We should be gifting Royal Mail shares to the least well-off

Olly Neville October 15, 2013 1
We should be gifting Royal Mail shares to the least well-off

Olly Neville shows how privatisation can be used to help the poorest members of society.

The first and most obvious point is that in a truly free market, there would be no need for centralised redistribution. The cutting back of tax and regulation means that small businesses could thrive and that jobs would be much more abundant; the removal of taxes would increase incentives to work as well as the benefit of doing so (especially to the worst off). Crucially, removing the possibility of regulatory capture and unravelling the corporatist relationship between big business and the state would mitigate the oligopolistic nature of certain markets. Large corporations which pin their success upon regulatory barriers to entry would no longer dominate, as competition would finally be able to flood the market. Indeed, cutting back the state would affect the major components that make up the cost of living. From housing – where relaxed planning laws would mean lower rents and cheaper homes, to energy prices – where the introduction of true competition and the removal of expensive regulations would slash energy bills and all things in between, a truly free market would make life better for the worst off in society.

Large corporations which pin their success upon regulatory barriers to entry would no longer dominate, as competition would finally be able to flood the market.

The unfortunate reality is that we do not live in a free market. In the corporatist system, we have big business that is able to use the state to game the market: a loss that particularly impacts on the poorest consumers. We need to look to see how we can help those trapped within this system: making life better for those that have been dealt the hardest hand. Privatisation could be a perfect way of redistributing to the poor without damaging jobs, entrepreneurs or investors. Instead of the Government selling off nationalised industry, why doesn’t it just gift shares in them to the poorest? Selling off nationalised industry seems attractive; the money the Government makes can be used for its own ends, to lower the amount we need to borrow, to cut taxes or to increase spending. However, many of the people who oppose privatisations entirely make some fairly valid points. The British public has already ‘paid’ for industries like the Royal Mail, via direct and indirect taxation for years. It is a service that we do already own. Selling it off, especially with minimum purchase requirements, means that only the middle class and the wealthy benefit – groups that already have easy or comfortable lives well above the breadline. Instead, why not give shares to the poorest, who can then choose to sell them when they please. The final distribution will be an efficient one – those who want shares in the newly privatised industry will be able to purchase them, or keep hold of them if they already own them. Those that don’t want them don’t have to buy them, or can sell them if they receive them initially. We will end up with a market where those that want them have them, and those that do not want them, don’t.

Instead of the Government selling off nationalised industry, why doesn’t it just gift shares in them to the poorest?

Moreover, the better off will have voluntarily transferred considerable sums of money to the poorest in society. If Royal Mail was worth £4bn, then that is around a £4bn voluntary transfer of money from the rich to the poor. I would argue that this is a better way of redistribution that any other that Royal Mail’s sale could be used for. If the money went into cutting borrowing then the worst off (at least at present) would not benefit. If it went to tax cuts (as unlikely as that seems to be from the current sale), then they would have some small benefit but much less than the direct one they received from being gifted the shares. So too with increased spending, which while being a benefit is unlikely to be as well targeted as a gift. As is regularly said, you know how to spend your money better than the Government does; an effective gift of £4bn to the poorest in society would be spent by them far more efficiently on improving their lives than if it had to go through dozens of bureaucrats, to be spent on programmes where waste is rife and contracts awarded to big corporations.

If Royal Mail was worth £4bn, then that is around a £4bn voluntary transfer of money from the rich to the poor.

Think too, of the political gains. How much easier it would be to move towards more efficient private healthcare systems like those in Holland (which regularly tops WHO rankings), Germany and Singapore if in doing so tens of if not hundreds billions of pounds were transferred from wealthy buyers to the poor shareholders? A more efficient redistributive method such as this would mean less requirement for spending on less effective Government redistribution programmes, allowing targeted tax cuts towards the poor and job creation. Selling off nationalised industries needs to be done in the least corporatist manner possible. Simply fixing a price means that wealthier members of society will be able to purchase and benefit from share price rises while poorer ones will be excluded from such an opportunity. A targeted gifting of shares at those with the lowest incomes would mean a huge, voluntary wealth transfer, where everyone wins. Of course, the Government may not be able to squeeze as much money out of us as it can, but as a libertarian I care more about those in need than I do about Government finances. Hopefully too in the long term, the benefit to Government finances of having less people in need to assistance could outweigh the cost of not making a quick buck. Either way, I still believe that the needs of people, especially the worst off, are much more important than the needs of Government.

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