With the leadership election approaching this an excellent opportunity to engage with wider debates about the direction for the party. Whilst many have argued for the party to be one for the political centre, I disagree.
History has shown that the British Liberalism does best when it offers a distinct and unique image (with a corresponding set of policies), that separate it from the Lab-Con duopoly.
The post 1950s recovery under Grimond and Thorpe (plus Steel prior to the SDP-Liberal alliance) was built on the vision of a progressive non-socialist party, standing in opposition to big government, big business and big unions.
Sometimes this vision was to the left of Labour regarding issues of wealth taxation, codetermination and unilateral nuclear disarmament, and even to the right of the Tories regarding cuts to income tax.
The Alliance of the 1980s was built on a distinct third way from Thatcherism and the isolationist state socialism of Foot era Labour, and the party’s post-war zenith under Charles Kennedy was achieved filling the political void left by New Labour’s rightward shift.
What we need is a distinctly liberal alternative to Labour and the Tories, with distinctly liberal policies, advocated in distinctly liberal terms.
Take for instance the issue of the ownership of utilities. Labour have clearly presented an alternative of mass nationalisation to the current system of private monopolies.
This is not without its flaws for (as Sir Vince Cable has put it) in practice it is leads to investment suffering, as the Treasury has to approve new investment against competing claims on government borrowing and historically has been conservative in protecting the government’s balance sheet from the risk of loss of investor confidence. Ultimately the Treasury will choose investment in hospitals and new schools over train signalling equipment and sewage farms.
Whilst the Tories offer little more than the status quo, our own 2019 manifesto said comparatively little on providing an alternative.
In his 1989 book Citizens Britain, Paddy Ashdown offered a genuine alternative to privatisation and nationalisation; mandatory consumer share ownership. Where consumers of said utility are issued shares with voting and dividend rights that can’t be sold. Ashdown put the proportion of those share at 30% with 10% of shares being held collectively by workers of said firms, the rest being part of a “Citizens Share Ownership Trust”.
With a few slight modifications (such as increasing enforced consumer ownership to 50%), this policy would offer clear alternative to putting utilities in the inept hands of a central government or greedy speculators, giving individuals greater control over their water and electricity supplies.
This must be the first of many ideas that are part of a unique Liberal vision for the nation. One in which recognises liberty requires some degree of economic security.
That economic freedom must not be about rights of the powerful to control markets and extract rents at their leisure, but the ability of citizens to have the means to invest, engage in entrepreneurship and ensure that their voice is heard in their workplaces, creating a genuine property-owning democracy where the citizen can actively participate in within the wider economy.
* William Francis is Chair of the Ealing Young Liberals
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20 Comments
As one who remembers him well, Jo Grimond had the advantage of tremendous charisma and wit, plus the ability to tap into intellectual talent and best policy advice from the Universities. It’s difficult to see any of the present parliamentary leadership aspirants matching any of these criteria at the moment.
“With a few slight modifications (such as increasing enforced consumer ownership to 50%), this policy would offer clear alternative to putting utilities in the inept hands of a central government or greedy speculators, giving individuals greater control over their water and electricity supplies.”
In a Green world, gas is dead, water is recirculated and electricity self-generated by solar or wind at the property, so these huge utilities are basically unwanted in a domestic situation and therefore the whole premise of this article is wrongly directed.
But if you want to get the attention of consumers, get rid of standing charges and have a low initial rate for low energy users (the money then recovered with a higher rate for those who use excess energy) rather than the reverse where low energy users are hammered.
So… who owns the other 70% or 50%?
Who would invest in any enterprise where they will lose the value of half their portfolio, lose control of the direction and half the dividends and still think ,”well I must invest in that because I want to have my property confiscated”?
Was this idea from the man who had to eat his hat?
Not surprised.
@David Raw
It is unlikely that we have a Grimond type leader in the wings, but we do not know. The membership need a chance to see our MPs in action and hear their views. An opportunity should be the March Conference, but instead we are looking backwards and having a keynote speech from an ex leader, chaired by the Chair of the FCC. The hierarchy of this party need to wake up to the fact that we are in a mess, which they got us into, and do not appear to have any motivation to get us out. There are still opportunities for the party, but we look like missing them again.
Quite frankly it would be very difficult to choose anyone who wasn’t an MP, wouldn’t it?
