Private Island: Why Britian Now Belongs to Someone Else (4 page)

The selling off of Britain's municipal housing without replacing it, which I write about in the last section of this book, was supposed to be a triumphant coming together of the individual and free market principles. It actually ended up as one of the most glaring examples of market failure in postwar history. It wasn't like the other privatisations; its justification as anything other than an electoral bribe to its relatively well-off beneficiaries always rang false. It certainly did to Thatcher in the beginning. She was, she wrote,

In the end, she came round, and made the policy her own. But the gap where the economic rationale for privatising council houses should be becomes a window through which it becomes possible to see beyond the individual privatisations to the meta-privatisation, and its one indisputable success: that it put more money into the hands of a small number of the very wealthiest people, at the expense of the elderly, the sick, the jobless and the working poor.

What do we think we know about taxes since the Thatcher revolution? Government spending has been cut, we know that. Income tax is lower than it used to be, we know that. And we might remember that the one time Margaret Thatcher tried to change the principle of progressive taxation, where the amount of tax you pay depends on your income, to a flat fee, where everyone pays the same – when the Conservatives tried to introduce the infamous ‘poll tax' on council services – it was the catalyst for her downfall. Low tax was her mantra. Her core political message was this, in her own words: ‘I believe the person who is prepared to work hardest should get the greatest rewards and keep them after tax. That we should back the workers and not the shirkers: that it is not only permissible but praiseworthy to want to benefit your own family by your own efforts.'

What we think we know is wrong. Yes, government spending was cut, and, as I write, it is being cut again, by Thatcher's Coalition successors. When the Conservatives came to power in 1979 the top rate of tax was 83 per cent, the basic rate 33. The top rate is now 40 per cent and the basic rate 20 per cent. The message seems clear enough. The Conservatives cut public spending and cut taxes, they kept their promises to working
people, and Labour went along with it. But that is not all that happened. At the same time as they cut income tax and public spending, the first Thatcher administration hiked the sales tax, VAT – a flat rate tax far more remorselessly regressive than the poll tax. When they came to power, the main VAT rate was 8 per cent. It is now 20 per cent. And the poorer you are, the harder VAT hits you. A study by the Office of National Statistics in 2010 showed that, for the richest fifth of the population, VAT added an extra 4 per cent to their tax bill. But the poorest fifth, often thought by the better off to pay no tax at all, actually pay 8.7 per cent of their income to the Treasury in VAT. When the Coalition came to power that year, its first chancellor George Osborne raised VAT by 14 per cent.

Where privatisation comes into this is that VAT isn't the only flat-rate tax on the poor. There are others, and they are onerous; they just aren't called taxes, though they should be – private taxes. One of the other ways the Thatcherites tried to balance the books in their first budgets was by hiking the price of gas, electricity and council rents, then all still under state control. After privatisation, above-inflation price rises have continued, in the private sector. A tax is generally thought of as something that only a government can levy, but this is a semantic distortion that favours the free market belief system. If a payment to an authority, public or private, is compulsory, it's a tax. We can't do without electricity; the electricity bill is an electricity tax. We can't do without water; the water bill is a water tax. Some people can get by without railways, and some can't; they pay the rail tax. Students pay the university tax. The meta-privatisation is the privatisation of the tax system itself; even, it could be said, the privatisation of us, the former citizens of Britain. By packaging British citizens up and selling them, sector by sector, to investors, the government makes it possible to keep traditional taxes low or even cut them. By moving from a system where public services are supported by progressive general taxation to a system where they are supported exclusively by the flat fees people pay
to use them, they move from a system where the rich are obliged to help the poor to a system where the less well-off enable services that the rich get for what is, to them, a trifling sum. The commodity that makes water and power cables and airports valuable to an investor, foreign or otherwise, is the people who have no choice but to use them. We have no choice but to pay the price the toll-keepers charge. We are human revenue stream; we are being made tenants in our own land, defined by the string of private fees we pay to exist here.

It is not racism that makes the foreign identity of some of the owners of our privatised infrastructure objectionable. It's the selling of taxation powers to foreign governments over whom we have even less democratic control than our own. It is the hypocrisy, in particular, of a party that claims to loathe nothing more than communism and totalitarianism obliging Londoners to pay a tithe to the Chinese government just for turning on the tap; of a party that claims it wants to free Britain from European interference obliging all of us to pay a levy to the French government in order to fund construction of experimental nuclear reactors in Somerset.

The shift of taxation from the rich to the middle class and low paid is reflected in the reverse of the long trend of growing income equality between the wealthy and the less well off. In 1937 the share of national income earned by the richest 1 per cent of Britons, after tax, was 12.57 per cent. This fell steadily until by the eve of Thatcher's coming to power it wasn't much over 4 per cent. It then began to climb steeply. By 2007, it was back to where it had been sixty years earlier – 12.57 per cent.

Beset by high VAT and an array of private taxes their parents didn't have to cope with, the low-paid are being squeezed by their employers, too. The story of the Royal Mail, leading up to its privatisation in 2013, is sometimes portrayed as if it were a textbook case of one new technology (the Internet) destroying an old-fashioned state monopoly while an obstructive trades union blocks the other new technology that might have saved it (new
sorting equipment). In fact, as I show in the opening chapter, the Royal Mail is the last in a sequence of trans-European privatisations that is likely to end with the work of a traditional British postman, on the face of it an honourable enough job that ought to draw decent pay, being recategorised as a minimum wage, breadline or pocket money occupation. To see how, I travelled across the North Sea.

