Friday, 18 October 2013

Selling out to China

For sale: a medium size European nation with highly attractive investment opportunities. Would particularly suit China. All inquiries to G Osborne, 11 Downing Street, London.

It would have saved a fortune, wouldn't it, if the Treasury had simply paid for a small ad in the People's Daily and left it at that?  Because, once you strip away the diplo-babble flim-flam, that's pretty much the message the Chancellor has been hawking around China this week as he sipped his endless cups of tea and smiled awkwardly for the cameras.

We've got used to the fact that our car industry is no longer British-owned; that much of our electricity, gas and water is provided by non-UK companies, and that Heathrow airport is owned by a consortium made up of Spanish railways, a Quebec pension fund, and a Singaporean sovereign wealth fund.

But how do you feel about Britain's nuclear power stations being owned by China? Does it make sense to entrust the bulk of the nation's future energy supplies -- gas, electricity, and nuclear -- to overseas interests?

For now, it may be only a minority holding that China buys in UK nuclear power projects, but as the Treasury itself admits: "While any initial Chinese stake in a nuclear-power project is likely to be a minority stake, over time stakes in subsequent new power stations could be majority stakes."

Many countries ring-fence certain industries to make them off-limits to foreign investors, the thinking being that if an enterprise is of sufficient strategic importance to a nation's well-being (energy, public transport, defence), then it's simply too risky to entrust it to shareholders who may have different priorities. (According to the book Britain for Sale, by Alex Brummer, about half of the companies providing essential services in the UK, including four of the six main energy companies, are foreign-owned.)

The British approach seems to be not just to flog off the family silver, to use Harold Macmillan's famous phrase in 1985, but to put up on eBay every single thing we might possibly be able to get a price for, up to and including the tiles on the roof.

I have nothing in principle against foreign companies operating in the UK -- on the contrary, from Aldi to IKEA to Sony and Toyota, they provide jobs, goods and services which make Britain a far better place than it might otherwise be.

But I do have serious migivings when it comes to essential public services like energy and public transport. Current corporate theory suggests that companies have responsibilities not only to their shareholders and to their customers, but also to their employees and, in this context most importantly, to the community in which they operate.

Is it reasonable to expect corporate decision-makers to be as sensitive to community needs thousands of miles from where they live, to feel the same sense of involvement with a society half way round the world, as they do to the society in which they live?

Ah, you may say, but the fact is that we simply don't have the cash to invest in the hugely costly infrastructure projects that might help us build a more prosperous future. (Look, after all, at the row over the HS2 high-speed rail project.) If we can't persuade the Chinese to build our nuclear power stations for us, who else is going to stump up the cash?

Well, how about UK tax-payers? Why does no one any longer argue that if the UK needs essential infrastructure investment, then it's the job of the government to raise the funds necessary to pay for it through personal and corporate taxation? I wonder what answer you'd get if you asked British voters: "Who would you prefer to build Britain's future power stations: the government, using money raised through taxes, or China?"

Even The Times, not usually an enthusiast for State-owned businesses, suggests in a highly critical editorial (£) today: "Perhaps this country’s taxpayers would be better off in the long-run if the British state built the next generation of power plants?"

Day after day, we're told that lower taxes equal greater prosperity. I'd find the argument just a bit more convincing if the money that no longer flows into the Treasury as a result of tax cuts was instead being used to finance future infrastructure investment, rather than to line CEOs' pockets to enable them to buy ever bigger houses and inflate an already insane London property price bubble.

I don't want you to take this as an anti-China rant, although I do think there are serious issues to be considered if China is to become a major investor in UK public infrastructure provision. How certain are we that China will be a stable, prosperous economy in 20, 50 or 100 years time? How big a risk is there that its own-brand combination of political authoritarianism and economic pluralism will come under intolerable strain within the next decade or so? Who will pick up the pieces if Chinese investment largesse suddenly vanishes?

And do we feel entirely comfortable with the prospect of becoming increasingly reliant for our own future prosperity on a country whose record on workers' pay and conditions, environmental degradation and basic human rights still leaves so much to be desired?

My former colleague, the respected China analyst Isabel Hilton, writes in The Guardian today that we should be asking even more questions: "Will British consumers end up paying high energy prices to guarantee a Chinese investor a good return? What future leverage will Chinese investment in British infrastructure give to an emerging power that frequently says it does not accept established global rules? What degree of transparency and accountability can we, as supplicants, enforce on our new partner? What guarantee have we that in depending on Chinese finance, we haven't surrendered more than we bargained for?"

She concludes: "Perhaps it is not too late to ask." I hope she's right.


Ed Wilson said...

Something called "Britain" does have loads of money, or has had in the recent past. Are "we" buying other countries' power stations or just as many financial instruments as we can pin down for a couple of nanoseconds?

Anonymous said...

Yes we're fast becoming a banana republic minus the bananas.