Well said William. I agree totally that we must think big, not get bogged down in the weeds of detail. The party’s biggest problem is that it is ignored and I fear will continue to be so unless radical changes are made. More power to your elbow for trying to start a debate
@Frank West
Whilst I do agree self generation and micro grids must be expanded and the electrification of heating is a goal still to strive for, large utilities will still be needed as electrification (a process that is required to reduce fossil fuel dependency) will result in greater demand for electricity (more than can be supplied from many residential buildings) and water treatment for even at a fraction of our current usage can only really occur at large plants making decentralisation impractical.
Furthermore, why not have consumers themselves vote on utility prices are structured?
“So… who owns the other 70% or 50%?”
Who do you think should? Personally I’d have 10-20% owned collectively employees of the utility and the rest free-floating.
“Who would invest in any enterprise where they will lose the value of half their portfolio, lose control of the direction and half the dividends and still think ,”well I must invest in that because I want to have my property confiscated”?”
I’m not sure what you are saying. I never once in the article I said support nationalisation without compensation. Although I never did specify how the ownership would be transferred ( I’m inclined for the state to buy up the aforementioned ownership share at a fair market price {determined by a panel of a dozen independent and impartial economists} then for the state to hand over the shares to the public), I’m sure how you got to your conclusion .
In any case, many individuals already buy equity in borderline SOEs anyway ( as of 30 June 2019, 2% of the equity of Électricité de France is owned by individual shareholders, despite the French State owning 83.7% of it {the rest being owned by employees and institutional shareholders}). Investment may stall in the short term between this idea being government policy and being implemented but upon completion investment should increase as customers will have a greater stake in their utilities and will have oversight over how the investment is carried out.
https://www.edf.fr/en/the-edf-group/dedicated-sections/investors-shareholders/the-edf-share/capital-structure
“Was this idea from the man who had to eat his hat?”
Ashdown wrote this in 1989. Decades before he made that statement.
@ Innocent Bystander
(please see previous comment regarding my reply, sorry I forgot to @ you in the reply)
@William
I am sorry I saw the word “issued” and that has a specific meaning. In your scenario the govt buys, on the open market 50% of the shares of all our utilities. Not at a price determined by either the market or the owners but by a panel of “experts” who will tell the owners of these shares what they are worth. That is going to be a very big sum and it still sounds like confiscation.
They are then given to utility customers.
The shares then become non- tradeable (they can not be sold) so must only provide a dividend coupon and voting rights while the ” owner” remains a customer??
When the company has an AGM can all the customers turn up?
If the company expands and has more customers, does the govt have to buy more of the traded shares to supply the new ones? Are all these transactions to be decided by the panel?
This scheme is entirely different to the many employee share schemes running. Normally you have to buy or earn the shares and they become yours. The concept is that the employee has “skin in the game”.
But this is for customers not employees and in this scenario the customers who have invested nothing (in a 51% case) get to control the private sector investor who are using their own money.
Do you get more shares if you spend more ? Or is it one customer, one share?
If a set of investors want to build a nice new highly efficient low carbon power station? Who will own it? Will the govt buy the shares before flotation? after? after the station is ready? at a lower price if the station is delayed? When the first customer signs up they get the immediate benefit of the other investors risk taking?
These are gifts from taxpayers.
As a taxpayer (and a voter) my view is very negative.
Again, I agree but I’m still not fully convinced because I don’t see anywhere a commitment or desire to being fiscally prudent, ie trying to construct a strong economy/ being reliable with the finances of the country. There is nothing wrong with this and it’s a liberal tradition; since we’re talking about liberal traditions. If you want to present liberal solutions to social ills and be distinct from Labour then why not include this in your plans?
@William:
Innocent Bystander makes some extremely good points.
I would add that you aren’t actually proposing that consumers own 50% of the utility: if you can’t sell your shares, you don’t really own them; they have effectively been loaned to you, until you cease to be a consumer of that utility.
Normally, if you were lent something (or rented it), you would be responsible for maintaining it and making good any delapidations.
But in this case, you aren’t; there’s no penalty for running the company down.
Equally, because you can’t actually sell the shares, it’s no skin off your nose if the company goes bust and the shares become worthless; after all, you’re in no danger of losing your services: after all, if the worst comes to the worst, the government would have to either bail out the company or take over the services, wouldn’t it?
So, as a nominal (but not true) shareholder, with voting rights, you would very rationally vote for the utility company to reduce its prices and increase its investments, and not worry about the business going bust – which it will, eventually.
