‘An education arms race’: inside the ultra-competitive world of private tutoring

A growing number of parents and guardians are paying for children as young as four to receive additional tuition. What is fuelling this booming industry asks Sally Weale in The Guardian?

As dusk falls in the Girlington district of Bradford, a trickle of cars begin to arrive in front of a small parade of shops. Parents who have just collected their children at the end of the school day are dropping them off at the Explore Learning tuition centre for extra maths and English coaching. The children sit at a cluster of computer terminals, where they log in to begin their evening studies. The atmosphere is relaxed and lighthearted. The children stay for an hour to work through their lessons, helped where necessary by a member of staff, with 15 minutes’ playtime at the end.

Located next to a Domino’s and a Subway, the Bradford branch of Explore Learning is a tiny window into Britain’s booming private tuition sector, now worth an estimated £2bn. At one time, private tuition meant a weekly one-to-one session at home with a tutor, the preserve of the privileged few. It is still not cheap – Explore Learning’s standard membership costs £119 a month, plus a £50 registration fee – but it is now on offer on our high streets, in supermarkets and increasingly online, with tutors offering their services from as far afield as India and Sri Lanka. Tutees include children who are little older than toddlers, pupils at prestigious private schools and undergraduates struggling at university. All are caught up in an educational arms race, which experts say is exacerbating social inequality.

The success of Explore Learning reflects some of these changes. The business was founded in 2001 by Bill Mills, a Cambridge maths graduate, and now has 139 centres around the country (plus five in Texas run by a sister company). They are located mainly in shopping centres, so busy parents can get on with their weekly shop while their offspring perfect their times tables, punctuation and grammar. Most of the children, who are aged four to 14, come at least a couple of times a week – the membership allows for up to nine sessions a month. Saturday and Sunday afternoons are the busiest times in the Bradford branch, which has 290 children on its books. The tutor-tutee ratio is one to six, but the tutors are not usually qualified teachers; they may be students or mothers returning to the workplace. All are trained in the teaching materials and behaviour management.
The families who use the centre come from various walks of life. Some parents have their own businesses; others work at Bradford Royal Infirmary. There are families from Latvia, Poland and the Philippines. The parents talk about giving their children “an edge”, the “leg up” they never had. Among them are a shift worker, Malik Ijaz, and his wife, Ayesha, who have been bringing nine-year-old Abubakar and his seven-year-old sister, Amna, to the centre for nearly two years. It is a big expense for the family, but the children’s education is a priority. Ijaz works extra shifts to be able to afford it. A third child, four-year-old Ali, will come when he is older.

‘I’m trying to do something for him that I never got’ ... Geoff Clayton, Brooklyn’s grandfather. Photograph: Christopher Thomond/Christopher Thomond/Guardian

“The world is very competitive and everybody is working very hard,” said Ijaz. “I know the school are doing very well, but there are 30 students in each class. It’s one teacher and support staff. They try their best to help, but I realise if I’m going to give my kids some extra help it’s going to be brilliant for their future. Anyone who does a bit extra always gets ahead.”

He is ambitious for his children. “I warn my kids they should be top – or among the top five at least – in class. They are doing well. I don’t mind paying extra. I’m investing in their future. I know the importance of education. My kids love it.”

Abubakar, a quiet, serious child, is planning to sit the 11-plus to win a place at grammar school. Sometimes he does not feel like starting work, “but when I’ve started I like to carry on”. Amna is a chatty livewire and wants to be a paleontologist. “I’m good at maths, but the thing I’m best at is history,” she chirps. “My brother does hard work. I’m doing the same now. I want to be the same as him.”

Geoff Clayton, a retired garage worker, has been bringing his 10-year-old grandson, Brooklyn, to Explore Learning for about nine months. Brooklyn lives with his grandparents and likes football, Minecraft and maths. “He’s done really well,” says Clayton. “His reading has got a lot better, everything’s got better.” The membership takes a significant chunk out of his pension, but he is happy to pay it to give Brooklyn “a bit of a leg up”.

“Nowadays, it’s all about exams and certificates and what you know,” he says. “When I left school, it was more: ‘Can you do the job?’ Brooklyn has done a heck of a lot better since coming here. Sometimes he moans, but he’s OK once he’s here. It does work if you’re prepared to put the time and effort in.”

