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Labour unveils National Grid takeover plan - your thoughts?

Discussion in 'Speaker's Corner' started by SDK^, May 16, 2019.

  1. The_Abyss

    Capodecina

    Joined: May 15, 2007

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    Location: Ipswich / Bodham

    No, you're still not understanding. This impact would be the equivalent of switching a stable high dividend yielding share for another one in another sector, or in the same sector in the another country.

    The impact could be positive or negative or none at all. It could add to, or take away, or make no difference to people's pockets, just like every other investment decision made by an pension fund investing.

    You're continuing to make the case for the ill-informed to cry that this would be bad for pension funds. My point is that it would likely make no difference if transacted at market value, and that it would if transacted at below market value.
     
  2. Rroff

    Man of Honour

    Joined: Oct 13, 2006

    Posts: 64,510

    I think you are being too dismissive of how big a factor in terms of stable growth they are in the context of pensions - sure they aren't the only thing pensions are funded on and there are no guarantees. Switching to the same sector in another country for instance falls foul of things like you mentioned earlier such as forex exposure and there aren't many alternatives that offer the same or better performance that they aren't already spread against so it increases the risk, etc.

    Also with the attitude some within Labour such as Corbyn have taken there is likely to be a push for them being transacted at sub market value.
     
  3. The_Abyss

    Capodecina

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    I've already covered the point about the value being transacted below market value and agree, so there's no need to keep bringing it up.

    The former point is a matter for the investment trustees of investment funds and the relevant IGCs. I'm not being dismissive of the impact at all, but rather generalising a complex point that's ultimately a matter for investment professionals to suggest that (for a number of reasons that i outlined above) utility companies are an attractive investment for pension funds, and that also there are equally attractive similar companies that do the same thing, and it is simply a question of asset allocation and risk exposure for these funds.

    In general, I suggested that utility stocks are (for the most part) relatively stable with high yielding dividends. There are plenty of those kinds of companies available to invest in: http://www.morningstar.co.uk/uk/news/132966/top-20-ftse-100-dividend-paying-stocks.aspx/

    And there are plenty of ways to achieve the same outcome without directly investing in those kinds of companies.

    So, we're back to the point about what impact this move would have on pension funds. My view is that:

    - if the nationalisation was transacted at market value, then there would be an impact but it would be negligible to the point that it is unknown, as there are plenty of equivalent stocks and strategies to achieve the same results
    - if the nationalisation was transacted at below market value then there would be a high risk of a loss
     
  4. D.P.

    Caporegime

    Joined: Oct 18, 2002

    Posts: 30,208

    I highly doubt that the transaction would be below a fair market rate, this just isn't a realistic proposal and I haven;t seen any suggestion that this is Corbyn's proposal. the complexity is defining a fair market value, because the share value will increase substantially under knowledge of a government acquisition at market value, thus the need to to define a value before the market was affected by thew decision.


    And as above, the effect on pensions will be minimal to non-existent because there are numerous alternative investments available and you can in general develop he same risk-return ratio though composition of higher and lower risk investments. There are far bigger effects in pension portfolios, the impending global recession will dwarf any micro-scale movement due to re-nationalization.

    There are also much bigger effects at play. Labopur isn't just proposing the simple re-nationalization of National Grid. That is just part of a much bigger push to properly tackling Climate change and environmental protection with a systematic move to re-newables. Any potential small loss in returns from NG could be more than mitigated by investment opportunities in solar and renewables given Labours pledge. Alternatively, such a bold but necessary move to reduce carbon footprint could have some big negative effects on energy in general and then industry indirectly. Frankly, it is a cost we have to simply bear in order to have any hope of a viable future for our grandchildren but I don;t actually think their ism much of a cost, only plenty of opertunity. China and India for examples are 100% on board the Paris agreement because simple economics shows with extremely high conference that the investment now will saves hundreds of billions in productivity later.
     
  5. Dolph

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    Location: Plymouth

    You didn't, you mentioned it, glossed over it, then posted a lot of irrelevance.

    Your post was an attempt to confuse, to build a straw man, because it focused almost entirely on a scenaro that isn't the one labour was proposing. Your attempts to pretend otherwise suggest this was a deliberate attempt to mislead, rather than an error on your part.
     
  6. Evangelion

    Capodecina

    Joined: Dec 29, 2007

    Posts: 23,053

    Location: Adelaide, South Australia

    See below.

    Really? When public services are privatised, quality of service inevitably drops, while prices shoot through the roof. This is because private operators have no incentive to improve service, and every incentive to improve profits.

    Government can run public services more cheaply, while absorbing losses (if necessary) that private operators cannot tolerate.

    Gifting the private sector a bunch of monopolies is never a good idea, especially if those monopolies include essential services
     
  7. FortuitousFluke

    Mobster

    Joined: Jul 7, 2011

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    Location: Cambridgeshire

    This depends entirely what you're looking at. When you assess central government privatisation you're right, there is the potential for monopolies, for gouging on both price and quality, I'm not a great fan of privatisation on a whole sector or whole service level. The problem is the government at various levels can't do everything so there needs to be that discussion about outsourcing non-core services, the issue comes when you consider that all political parties have a different idea of what core services are.