I’m afraid this is a nice idea, but it is just too flawed to be viable.
@William,
Not to labour the point, but the examples you gave are the exact inverse of this proposal.
There a govt owned 100% of the utility and chose to sell off some percentage of its own property ( in many cases employees got some beneficial strike price or options which would vest at some point).
@Innocent Bystander
“Not at a price determined by either the market or the owners but by a panel of “experts” who will tell the owners of these shares what they are worth.”
Market prices are subject to-day-to fluxations and when the government declares it will buy an asset the price will rise artificially due to speculation. Furthermore many utilities aren’t publicly traded firms. 12/15 water companies are private equity vehicles.
“That is going to be a very big sum and it still sounds like confiscation.”
1) That depends. Estimates on completely nationalising the water industry vary from
£14.5 billion to £90 billion. Government debt is cheap as well right now. https://www.ft.com/content/8ee5d48a-6103-11e9-a27a-fdd51850994c
2) It’s not confiscation if property holders are paid decent compensation.
“The shares then become non- tradeable (they can not be sold) so must only provide a dividend coupon and voting rights while the ” owner” remains a customer??”
Yes.
“When the company has an AGM can all the customers turn up?”
It will be the same as any company with large numbers of individual shareholders.
@Innocent Bystander
” If the company expands and has more customers, does the govt have to buy more of the traded shares to supply the new ones? Are all these transactions to be decided by the panel? ”
That will be up to the boards of the utility companies themselves. How they approach the matter is up to them, so long as the conditions of the shares ( that customers must own 50% and they can’t sell them whilst they are customers) are met.
“This scheme is entirely different to the many employee share schemes running. Normally you have to buy or earn the shares and they become yours. The concept is that the employee has “skin in the game”.
But this is for customers not employees and in this scenario the customers who have invested nothing (in a 51% case) get to control the private sector investor who are using their own money.”
Don’t think you get the motive behind the policy. The customer of the utility already has a great degree of skin in the game, given how changing utilities is very difficult to change suppliers and (therefore) is heavily reliant on a said firm to provide essentials for living. They have been locked out of corporate in the past via state ownership, or presently via private equity vehicles (which is the model of ownership for the vast majority water companies). This policy precisely designed to give customers greater control of their utilities.
@Innocent Bystander
“But this is for customers not employees and in this scenario the customers who have invested nothing (in a 51% case) get to control the private sector investor who are using their own money”
It’s rather different in the case of utility which is essentially a monopoly. A greater degree of the rate of return on capital in these firms is economic rent compared to other firms.
“Do you get more shares if you spend more? Or is it one customer, one share?”
All customers get the same number of the aforementioned special shares.
“If a set of investors want to build a nice new highly efficient low carbon power station? Who will own it? Will the govt buy the shares before flotation? after? after the station is ready? at a lower price if the station is delayed? When the first customer signs up they get the immediate benefit of the other investors risk-taking?”- After the station is ready. In theory corporate taxation already ( in theory) gives other some benefits of others risk-taking and investors buying from secondary markets are in a not to dissimilar situation.
“These are gifts from taxpayers.
As a taxpayer (and a voter) my view is very negative.”
You are more than welcome to have negative views on this but taxpayers already indirectly gift large amounts through pension contribution tax relief and preferential tax treatment on capital income, which disproportionally aids the already affluent. This gift from taxpayers is more widely shared.
“…examples you gave are the exact inverse of this proposal.There a govt owned 100% of the utility and chose to sell off some percentage of its own property”
I’m not sure what your point is. They aren’t a 100% owned govt owned utility if they have sold off some equity in it, by definition. As I stated before Electricité de France is 83.7% by the French state. The point being is that minority shareholders do exist in firms even when government policy has a huge influence on the nature of ownership of a firm, and where they themselves don’t have great control over corporate governance.
@Toby Keynes
@William:
“I would add that you aren’t actually proposing that consumers own 50% of the utility: if you can’t sell your shares, you don’t really own them; they have effectively been loaned to you, until you cease to be a consumer of that utility.”
Many models ownership have strong limitations on property rights. Private limited companies general have restrictions on how shares in them can be sold and to who. This would not be that different.
“Normally, if you were lent something (or rented it), you would be responsible for maintaining it and making good any delapidations.
But in this case, you aren’t; there’s no penalty for running the company down.”