The Sutton Trust, a charity that seeks to improve social mobility through education, has documented a huge rise in private tuition in recent years. Its annual survey of secondary students in England and Wales revealed in July that 27% have had home or private tuition, a figure that rises to 41% in London.

The Bradford outpost of Explore Learning, which now has 139 centres across the UK. Photograph: Christopher Thomond/Christopher Thomond/Guardian

With tutoring commanding a fee of about £24 an hour, rising to £27 in London (although many tutors charge £60 or more), the trust is concerned that the private tuition market is putting children from poorer backgrounds at even greater disadvantage. To redress the balance, it would like to see the government introduce a means-tested voucher system, paid for through the pupil premium funding that schools receive to support disadvantaged pupils.
“We are in an education arms race,” says Peter Lampl, the founder of the trust. “Parents are looking to get an edge for their kids and having private tuition gives them that edge. But if we are serious about social mobility, we need to make sure that the academic playing field is levelled outside the school gate.”

Initiatives aimed at making tuition more accessible already exist: some agencies pledge a proportion of their tuition to poorer pupils for free, while non-profit programmes such as the Tutor Trust connect tutors with disadvantaged schools. Explore Learning offers “scholarships” that give a 50% discount to parents on income support or jobseeker’s allowance. Parents can also use childcare vouchers and tax-free childcare schemes to help pay for tuition.

Nevertheless, huge inequities in education persist. Nowhere is this more evident than in children’s battle to pass the 11-plus to get into grammar school. Research published earlier this year revealed that private tutoring means pupils from high-income families are much more likely to get into grammar schools than equally bright pupils from poorer families. John Jerrim and Sam Sims from the Institute of Education at University College London looked at more than 1,800 children in areas where the grammar school system is in operation. They found that those from families in the bottom quarter of household incomes in England have less than a 10% chance of attending a grammar school, compared with a 40% chance for children in the top quarter.


If we are serious about social mobility, we need to make sure the academic playing field is levelled outside school - Peter Lampl, the Sutton Trust

They also established that wealthier families are much more likely to use private tutors to prepare their children for the entrance exam. Fewer than 10% of children from families with below-average incomes received coaching, compared with about 30% from households in the top quarter. About 70% of those who received tutoring got into a grammar school, compared with 14% of those who did not.
Alexa Collins lives in Buckinghamshire, which operates a grammar school system. She could not afford tuition to prepare her daughter for the 11-plus; despite being a top performer at primary, she failed the test, but has since thrived at her comprehensive, gaining nine GCSEs.

Collins, who went to grammar school herself but received no coaching, says she is ideologically opposed to tutoring because it is unfair to those who cannot afford it. Although she can see the case for short-term tutoring on a specific subject when a child is struggling, she adds: “I think it’s awful, that idea of tutoring kids from seven to push them through this exam. How can you possibly put that pressure on them?”

Another parent, who wishes to remain anonymous but lives in Kent, which operates grammar schools, says her son tackled the 11-plus without a tutor. “It felt morally wrong to claim an advantage by paying cash. It’s so unfair.” As she tried to coach her son, she felt at huge disadvantage. “So much depends on a parent’s skills to teach. A tutor would know the best way to teach the 11-plus concepts. I was terrible at maths at school, so I was really stuck.”

“The government claims that expanding grammars will boost social mobility,” said Jerrim, a professor of education and social statistics at UCL, when the research was published. “But our research shows that private tuition used by high-income families gives them a big advantage in getting in.” One of the factors behind the increase in tuition, he says now, is the pressure exerted by school league tables and growing accountability measures. “Those schools might well be passing pressure on to parents,” he says. “It’s not a negative reflection on schools and the job that they are doing; it’s more a reflection of the pressure they are under to achieve results.”

A callout asking Guardian readers about their experiences of tuition drew hundreds of responses from tutors, parents and school teachers. One tutor told of being approached by parents of children as young as three or four; another had been hired to provide extra coaching for pupils whose parents were already paying for all of the privileges of private schools, including Marlborough and Eton. “We pay thousands of pounds a year on school fees,” said one parent. “If he needs a little help with certain subjects, why wouldn’t you help him?” There also appears to be a trend for university students to buy extra tuition. Most are already paying £9,250 a year in tuition fees, so why not spend a little more to ensure they get the best possible degree?

