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Unmasking the State

George Obsorne - CEO of Britain PLC

“The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” So wrote Karl Marx and Friedrich Engels in 1848. And today George Osborne confirmed how true this observation remains.

The chancellor, or should that be the chief operating officer (CEO) of Britain PLC, announced that firms involving in fracking – the highly-dangerous, controversial, ecologically-damaging extraction of shale gas – will only have to pay a 30% top rate on production.

That compares to 62% on new North Sea oil operations, rising to 81% for established offshore fields. Leaving aside for a moment that Osborne’s father-in-law is head of a lobbying organisation for big oil and gas companies, the position is clear.

The government, any government, will use its authority to command the state to do what’s best for business – often to the detriment of a particular community or society at large.

Desperate to create new energy supplies as North Sea oil runs down, the government is hoping that a shale gas bonanza is the answer to their prayers. Hence the tax breaks announced today.

Every day there’s another example of this ever-closer alliance with business that is the hallmark of this particular period of globalised capitalism. Last night, the UK’s state-owned blood supply was sold to a US-based private equity firm.

The Department of Health sold an 80% stake in Plasma Resources UK to Bain Capital. This company was founded by Republican presidential candidate Mitt Romney, which paid £230m for a controlling interest.

This is consistent with the approach of all governments over the last 30 years. In 2004, New Labour prime minister Tony Blair said:

Our aim is to open up the system, to end the one-size-fits-all model of public service, which too often meant one supplier fits all, with little diversity, irrespective of how good new suppliers – from elsewhere in the public sector, and from the voluntary and private sectors – might be.

In 2011, David Cameron remarked:

From now on, diversity is the default in our public services. What does that mean? It means that instead of having to justify why it makes sense to introduce competition, as we are now doing with schools and in the NHS, the state will have to justify why it makes sense to run a monopoly.

As a result, public services wholly provided for by the state are an increasing rarity. Today roughly £1 in every £3 that government spends on public services goes to contractors of one sort or another. That’s about £100 billion a year. That’s a bigger proportion than in any other country, the US included.

With the state lacking expertise in contract negotiating, let alone auditing what’s going on, the scene is set for creaming off the top, also known as scamming or gaming. Last week it was revealed that government contracts for tagging offenders held by G4S and Serco had been suspended.

The firms had been charging for tagging people who were either dead, in prison, or never tagged in the first place. Even this government had to act when the truth came out. This week, an extensive report by the Institute for Government into the outsourcing bonanza, gave chapter and verse on “gaming” by all sorts of agencies. The report noted:

Such ‘gaming’ behaviours included excessive ‘parking’ of service users with complex needs and ‘creaming’ of users who are easier to support, and therefore more profitable to serve… Such gaming was most apparent in the Work Programme where the combination of low fees and specific design choices in the ‘payment by results’ system of reward acted to discourage investment in helping those who were less likely to get back into work swiftly.

Choosing easier-to-pass qualifications is an education form of “gaming”, often used to maintain or attract fund. One head teacher told the researchers: “Schools that turn themselves around often do it… [by] exploiting tactics to improve exam results in the short term which are not about the experience that every child gets in every lesson.”

For Osborne and his corporate chums, however, it really is one big game which ends with directors and shareholders laughing all the way to the bank.

Paul Feldman
Communications editor
19 July 2013

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