I would have thought poor quality drinking, bathing and cooking water, plus unreliable electricity supplies at your place of residence would be a significant penalty for running down a company down. The customer-shareholder would bear the costs of poor service in a way a large investor does not.
“Equally, because you can’t actually sell the shares, it’s no skin off your nose if the company goes bust and the shares become worthless; after all, you’re in no danger of losing your services: after all, if the worst comes to the worst, the government would have to either bail out the company or take over the services, wouldn’t it?”
1) The risks involved natural monopolies like utilities aren’t that high. 2) A few days without power and water is a pretty big moral hazard 3) You’d still lose shareholder dividend and bailouts for non-financial companies aren’t really a thing the British government provides much of as of late ( just look at Thomas Cook).
“So, as a nominal (but not true) shareholder, with voting rights, you would very rationally vote for the utility company to reduce its prices and increase its investments, and not worry about the business going bust – which it will, eventually.”
Wanting price reductions depend if you want a larger dividend or don’t consume much of the utility. In addition, increasing investments is something that is policy is supposed to encourage.
“I’m afraid this is a nice idea, but it is just too flawed to be viable.”
Whilst I recognise my policy does require some considerable alterations, overall I think your criticism ignores the extent to which the customer-shareholder is able to suffer from the moral hazard of running their own water supplier into the ground.
@William,
Us mere peasants struggle to respond as we get hit with flood protection or post is too long so I can only cover the most egregious components here.
What has confused me are your terms “consumer share ownership” and “issued shares”. I understand now. These aren’t shares at all. As Toby said, If you can’t sell them you don’t own them.
The taxpayer is just paying the owners to grant the customers an allocation of dividend and a right to vote on the company direction and you “own” no “share” of the company at all.
So here goes on unravelling this non-share ownership scheme.
1. Your definition of “decent compensation” is your own invention. If that is less than the owners could get on the open market it is nothing other than confiscation.
2. As a utility increases its customer base it just has to split that half of the dividend over more customers but gets more voters on its board. So as a customer I am going to vote for the smallest investment in the future and the biggest declaration of dividend because it isn’t my company, I don’t own any part of it and I don’t care about the future. As Toby says, I have no skin in this game. A moral hazard argument is silly. You be responsible all you want. I want money now.
3. As to your claim that changing utilities is very difficult. For water it is impossible because I have only one (but my point about the future and this year’s dividend will still motivate me at the AGM). For electricity and gas your claim is untrue. I have changed suppliers every year (apart from once when I signed up for a two year deal at very attractive price). I can change suppliers in ten minutes, tops.
4. Investors build a new low carbon power plant and give away half the profit and control as soon as it is ready. Find me an investor who is up for that.
5. This is what I wrote – “There a govt owned 100% of the utility and chose to sell off some percentage of its own property”. I read your response but can only point out that ‘owned’ is the past participle of the verb ‘to own’.
6. I would prefer to have a percentage reduction in my bill instead of a ‘dividend’ although as I do a tax return anyway it will be no problem to me. Those millions of customers who are only PAYE will now have to fill in a tax return to pay tax on the dividend. That will be a shock! HMRC SA100 is not for the faint hearted.
Grimond’s views were very much in the centre ground, way to the right of the mush put out today, very much in favour of mainstream common sense as well as choice and freedom as long as not doing harm.
A party that is slave to power, big business, on free movement and paying people pittance, corporate power, not even considering nationalising rail , the BBC, never seeing the awful tv licence as top down anti the poorest in our country, the EU, too much of a one size fits all ideologue driven project, is not in keeping with the ideas of Grimond’s ilk.
He wrote for choice in public services thirty years before Blair.
He favoured very strict restrictions on demonstrating around parliament for his views on security were strong. He had little interest in peripheral topics. He would probably think the party daft now. We need a mainstream party. Is this one aware of this?
Blair is suggesting a pre-election arrangement between Labour and the LibDems. It is needed to break the mould and dump FPTP voting, at least:
Mr Blair even didn’t rule out a full-blown formal alliance with the Lib Dems – saying: “How this is done institutionally, that’s a matter for debate.” Asked directly he said: “I literally don’t know at this stage. It could go in a number of different directions.”
He warned simply ditching Jeremy Corbyn’s left-wing agenda wouldn’t be enough to win power – and said today’s Lib Dems must “aspire to govern” and show “clarity of purpose”.
The ex-PM spoke on the 120th anniversary of the Labour Party as he claimed Brexit could have been stopped – if only there had been “serious opposition”.