The Profs, which launched in 2014, specialises in degree-level and professional-qualification tutoring. According to its website, an undergraduate teacher with a master’s in the required subject costs upwards of £70 an hour (plus a £50 placement fee); tutors specialising in applications to Oxbridge and Ivy League universities start at £120 an hour, plus a £250 consultation fee. According to Leo Evans, one of the founders of The Profs, university lecturers can struggle to address individual learning difficulties. “Catching stragglers and helping them get on top of their studies is a useful social function. Also, for students with disabilities and impairments, it’s essential.”

 I don’t mind paying extra. I’m investing in their future’ ... Malik Ijaz and his wife, Ayesha, bring a son and a daughter to the Bradford classes. Photograph: Christopher Thomond/Guardian

Other responses to our callout came from parents who were worried about schools’ increasingly limited resources due to budget cuts. Much of the additional support that was once available in classrooms is disappearing and some specialist teachers are in short supply. These parents see tutoring as a way of patching the gaps in their children’s education. “It’s only one hour a week, but the practice crammed into that time is like a full week of lessons at school,” said one parent, who is a teacher. “The ability to check every week how well the information is being retained is great. It also provides ‘real-time’ feedback that we don’t get from schools.”

Some parents buy extra tuition to support children with special educational needs such as dyslexia, which mainstream schools are increasingly unable to meet. The new, tougher GCSE exams are also a factor, with some parents hiring private tutors to help children who are struggling to secure the level 4 or above required in English and maths.

One mother from Nigeria said she sought extra support for her child as a practical response to racial discrimination: “Any child from a minority has to be many times better than their white counterparts to be able to get into the top schools and universities.” Another parent told of a daughter with cancer who missed a year of formal education, but got through with the help of a tutor. Another respondent claimed the shadow tutoring workforce “props up” some “outstanding” schools – private, grammar and state.

Not everyone was positive about the impact of tuition. “It can cause students to not work in lessons,” said one teacher. Another said: “The need for tutoring frightens me. Schools should be able to offer students the support they need in class sizes that are manageable.” While one parent said: “I resent it when having a tutor is seen as a class crime,” another acknowledged the unfairness at the heart of the system: “I feel uncomfortable that we can afford to pay for this privilege.”

The callout also revealed the appeal of private tuition for teachers, whose salaries have been depressed for years while the demands upon them have grown. Some said they did private tutoring to boost their income; others, tired of the one-size-fits-all approach in schools, have quit their jobs to do it full time.

Asked about the boom in private tuition, the Department for Education responded that standards are rising in schools and that the attainment gap between rich and poor pupils is shrinking. “While we believe families shouldn’t have to pay for private tuition, it has always been part of the system and parents have freedom to do this,” a spokesman said.

“Tutoring is huge, it’s getting bigger and it’s not going away,” says the Sutton Trust’s Lampl. “You can’t stop people from doing it. What we’ve got to do is make it more accessible for parents who currently can’t afford it.”

Clayton, the retired garage worker from Bradford, is not a rich man, but he wants to invest what he has in his grandson’s future. His hopes for Brooklyn are modest and honourable and shared by parents and grandparents everywhere. “I want Brooklyn to have a good start in life … Nobody gave me a leg up. I’m trying to do something for him that I never got. I hope he ends up being a decent person when he grows up and gets a decent job and doesn’t have to struggle.”

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Capitalism’s new crisis: after Carillion, can the private sector ever be trusted?

Will Hutton in The Guardian


It is one of the most spectacular corporate failures of recent years. Carillion’s collapse, with £2bn of debts, threatens to deprive tens of thousands of workers, directly or indirectly, of their livelihood. The company had only £29m of cash left. This broaches new levels of fecklessness and the impact will be felt across Britain.

For Carillion was not only a major construction company: it had entered the lucrative public service delivery business. The shockwaves have been felt not only on building sites but in multiple schools, hospitals and even prisons, where tens of thousands of cleaners, porters and maintenance workers have suddenly found their employer has gone bust.

The hospital and school workers on TV news, worrying about their next payslip, are a forceful reminder of how deeply privatisation has entered everyday life.

Schools are run by private academy trusts and school meals provided by companies like Carillion. Switch on the light, catch the bus, post a letter, turn on the oven, drink a glass of water, register for an apprenticeship, use a train, park the car or eat the food in the hospital canteen – it’s all provided by private companies.