    Look at the care sector currently most local authorities will operate a blended approach, responsibility for management of individuals on a high level, including assessment of need etc will be considered core and will be delivered in house, the performing of care tasks is non-core and generally delivered by the private or third sector. This then becomes a question of are you getting value for money, any old school public sector care worker will tell you that the quality of care was better back when it was delivered by the state (anecdotal), I would argue that, even if that is the case, studies have shown that re:nationalising that aspect of care delivery will lead to the cost of care doubling.

    I like being able to shape services, the idea of inhousing something like care is incredibly attractive to me from the point of view of providing overall control that allows rapid and wholesale service transformation, however, I am also a pragmatist, and I know that we can't really afford to do it.

    Now having said all of the above I would have a massive problem with privatising the entirety of the care process, from assessment down to delivery. I will guarantee that will lead to massive overspends, poor quality, cut corners, and avoidable deaths. It's all about balance.
     
  8. Dolph

    Man of Honour

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    And yet reality when measured objectively disagrees. The railways now are better than they ever were under br, the energy companies are cheaper, relative to costs, than they were pre privatisation, ditto the phones etc.

    Your subjective view simply doesn't match the actual statistics.
     
  9. The_Abyss

    Capodecina

    Joined: May 15, 2007

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    Location: Ipswich / Bodham

    Not at all. I mentioned it and stated the outcome - a capital loss to pension funds - and left it at that as it would be the definitive outcome. That's not glossing over it - it is stating a fact. I was making a wider point about what the different impacts to pension funds could be, anticipating that this will be one of the factors held up by both sides as a reason to support or argue against the plans. That's about providing a balanced view, but I can understand that you prefer a more focussed context.
     
  10. FortuitousFluke

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    To be fair Dolph there are also some pretty high profile examples of privatisation being a disaster. You can look at issues in the prison service, probation services, failed contracts within public outsourcing organisations, outsourcing of the assessment for PIP, the state of the water network, rollout of broadband under open reach. Privatisation is not the miracle solution to public funding gaps that people seem to think it is.
     
  11. bloodiedathame

    Sgarrista

    Joined: May 11, 2007

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    Location: Surrey

    I have no expertise on the matter so my opinion is invalid.

    Though through rose tinted glasses it's a nice idea that an essential national resource is owned and run by the government in a not for profit way.

    The reality is far from that I'd imagine.
     
  12. VincentHanna

    Capodecina

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    Recently when the Government had to take over the East Coast rail contract, it was run better and generated more profits for the treasury than when Privatised.
     
  13. Dolph

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  14. VincentHanna

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    I hadn't seen your previous post, but it only disputes that the figures aren't quite as clear-cut as the Guardian make out.

    It doesn't address the point that customer satisfaction was better, which means the service must have been better.
     
  15. Dolph

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    This is true, a badly run or badly structured organisation is that regardless of the specifics of the ownership structure. A company that is a defacto or state granted monopoly will always have less structural incentive to perform well, regardless of ownership structure, and prison and probation services should IMO never be Privatised as they involve the application of the state monopoly on the legitimate use of force.

    There is also, as I have mentioned, a big difference between state owned and state run, with the latter being much more prone to bad practices and processes than the former.
     
  16. Dolph

    Man of Honour

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    Customer satisfaction on uk railways is one of the highest in Europe, despite the uk being one of the busiest networks in Europe, which given the vast majority is Privatised, doesn't really back up your case.

    https://www.raildeliverygroup.com/media-centre/press-releases/2017/469771615-2017-02-11.html

    This is the problem, you have to start with an honest review of reality if you want to change things, otherwise you'll take the wrong actions.
     
    Last edited: May 17, 2019
  17. ttaskmaster

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    NVM
     
    Last edited: Oct 3, 2019
  18. FortuitousFluke

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    I'm not sure that a privatised industry has much more incentive to perform well when compared to a state owned monopoly. If we're talking bottom line they have two fundemental requirements:

    1. Perform at a level, against their KPIs, that ensures either contractual compliance, or, performance to a level below contractual compliance which won't result in termination. Effectively they must provide a minimum level of performance. If this were a private sector organisation selling to the general public or the private sector then they would need to meet a level of compliance that ensured return custom, but that's not how it works in the public sector.

    2. Perform at a level of efficiency that ensures the maximum level of profit for shareholders, note that due to the relationship between public sector commissioners and providers there is no requirement to ensure that this doesn't come at the cost of quality, provided the red line laid out in point 1 isn't breached.

    Now the big kicker comes when you come to retender the service, because it's very difficult to exclude poor performing organisations unless that under-performance has been formalised. So you can coast at the red line, and as long as you don't default or find yourself breaching a contract you're probably okay.

    Again the above isn't true in all cases, but from my experience you can't apply general rules to private sector and public sector management in order to imply that one is more successful than the other. As an example I've seen a damn sight more quality issues come about as part of contracting with private organisations than I have from internal public sector services. There's a cost benefit in the short term, but it's not as massive as you'd think when you consider the additional activity required to manage the quality drop, the costs of underperformance on related services, and the risk of contractual failure.
     
  19. Tony Edwards

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    Article asks turkeys what they think of Christmas. Turkeys say they dont like it! Shock. :p
     
  20. ttaskmaster

    Sgarrista

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    NVM
     
    Last edited: Oct 3, 2019