By Alan Clawley

State support to individuals is seen by many well-off people today as a reward for fecklessness and labelled a ‘handout’ whilst support for business is seen as ‘investment’ for higher purposes such as regeneration, economic growth or job creation.

Sunset behind QE Hospital and Birmingham University

The theory goes that giving money to unemployed people will only keep them that way whilst investing money in private enterprise or regeneration will create jobs and thereby benefit them in the long run by making a bigger cake to share out. This strategy, known as ‘trickle-down’, has obviously failed so far.  To pay for the International Convention Centre, for example, the city council raided the schools budget that was meant for the children of Ladywood that, two decades later, is still one of the poorest places in the country.

The underpinning of the private sector continues to be justified by outlandish claims of the kind recently made by the city’s officer for Regeneration, Waheed Nazir.

Speaking of the lack of progress on the Beorma redevelopment in Digbeth he said, “The implementation [of an office block] will deliver significant regeneration benefits for Digbeth and the city centre through the proposed investment in new commercial facilities that will not only bring greater economic use back to the site itself, it will also provide a catalyst for further growth and investment into the wider Digbeth Quarter.” How can he be so sure?

Governments also spend public money on glamorous projects like the Library of Birmingham in the hope that it will encourage the private sector to build office blocks whose owners will one day pay business rates to the council. In the meantime the taxpayer carries the initial cost and the long-term risk.

Surely state financial support should be used to underpin social and environmental objectives not to subsidise wealthy corporations many of which help a political party gain power. In an increasingly privatised economy the private sector will always benefit from government spending by winning contracts for the supply of goods and services.

Before it was privatised British Rail designed, built and ran its own steam locomotives with steel from British Steel and coal from the National Coal Board. Private profit was kept out of what was seen as a railway service that was owned and run purely for the public good. That, at least, was the theory.

Today the private sector begs government to ‘invest’ taxpayers money in large projects like HS2, New Street Gateway and the Birmingham Airport runway extension –  none of which at the moment are state–owned. It is still not clear how much of the £44 billion cost of HS2 will come from the public purse and how much from the private sector, but we do know that the £600 million Gateway project will be underpinned by £398 million of public funding and that the City Council has put aside £17 million towards the cost of diverting the A45. Since neither the city nor government expect to get their money back with interest these payments will amount to handouts, not investments.

Private business avoids spending its own money when it cannot be sure of financial success and so prefers the state to carry the risk. Thus, housing for the poor was left to the public and charity sectors – but with the reaction against the ‘socialist’ housing schemes of the 70s, government ploughed public money into Urban Renewal to help owner-occupiers refurbish inner city terrace houses instead. The money it spent far exceeded the market values of the refurbished houses, but the aims of maintaining the stability of the community and bolstering home ownership were more important for the government (as well as costing less than clearance and rebuilding). Big construction companies tendered for the work and were paid under a contract with the council, they did not ‘invest’ in or help pay for the scheme.  Far from it, they made big profits from inflated tender prices.

Edwina Currie doing Urban Renewal in 1983 Photo: Dennis Thorpe ©The Guardian

Contrast that with the situation today. The selling of public assets and services to the private sector begun by Margaret Thatcher shows no sign of slacking. Private Finance Initiatives and Public-Private-Partnerships are still used despite their poor value for money as ministers are put under huge pressure by the construction and property conglomerates to keep them going. There is no going back to a previous era, but we can at least question the claims that government goes on making for the benefits of subsidising the private sector. And our government advisors need to be much smarter to avoid being ripped off by it.

Since publication we have been advised that “One error in this is Airport handout = £15m from LEP (through regional growth fund) and £10m from centro – that’s £25m!!”