The amount of activity now performed by organisations we all own and whose overriding purpose is public service is minimal. Day-to-day life now depends on private companies with private ambitions.

The intertwining of the public and private is not new: it is as old as the state. Elizabeth I’s navy was built in private shipyards; the warplanes and engines that won the second world war were built in corporate factories. There is nothing novel in contracting out or public commissioning; the debate is where to draw the line – and whether the contractors will deliver what they promise.

It was the advent of Margaret Thatcher that saw the first major redrawing of the line, with a wave of wholesale privatisations.

Private owners would necessarily perform better than any public owners because they were private, it was asserted. But that was only the beginning.

Why couldn’t the same principle be extended to the heartland areas of public provision in central and local government? Private companies, like Capita or Carillion, could accept commissions to run the functions of the state more cheaply than government could itself. The state could become no more than a commissioning and procurement agency. The public services delivery industry was born.

In the 1990s, John Major’s government flirted with going further, getting private companies to own and finance public facilities, such as hospitals and prisons. However, whatever the ideological attractions, private borrowing costs were prohibitively high.

It took New Labour’s zeal to get private borrowing off the public books, at any price, for the private finance initiative (PFI) to boom: nearly all Britain’s PFI deals – more than 700 of them – were done by New Labour. 

There is now a sense, growing with every successive scandal, that the privatisation of the everyday has gone too far – a mood captured by startling opinion poll majorities of 80% in favour of renationalising utilities. The opposition leader, Jeremy Corbyn, struck a chord when he said Carillion’s failure was a key moment.

Carillion’s failure is part of a wider story of corporate mishaps and debacles. The financial crisis, starting with the run on Northern Rock and culminating with Royal Bank of Scotland teetering on the point of closure, was a tipping point: banks and building societies could no longer be trusted.

Since then, a succession of illustrious British names have become embroiled in varying crises. BT, Tesco and, most recently, GKN have all suffered from multimillion-pound accounting irregularities, with the resulting fall in GKN’s share price exposing it to an opportunistic £7bn hostile takeover last week.

The public service delivery industry, of which Carillion is part, is not exempt. Serco and G4S have had to repay £180m for the overcharging of tagged prison offenders.

Learndirect – privatised and sold to the private equity arm of Lloyds Bank in 2011 and, until recently, Britain’s biggest training provider – proved to be systematically failing up to a third of its apprentices; it is being investigated by the National Audit Office.

Stagecoach and Virgin say they will walk away from their East Coast mainline contract unless the government waives up to £2bn of contract payments.

PFI, aimed at getting debt off the government’s books, turns out to be organised hugely in the private sector’s interest. The taxpayer is up to £150bn out of pocket. And now Carillion.

But is it capitalism, or capitalism British-style, that is at fault? The Conservative party, as the promoter of capitalism and the private sector, sees no differentiation – and neither does the current leadership of the Labour party, who are in receipt of a political gift.

There must be an end to privatisation’s dogma and rip-offs, runs the attack by Jeremy Corbyn and John McDonnell: the answer is plainly nationalisation and bringing contracts back “in-house”, which, if Labour were elected, would become a statutory requirement. There will be no more indulging of the private sector with the taxpayer picking up the bill. How could Carillion continue to be awarded contracts last year, including for HS2, after issuing a series of profit warnings? Above all, says Labour, it seems to be one law for workers and another for overpaid directors.

These are telling criticisms, but they do not get under the skin of why so much has gone wrong. Britain’s nationalised industries suffered from inefficiency and persistent underinvestment. Taking activity back in-house is a strong soundbite, but no panacea.

While some public sector delivery is outstanding, notably in parts of the NHS, the general pattern is more patchy. It is for this reason that governments for decades have been contracting the private sector to deliver goods and services. Trying to extend that principle is not unreasonable if high-quality private sector partners step up to the mark: the problem is they are in such short supply. Equally, a better-designed private finance initiative could have transferred risk and debt to the private sector more equitably. Why did British companies drive such an impossibly expensive and unfair bargain? 

Some of the answers lie in the Carillion scandal. Its top directors were exceptionally well rewarded if they could keep the share price up, which meant running the company to minimise short-term costs and cap investment, with no margin for error. Carillion might have survived one mishap, but a succession inevitably bowled it over.

