard Branson’s Virgin Care pays virtually no UK taxes it’s registered in Bermuda and this happens everywhere you see outsourcing.

    Yet another example of Britain’s lack of regulatory cohesion. In the Netherlands he’d have a chance to get away without paying taxes, and NL is being pushed by the EU to introduce zero-hours contracts in order to make the country look more efficient… on paper at least. That is what Britain has, isn’t it? It’s all on paper.

    In Germany, if he had a Bermuda registered company, it would still have to be registered in Germany and pay German taxes. Not to mention workers’ regulations that are truly byzantine. Well it makes work for the HR departments, doesn’t it?

    There is something to the way Germans do things that is the antidote to Britain’s laissez faire. Or should that be laissez unfair??

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    1. There was a recent case in Germant, I can’t finf it now, where a relatively lowly tax official spotted tax irregularities saving the exchequer millions of euros.
      In the UK she would have been branded a whistleblower, sacked and stripped of
      everything she possessed.

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