Interesting Links for 22-10-2013
- A handy guide to the new nuclear power plants deal
(tags: uk nuclearpower ) - The letter Q was illegal in Turkey from 1928 until last month
(tags: spelling turkey ) - The ocean is broken
(tags: environment ocean nuclearpower ) - Facebook stops censoring violent videos
(tags: censorship facebook ) - Heavy new penalties for VAT evaders boost revenue from ( Read more... )
If HMG does it, they have to pay up front, and that counts as part of the public debt. But if they find a way of creating an ongoing public liability that doesn't look like a debt, it doesn't get counted as one. I think this is shockingly awful - PFI was bad enough. An ongoing liability for a stream of payments IS EXACTLY WHAT A DEBT IS. Sorry.
(Complete side track: they pulled this fast one on the Royal Mail privatisation, which to my mind is way more outrageous than the bare fact of the sell-off itself. The main block to privatisation was the £10bn black hole in the Royal Mail pension fund. So the Government took it all on ahead of the sale. But it doesn't count as £10bn added to the national debt, oh no. They got all the assets from the pension fund, which from memory were about £30bn - which were sold off and the proceeds booked as a £30bn reduction in the debt. But the future liabilities to pay pensions - for which you need about £40bn in the bank now - have vanished in to thin air. They still exist: the Government is legally required to pay these pensions. But it doesn't get booked in to the accounts as a debt. In reality, the taxpayer is about £10bn worse off as a result of the transaction, but the accounting shows this as being £30bn to the better. No good will come of this sort of shenanigans.)
Another really frustrating thing about this hide-the-debt nonsense is that it is financially ludicrous. Not only do the contractors demand and get a profit premium on the deal, but the Government can borrow capital - even now - at a much cheaper rate than pretty much any private sector entity.
Two other significant reasons for doing the nuke deal this way are (a) EU rules about public subsidy and (b) the Government's firmly-announced policy of not subsidising new nuclear power. This way you can sort-of squint and pretend it's not a subsidy - and my understanding is that it is indeed a way of squirming through the EU rules about public subsidy.
There's also some awful, dark stuff in the reporting about HMG providing some "financial risk support" to the project, without which the counterparties weren't prepared to take it on. I think that means that the taxpayer will turn out to be on the hook for the inevitable cost overruns.
Another hidden subsidy is the catastrophe insurance, and that's entirely off-balance sheet and not SFAIK added up anywhere. It's such a huge potential liability that only a handful of non-sovereigns could credibly sell you a policy on it anyway.
In short, you probably don't see why it makes sense to subsidise it this way BECAUSE IT IS COMPLETE MADNESS.
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You'd think people would learn...
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That leaves the only arguments for the Royal Mail sell-off as being ideological - the Condems want to get rid of everything and the kitchen sink - and enriching their already super rich chums? I can't see any other rationale behind it.
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Government accounting makes no sense anyway, they don't include liabilities for any pensions they have to pay, nor guaranteed future income nor assets. If you did try and do this stuff you end up with things like the annual deficit is dominated by life expectancy changes, and one quality terrorist attack results in a huge government profit due to the sudden removal of a bunch of liabilities.
Privatising RM is a win for the pension fund, but that's because the management is probably going to fire around 100k people who will then draw much smaller pensions than you might currently estimate, and they'll stop anyone else joining it whereas previously this would have been subsidised by the general taxpayer forever.
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