When the terms of directors’ pay was changed in the very small print of a remuneration report, so that extravagant short-term bonuses could still be paid even if Carillion collapsed, no shareholder noticed the change. Nor did any of the proxy voting agencies to whom many shareholders delegated their votes and decision-making rights. Indeed, when Carillion was begging the government for a short-term £150m loan at the very last, no investors were alongside them, mounting or supporting a rescue package. The main shareholder activity was to sell the shares short.

This was an ownerless company denuded of any purpose except seemingly to enrich its directors and keep its rootless multiple shareholders happy from one profit-reporting period to another. There was no mission to deliver, no drive for excellence, no pride in service. Workers were disposable notations on spreadsheets. Yet it could be different.

This malaise is at the heart of too many British companies and is what lies behind the litany of disasters and economic under-performance. One leading international investment manager, who wishes to remain anonymous, says that British companies suffer from a disproportionate number of irregularities, fines, missed profit forecasts and malpractice compared with the companies in which he invests in other countries. It is part of a wider picture in which British companies tend to under-invest and under-innovate – even while executive pay has grown at a startling rate to become, per pound of turnover, the highest in the world.

So what to do? One of the striking distinctions of the British system, as the Big Innovation Centre’s Purposeful Company Taskforce revealed in its 2016 Evidence Report (full declaration: I am the co-chair), is that British quoted companies do not have “anchor” shareholders owning a critical mass of their shares (blockholders in the jargon) – engaged owners who will support them through thick and thin. Instead, British companies have the most diffuse, disengaged and transactional shareholder base of any corporate sector in the advanced industrial world.

With so many shareholders, the voice of any single one is easy to ignore. The yardstick becomes immediate financial performance. A preoccupation with the short-term share price becomes inevitable, with shareholders linking executive pay to achieving just that.

On top of this, there is a culture, imported from the US and legitimised by the dominant free market theories of the 1970s and 80s, that the sole purpose of a company is to make as much money as possible as quickly as possible.

In Professor Milton Friedman’s conception, a company can only make a lot of money if it is delivering economic and social good. But maximising shareholder value has become corporate Britain’s intellectual god.

British company law does not require companies to declare any purpose when they incorporate: indeed, the whole British ecosystem is organised to put short-term financial priorities first, and all the other things that make a company great – its people, its relationship with its customers, its capacity to innovate, its declared reason for being – in second place. Bad economics married with Britain’s unique institutions delivered what we now have: a rogue form of capitalism.Q&A
What went wrong for Carillion?Show

The task now is to repurpose that capitalism – a task with no single solution, but rather a range of initiatives that cumulatively will move the dial.

The first step is to make declaring a purpose beyond profit-making mandatory, and incorporating it in the constitution of the company – its articles of association. Another is to harden up the requirements to incorporate wider stakeholder interests into corporate decision-making. Companies should be required to put their reason for existing to a regular shareholder vote, a “say on purpose” beyond merely maximising profits.

Every effort should be made to widen company types beyond the public limited company. There should be more co-operatives and employee-owned companies – companies consecrated to delivering a public benefit first and foremost. The £7 trillion asset management industry should take its obligations as owners much more seriously: every inhibition to forming “anchor” shareholding groups should be dropped, every incentive to become more active long-term stewards encouraged.

Directors’ bonuses should be paid only after a period of between five and seven years, so that boards think long-term. Trade unions should be encouraged, their voices heard and built into company decision-making. Pension funds should be encouraged to invest in purposeful companies; up to £100bn could be earmarked. The 40,000 pension funds should also be consolidated into many fewer entities, so they have genuine clout. The under-resourced and under-powered Financial Reporting Council should become a proper business regulator.

There is a movement for change, but it is on the margins. In Britain, along with the Purposeful Company Taskforce, there is Tomorrow’s Company and Blueprint for Better Business all arguing for systemic change. Internationally, the thinktank Focusing Capital on the Long Term makes a similar argument, as does the “inclusive capitalism” movement. The TUC, under Frances O’Grady, is pushing a parallel agenda.

The best and most reflective people in the business lobby are alarmed by the growing “trust gap” and want to close it. There is intellectual support: the new economics is attempting to integrate the best of free-market, Keynesian and even Marxist traditions. Companies cannot be seen as solely profit machines, but as complex problem-solving organisations, bound together by the social glue of shared purpose, in which tensions and power battles between management and stakeholders will be inevitable. How companies are owned, purpose expressed, directors paid and stakeholder interests traded off will be of fundamental importance.

