Friday, 13 August 2010

Fancy a Neoliberal Mortgage?

Imagine receiving this from your bank.
Dear Sir/Madam

I'm writing to offer you a once in a lifetime mortgage opportunity.

With the shortage of suitable properties and prohibitive prices preventing many people from getting on the housing ladder, we are prepared to offer you one of our very special products. Because we value your custom, we will build you a bespoke house without a prior credit check or proof of income. It requires no deposit or down payment. And you can move in immediately.

All we require is you take out a mortgage repayable over 20, 30 or 40 years. The total monies you will pay will be approximately six times the value of the build. We think this is a reasonable deal, and no doubt you will too.

Don't hesitate to get in touch!

Such an offer was made to NHS bosses up and down the land in New Labour's early years. And it was an offer they could not refuse. Given the choice between taking out a rip-off mortgage for a new hospital, or muddling through with leaky, crumbling buildings from a century ago, few could blame them for taking the first choice.

I know many party members are proud of Labour's hospital-building programme. But would they have been had they'd known the mechanics of Private Finance Initiatives?

Still, it is annoying the great PFI rip off has only become
national news only now. From the beginning the left has called PFI for what it is: a means of transferring public funds to private coffers. One can speculate why the BBC have only just "discovered" this. Perhaps bosses think buying into the Tories' 'Labour's legacy' narrative will protect their positions from the axe. Note how supine the BBC has been reporting public sector cuts elsewhere. They wring hands while hammering home how painful but necessary it all is. Even Pravda during the period of high Stalinism showed more editorial independence.

But the NHS PFI scandal is only the tip of the iceberg. Blair and Brown insisted new school, community, public and council buildings be built under the same scheme (and some roads!). In their attempt to make New Labour the preferred party of British capital they saddled the public sector with mortgages a house buyer would be insane to take out. One wonders how many more billions will pour into construction company profits for the next 40 years?


Budapestkick said...

Lost for words

Chris said...

I agree with the spirit of the article but would the BBC etc have preferred it if New Labour had not built these hospitals or schools etc? What would have been their alternative to the utter neglect suffered under Tory rule?

It is the same argument when it comes to saying 'we' lent to people who could not afford it and this was the problem. But if the lending hadn't happened then these people would never have been in a position to buy the things they needed!! Catch 22.

Boffy said...

Actually, I find myself in agreement with Chris(!!!) As I've written previously in relation to PFI in a discussion with Mike McNair, as a Marxist I wouldn't see it as my role to advise a Private Capitalist to raise funds by a Share issue rather than a Bond Issue, because the former might be a cheaper way of raising Capital, and might, therefore, enable them to reduce costs or prices. I see no reason to offer that advice to the State Capitalist either, and for the same reason.

There is some tricky economics involved in determining what element of the cost of Health Care provided by the State is an essential component of the Value of Labour Power (and therefore, forms part of Wages [Variable Capital]), and what does not, and is therefore, a deduction from Surplus Value. Generally speaking, the marxist definition is based on the concept of "Socially Necessary", so if this method of financing truly was more costly than it needed to have been, it was not "socially necessary", and is then a deduction from Surplus Value. As such it just means a redistribution from one group of Capitalist to another via the Tax system. Which means I'm even less bothered.

But, the message is that if worekrs had control of this process they would have a direct incentive to ensure that the most efficient means of raising the financing, and of building the hospitals - even had they decided they were necessary or the most effective means of providing workers with healthcare, which I doubt - and of running them was chosen, and deployed.

Anonymous said...

The alternative would have been to raise taxes and pay for the projects upfront. Better than squandering taxpayers money on the PFI rip off. New Labour wanted to spend without raising taxes. PFI was a short term expedient that has come back to bite us as the left always said it would.

Boffy said...

The point is that if as Marx says all TAX is a deduction from Surplus Value, then the taxes that will now have to be raised to cover the cost of PFI will be deductions from Surplus Value, i.e. deductions from the incomes of Capitalists. Why should workers be bothered by that? All it means is that one group of Capitalists will be paying that tax, and handing it over as profits to another group.

Moreover, the idea that the alternative was just to raise taxes in initially is not as straightforward an alternative as you make out. Had taxes been raised, then precisely because as Marx says Tax is a deduction from Surplus Value, then that would have meant a reduced level of Capital Accumulation, because there would have been less Surplus Value to turn into Capital. That would have meant a lower level of economic activity, more unemployment, lower wages, and hence higher levels of Public Spending, and lower levels of Tax income. Its not clear that this economic cost would have been less than the cost of PFI, which as stated above simply recirculates Surplus Value from one group of Capitalists to another. The costs to workers during that period certainly would have been greater, because the lower level of Capital Accumulation would as stated have meant more unemployment, and lwoer wages.

It still may not prove a good strtaegy from the point of Capital, if taxes are raised to cover the cost, but its not a marxists job to be over concerned with what is a good tactic or not for Capitalists!

Alan G said...

And at the end of the time period the bank will still own the deeds to the house. Oh and if you want to do any DIY you have to ask us to go through our expensive subcontractors