Somewhere in the Netherlands a postwoman was in trouble. Bad health, snow and ice and a degree of chaos in her personal life had left her months behind on her deliveries. She rented a privatised ex-council flat with her partner and so many crates of mail had built up in the hallway that it was getting hard to move around. Twice a week one of the private mail companies she worked for, Selektmail, dropped off three or four crates of letters, magazines and catalogues. She sorted and delivered the fresh crates but the winter backlog was tough to clear. She thought her employers were getting suspicious. I counted sixty-two full mail crates stacked up in the hall when I visited. There was a narrow passageway between the wall of crates and her personal pile of stuff: banana boxes, a disused bead curtain, a mop bucket. One of the crates had crept into the study, where the postwoman's computer reared up out of her own archival heaps of newspapers and magazines. Were those two streams of paper to merge they would not have been easily separated. The postwoman hadn't given up. She'd had a similar problem with the other private mail company she worked for, Sandd, a few years earlier. ‘When I began at Sandd in 2006 I delivered about fourteen boxes of mail every time,' she said. ‘I couldn't cope and at Christmas 2006 I had about ninety of these boxes in the house. By New Year's
Day we had ninety-seven. There were even boxes in the toilet.' The postwoman was paid a pittance to deliver corporate mail. She hadn't done her job well, yet so few people had complained about missed deliveries that she hadn't been found out.

Across the world, postal services are being altered like this: optimised to deliver the maximum amount of unwanted mail at the minimum cost to businesses. In the Internet age private citizens are sending less mail than they used to, but that's only part of the story of postal decline. The price of driving down the cost of bulk mailing for a handful of big organisations is being paid for by the replacement of decently paid postmen with casual labour and the erosion of daily deliveries.

I agreed not to name the Dutch postwoman or to give away any detail that would identify her. Even if she hadn't been sitting on months of undelivered mail Sandd or Selekt could have sacked her in a heartbeat. She worked, she reckons, about thirty hours a week for the two companies, earning about five euros an hour, although the legal minimum wage in the Netherlands is between eight and nine euros an hour. She had no contract. She got no sick pay, no pension and no health insurance. One of the companies gave her a dribble of holiday pay. Selekt gave her a jacket and a sweatshirt but she got no other clothing or footwear and had to pay to maintain her own bike. The company was able to offer such miserable conditions because of loopholes in Dutch employment law. The postwoman was paid a few cents for each item of mail she delivered. The private mail firms controlled their delivery people's daily postbag to make sure they never earned more than €580 a month, the level at which the firms were obliged to give them a fixed contract. Somehow Selekt hadn't noticed it was getting fewer empty crates back than it sent full crates out. When I followed the postwoman to the kitchen, I saw, like some recurring nightmare, twenty more crates filled with letters.

Selekt's crates were yellow and stamped with the black hunting horn logo of Deutsche Post, the former German state mail
monopoly that, like its Dutch counterpart, was privatised long ago. For years the two had been locked in a struggle for business on the streets of the Netherlands, part of a fratricidal postal war across northern Europe into which Britain's newly privatised Royal Mail has been drawn. Privatising old state post companies doesn't necessarily make it easier for rivals to compete with them. Privatisation isn't the same as liberalisation. But in Holland privatisation and liberalisation combined have altered the post in a way far beyond anything Britain has so far seen.

At the time I visited the Netherlands, Dutch households and businesses were visited by postmen and postwomen from four different companies each week. There were the ‘orange' postmen of the privatised Dutch mail company, trading as TNT Post but about to change its name to PostNL; the ‘blue' postmen of Sandd, a private Dutch firm; the ‘yellow' postmen of Selekt, owned by Deutsche Post/DHL; and the ‘half-orange' postmen of Netwerk VSP, set up by TNT to compete cannibalistically against itself by using casual labour that is cheaper than its own (unionised) workforce. TNT delivered six days a week, Sandd and Selekt two, and VSP one. From the point of view of an ardent free marketeer, it sounded like healthy competition. Curiously, however, none of the competitors was prospering. TNT was being forced by the hedge funds and other transnational shareholders who controlled its destiny to split up, even as it tried to beautify its bottom line by replacing reasonably paid jobs with badly paid ones. Deutsche Post was pulling out of the Netherlands and selling Selekt to Sandd – a company that had never made a profit.

Sandd, set up by a group of ex-TNT managers, pioneered the distinctive Dutch style of private mail delivery. ‘Sandd' stands for ‘Sort and deliver'. In Britain, as in many other countries with big postal networks, private companies can now collect and sort mail, but delivery, the so-called ‘final mile' of a letter's journey, has remained until very recently a Royal Mail monopoly. Mail is delivered from distribution centres to local delivery offices,
where salaried Royal Mail postal workers sort it into individual rounds and deliver it by van, bike and on foot. Under the Sandd system, crates of mail are delivered to casual workers' houses. These workers sort the mail, on whatever flat surface they can find, then deliver it on set days at a time of their choosing. Besides slashing the mail companies' overheads, the system has the advantage, from the management's point of view, that there is little danger of the postmen and postwomen meeting each other to swap grievances or talk about joining a union.