More Carillion-style disasters lie ahead as the economy slows down. The government cannot continue to ignore these failings, nor can the Labour party simply promise to nationalise everything. The debate about our capitalism can only deepen. For the ordinary Briton, the sooner it is resolved the better.

Carillion collapse a ‘watershed’ for outsourcing

George Parker and Gemma Tetlow in The Financial Times

The collapse of Carillion, the company responsible for everything from building hospitals to providing school meals, is a “watershed” moment that proves that the private sector should not be running swaths of Britain’s public services, according to Labour leader Jeremy Corbyn. 

The revolution in outsourcing public services started by Margaret Thatcher, which by 2014-15 accounted for about £100bn or 15 per cent of public spending according to the National Audit Office, faces a thorough reappraisal, with Mr Corbyn standing ready to disrupt the industry altogether. 

“It is time to put an end to the rip-off privatisation policies . . . that fleeced the public of billions of pounds,” said Mr Corbyn, in a video that was watched almost 300,000 times in 24 hours on Facebook. 

“Across the public sector, the outsource-first dogma has wreaked havoc. Often it is the same companies that have gone from service to service, creaming off profits and failing to deliver the quality of service our people deserve,” he added. 

Outsourcing of public services to the private sector was virtually non-existent in the 1970s, but Mrs Thatcher changed that in 1980 when local authorities — which had previously directly employed blue-collar workers to build roads and houses, and collect refuse — were required to put the work out to tender. 

David Willetts, a former Treasury official, policy wonk and later Tory MP, was a key promoter of the private finance initiative, but admits that in some recent projects the scheme has gone awry. 

He argues that it was right to hand projects to the private sector if there was a genuine transfer of risk, but that the Carillion collapse had exposed cases where in the end, the risk reverted to the government, which had to maintain public services. 

Last year John McDonnell, shadow chancellor, vowed at the Labour conference to nationalise such contracts as part of a wider plan to roll back private sector involvement in public services. Carillion has strengthened his resolve. 

 

In a more detailed email briefing, the party’s position seemed more nuanced. It said Labour would “look to” take control of PFI contracts and that it would review all of them and — “if necessary” — take them back in-house. 

This has unsettled some Labour moderates. “Where is the element of choice if everything is done in house by a public sector body?” asked one Blairite former minister. “Could things be done differently? All that would be lost.” 

Since 1980 huge swaths of services — from providing school meals to refuelling RAF aircraft — have been outsourced to the private sector under Conservative and Labour governments. 

This outsourcing boom led to the creation of new companies, such as Capita, that specialise in serving public sector clients but it also attracted existing overseas municipal providers, such as Veolia. 

NAO figures suggest the bulk of central government spending on outsourcing goes to pay for IT, facilities management and professional services. Local authorities rely on the private sector to provide a range of services from social care to waste disposal, and the private sector provides healthcare to NHS-funded patients. 

Several high-profile outsourcing failures have raised questions about whether the taxpayer is getting best value for money from some contracts. Carillion’s collapse is the most recent, but not the only example. 

Members of the armed forces were drafted in to provide security for the 2012 London Olympic Games after G4S was unable to provide sufficient numbers of staff.

The failure of Metronet, which had been contracted to maintain and upgrade the London Underground, in 2007 cost the taxpayer at least £170m. Several privately run prisons have hit the headlines over the past 18 months as levels of violence have increased while spending and staff have been cut. 

But many other public services have been successfully outsourced with little or no public comment. 

“Most people in Britain are endlessly using contracted-out services without really noticing it,” said Tony Travers, a professor at the London School of Economics. “The question is what is the contract mechanism to ensure that what is done is done appropriately.” 

He said at least two lessons could be drawn from recent failures. The first is that overzealous efforts by government to drive down costs in contracts are not necessarily a good thing. 

Carillion is not the only private provider to have signed up to contracts committing to providing services at implausibly low cost. At the end of last year, the Competition and Markets Authority highlighted concern that private providers of social care that serve mainly the public sector were “unlikely to be sustainable” unless local authorities paid more for their services. 

The second lesson is that ministers and civil servants need to carry out proper due diligence on companies tendering for public contracts.

The “Inefficient” State Mops up the Disasters caused by “Efficient” Private Companies.

