Letters to the Press

More ‘quids’ than ‘pro quo’ I fear
By Richard Toller

Why is it impossible to get an NHS dentist’s appointment in North Devon, and why is it so expensive to go privately? Why has taking your pet to the vet’s surgery become financially terrifying? Are the people we all know and like in these businesses making a fortune? Well, no. There’s an - innocuous sounding - factor at work here called “Private Equity”; so how does it work? (Please bear with me; followers of Manchester United may recognise a pattern).

Imagine an independent business that is worth £10 and makes £1.50 profit per annum. Along comes a Private Equity “Investor” and buys the business for £11. They then go to a bank and borrow £10 at 10% a year, secured against the assets of the business, (re-pocketing the £10); loan interest will cost the business £1 per year. The “owners” are now making net 50p a year on their net investment of £1 – a 50% return. For every 1 percent the profits of the core business goes up, their return goes up by 10 percent. Private Equity Investors love (and are massively invested in) business sectors like vets, dentists, undertakers, and care homes – all where the customer has little bargaining power, so prices can be ramped up easily; staffing costs (wages) may even be reduced; any uneconomic local social responsibility is eliminated (no NHS appointments). If the business fails, the bank, the state or employee pensions will be there to pick up the pieces, as no profits or initial value will have been retained within the core business. This is what “efficiency” looks like in the modern, deregulated world.

It is this kind of “financial engineering” that has caused so many of the problems in the water industry, whether owned through private or public equity.

We get all misty eyed about the free market, imagining scenes from the Mayor of Casterbridge and Adam Smith’s “invisible hand” directing the widget maker for the general good. The old, generally benevolent form of free market has mutated into an often-malevolent offspring, mainly interested in extracting profits – the euphemism is “maximising shareholder value”. The invisible hand is now throttling our society and, literally, our planet, while the ideologues who make up much of today’s Conservative Party cheer it on.

It may not come as a great surprise that Private Equity “Investors” are among the largest financial backers of the Conservative Party, along with hedge funders, dead people (look it up!)  and an opaque Conservative Party membership open to people from anywhere in the world; this week an order has been quietly slipped through by the government, allowing political parties to increase election spending by 45%, favouring the Conservatives; (all this when there’s supposedly not enough money for vital services). This country used to pride itself on one person one vote; the main backers of the Conservative Party today want one dollar one vote, but they also want their “quid pro quo” – indeed, usually lots of “quids” in all our pockets!”

I have recently been feeling deep despair about the atrophy of our society, about the climate, and much else; this is quite the wrong approach. We must all start acting together from today to repair our social and economic fabric, and to ensure the world is liveable for those coming after us.

Firstly, the local Conservative MPs must go; there will be money behind them, and social media campaigns, and AI, but they must go; they put on a show of concern but are at heart enablers of our decline.

Then we need to fight for a society that is fair; we need fair government and a fair, properly regulated economy.  This will need deep constitutional reform, but there are plenty of ideas and proposals out there. I strongly recommend listening to Ben Ansell’s first 2023 Reith Lecture on “Our Democratic Future” on BBC Sounds.

Richard Toller,
Queens Nympton

Published in the North Devon Gazette, December 2023

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