Let’s look at this another way. First, why is nationalisation popular? Let’s not play with trivia at the edges: let’s go to fundamentals. People know that what we’re talking about, whether it be trains, power, water and maybe other utilities (BT OPenreach is an obvious example; the banking platform that guarantees that payments can take place another, the National Grid a third, and healthcare an obvious fourth) are natural monopolies. There really is no room for a second serious supplier in any of these markets. Competition is not then ever going tio be a reality in practice.
Water pipes may well be a natural monopoly, the national grid too. But other than that where’s the natural monopoly in these things? Banking? Health care? Seriously? Hasn’t he even had the most modest look around the world to see that health care is near nowhere organised as a monopoly? Nor, actually, is water.
And they also know that the state can fund such businesses more cheaply than anyone else: if PFI has served any purpose then it has been to prove that the state’s cost of capital is vastly lower than the private sector’s, in which case using private sector funding for state activity rather than government borrowing now very obviously makes no sense at all to anyone but the most hardened of dogmatists.
How odd of an accountant to think that cost of capital is the only important thing either way. Did prices after privatisation rise or fall? And which way did profits go at the same time – even given that higher cost of capital?
Hmm, if cost of capital is the only important thing then what did happen, falling prices and rising profits just couldn’t have happened, could they?
So they now know the government can make money out of thin air for the sake of the economy when it is appropriate to do so. Using QE created funds to pay for nationalised assets would make sense.
Make the gilts in question very long dated, if they need be dated at all (after all, they’re replacing equity and equity is not dated) would be very wise.
Then make them very low coupon i.e. Set the interest rate very low. So low in fact they are very unlikely to exceed current inflation, but will still beat rates available from banks at present.
Substitute low coupon bonds for higher dividend equity? Err, how can that be paying full market value?
This is not rocket science. It just requires clear thinking.
Err, yes, yes…..