How on earth have we come to the point where a company can be successful, pay its directors big bucks and substantial dividends to its shareholders and be in receipt of public subsidies?
Large-scale farms, high profile entrepreneurs, pharmaceutical giants, multi-national corporations surely should not be taking public handouts – but they are.
Every successful business knows you have to speculate to accumulate but with whose cash?
Innovation often comes at the end of years of research. Good research costs and success is never guaranteed but there are ways of alleviating overheads. Super successful giant Apple was helped on its way by a $500 000 research programme paid for by the US government. But once Apple became successful where was the quid pro quo? There was none.
Where a private enterprise uses publicly funded and operated facilities shouldn’t there be some means by which the intellectual property becomes a stake in the enterprise for which a percentage comes back to the public body in profits?
It’s not just Apple, Google too built its empire on an algorithm funded by the National Science Foundation, a government funded agency in the US. Shouldn’t some of that success have been shared with the NSF?
That is not how the world of entrepreneurship works. Not only do companies walk away with all the benefits provided by the taxes of Mr and Ms Average but many of them take advantage of every loophole to avoid paying taxes which support the social fabric which underpins the lives of Mr and Ms Average.
When I hear people proclaim how successful capitalism is I wonder how they calculate success. Being dependent on state subsidies is not being successful.
They provide jobs it is claimed. But where? Not necessarily in the countries where they got the leg-up. Large parts of Apple’s production takes place outside the US. Can you think why?
And it’s not just in the USA.
Every year £4bn of our cash is paid to subsidise franchise rail companies in the UK. I don’t object to paying for utilities. I do object to paying private companies subsidies which are integral to their success and allow them to pay out handsome salaries to directors and dividends to shareholders.
Why have access costs to Britain’s rail tracks been slashed since the 1990s? Because public money is being poured in to offset the actual charges which should be made by rail companies which then appear more efficient than they are and enable them to pay dividends to their investors. Whatever happened to the free market? Network Rail issues private bonds that are publicly guaranteed – to the tune of around £30 billion which means that it can then charge, say Branson’s Virgin Rail, artificially low charges for track access.
The £½ billion profits made by the Virgin rail franchise tells its own story: charismatic entrepreneur shakes up inefficient public institution and transforms it into a success. Believe that if you like.
The billions that have gone on subsidising the rail system disguises the truth about privatisation. Money not only goes to allow them to operate but to finance their management and pay out to shareholders.
Everyone knows about the profits enjoyed by pharmaceutical companies. They, of course, have their own laboratories but they also benefit from research funded from the public purse as we’ve seen in the US. Fair enough but what isn’t fair is that once a drug has been proven a winner and being sold around the globe there is no pay-back in the form of sharing that success with the state that funded its new multi-billion drug. Instead we pay for the development of the new medicine and we pay to buy that same medicine. We pay and we pay again.
Where is the public interest in this arrangement? If we are paying for research why aren’t pharmaceuticals nationalised to provide us with cheaper medicines? If the pharmaceutical companies can do without publicly funded research why aren’t they?
If Virgin and the rest are able to pay dividends to their shareholders why aren’t they able to pay back public subsidies? More to the point why are they recipients of any public subsidies? Why do we have franchised rail companies if they cannot operate without state help? Why are they taking our money and labelling them as their ‘profits’?
If you can’t afford to operate a rail franchise or are not some cool dude with a keen eye for a canny business setup then there are still ways of raking in public money. You could take a piece of land out of agriculture for example.
Anyone who owns land may be able to pick up Farm Woodland Payments which run from £121 to £60 per acre.
The less you earn through agriculture in relation to your overall income the lower the subsidy you can claim but if you own a country pile, let’s say, and perhaps earn your living elsewhere, perhaps in a rail franchise, then you might think of setting up a separate farming business on that country plot. Do this and your other income is ignored and you will be free to pick up your public subsidy. If you remember to register your farming business for VAT you will be able to save in running this agri concern, whatever it is.
How does £85 an acre each year sound? For townies an acre isn’t much land but we’re not talking the odd acre here. This handy sum can be had under the Single Farm Payment. Add to this the Environmental subsidy which goes from £12 to a whopping £121 an acre and you’re talking lots and lots of cash for just being you. These two subsidies alone for doing sweet nothing amount to around £200 for every acre around your pile. Not to be sniffed at – enough not to worry about having to have the oiks constantly traipsing around your grounds and charging them for the privilege.
In Scotland under 19 000 landowners/businesses receive £484,528,467 in Single Farm Payments and if you think, single payment sounds puny then how about Torphins farming business Frank Smart and Son who were the lucky recipients of a cool £3.2 million in 2012. I’ve rounded it down for simplicity. And don’t go away with the idea that times are tough and we’re all in it together – the Smarts subsidy from us rose by £781,853. 93 from their previous handout. In 2009 the Smart business was handed a mere £1.2 million – does this mean it has become less efficient to the tune of £2 million?
You may want to pause for a cup of tea to digest these figures. They amount to money. From you and more importantly, from me.
I can’t get my head around the fact that anyone who can claim £3 million is in any way entitled to public handouts. The lists of land subsidy winners is a who’s who of estate owners and big knobs from British society. Outside of Scotland the Queen and Duke of Westminster also benefit from public handouts.
Landowners, at least farmers, can buy up entitlements to subsidies – that is buy land away from their main holding which may or may not be farmed but which adds to their business portfolio.
If you’re serious about your land you might actually farm it and then you can claim some of the £21 918 281 paid out to Scotland’s nearly 8 000 beef producers (farmers).
If your land is not up to supporting beasts don’t worry. You can still get your hands on public dosh through the Less Favoured Area Support Scheme. Last year 11 000 Scottish land owners were able to claim £66 533 651.
It is a very very long time since farming went it alone in this country. Fear of food shortages led to agri subsidies and, well, have you ever tried to get money off a farmer?
The president of the Scottish Farming Union recently declared the arrangement for SFPs was wrong. He was responding to complaints that some farmers are unable to claim subsidies but why are we still paying out subsidies to them at all?
There are other agri subsidies such as Weather Aid. This is a pot of £6 million to cushion the blow of the impact of extreme weather on farming production such as loss of stock or arable crops.
But back to the railways. New Labour in government completed the privatisation of Britain’s rail services and so enabled the system where private rail franchises are able to claim subsidies higher than the premiums they pay to the government for the franchises they claim to be able to run efficiently.
Where is the sense in that?
Virgin receives 3.6 p per passenger mile to the tune of £133 million. Of £41 million pre-tax profits it provided £29 million to shareholders. At the same time the east coast service receives 0.5 pence each passenger mile.
Virgin has denied any imbalance.
The system of subsidies in this country is a win win for those who are prepared to work the system. At a time when seriously ill and disabled claimants are having their incomes reduced by changes to DLA is it acceptable that multi-nationals, landowners, pharma giants and the rest are being provided with non-returnable public money collected from our taxes? Talking of taxes – another day.
Any private company reliant on the state for subsidies is a failing business. If the state has to act to finance any private organisation then the state should take over its business. Don’t tell me the state is necessarily more inefficient. What we have now is subsidy-junky culture which camouflages failures in private enterprise. Why are we pretending private is better than public in cases when it is patently incapable of supporting itself or unwilling to do so? It used to be that the free market was a risky place to enter but for some that element has been removed knowing failure will be underwritten by those of us who pay our taxes.