George Monbiot in The Guardian


Again the “inefficient” state mops up the disasters caused by “efficient” private companies. Just as the army had to step in when G4S failed to provide security for the London 2012 Olympics, and the Treasury had to rescue the banks, the collapse of Carillion means that the fire service must stand by to deliver school meals.

Two hospitals, both urgently needed, that Carillion was supposed to be constructing, the Midland Metropolitan and the Royal Liverpool, are left in half-built limbo, awaiting state intervention. Another 450 contracts between Carillion and the state must be untangled, resolved and perhaps rescued by the government.

Fire services ready to deliver school meals after Carillion collapse


When you examine the claims made for the efficiency of the private sector, you soon discover that they boil down to the transfer of risk. Value for money hangs on the idea that companies shoulder risks the state would otherwise carry. But in cases like this, even when the company takes the first hit, the risk ultimately returns to the government. In these situations, the very notion of risk transfer is questionable.

Nowhere is it more dubious than when applied to the private finance initiative projects in which Carillion specialised. The PFI was invented by John Major’s Conservative government, but greatly expanded by Tony Blair and Gordon Brown. Private companies finance and deliver public services that governments would otherwise have provided.

The government claimed that the private sector, being more efficient, would provide services more cheaply than the private sector. PFI projects, Blair and Brown promised, would go ahead only if they proved to be cheaper than the “public sector comparator”.

But at the same time, the government told public bodies that state money was not an option: if they wanted new facilities, they would have to use the private finance initiative. In the words of the then health secretary, Alan Milburn: “It’s PFI or bust”. So, if you wanted a new hospital or bridge or classroomor army barracks, you had to demonstrate that PFI offered the best value for money. Otherwise, there would be no project. Public bodies immediately discovered a way to make the numbers add up: risk transfer.


Nurses might be laid off, but the walls will still be painted


The costing of risk is notoriously subjective. Because it involves the passage of a fiendishly complex contract through an unknowable future, you can make a case for almost any value. A study published in the British Medical Journal revealed that, before the risk was costed, every hospital scheme it investigated would have been built much more cheaply with public funds. But once the notional financial risks had been added, building them through PFI came out cheaper in every case, although sometimes by less than 0.1%.

Not only was this exercise (as some prominent civil servants warned) bogus, but the entire concept is negated by the fact that if collapse occurs, the risk ripples through the private sector and into the public. Companies like Carillion might not be too big to fail, but the services they deliver are. You cannot, in a nominal democracy, suddenly close a public hospital, let a bridge collapse, or fail to deliver school meals.

Partly for this reason, and partly because of the inordinate political power of corporations and the people who run them, governments seek to insulate these companies from the very risks they claim to have transferred to them. This could explain why Theresa May’s administration continued to award contracts to Carillion after it had issued a series of profit warnings. Was this an attempt to keep the company in business?

If so, it was one of a long list of measures designed to privatise profit and socialise risk. PFI contracts specify that if there is a conflict between paying the private provider and delivering public services, the payments must come first. However deep the crisis in the NHS becomes, however many people must have their cancer operations postponed or be left to rot on trolleys, the legal priority is still to pay the contractor. Money is officially more valuable than life.

If a PFI consortium is contracted to deliver maintenance and ancillary services, these non-clinical functions are ringfenced, while the clinical services delivered by the public sector must be cut to make room for them. This forces public bodies to respond perversely to a funding crisis: nurses might be laid off, but the walls will still be painted. Many of the contracts cannot be broken for 25 or 30 years, regardless of whether or not they still meet real needs: again, this insulates the private sector from hazard, leaving it with the public. The risk lands not only on the state but also on the people. Carillion leaves behind a series of scandals, such as the food hygiene failure at Swindon’s Great Western Hospital, and the failings at the Surgicentre clinic it ran in Hertfordshire, revealed in a horrifying report in the Observer. Similar crises have attended many other deals with private providers: operating theatres flooded with sewage, power cuts which have left nurses to ventilate patients on life support by hand, school buildings falling apart, useless services continuing to be delivered while essential services are cut.

None of this was unforeseen. Some of us warned again and again during the New Labour years that this programme would prove to be an expensive fiasco. Even the Banker magazine predicted, in 2002, that “eventually an Enron-style disaster will be rerun on a sovereign balance sheet”. But the government didn’t want to know. Nor did the Conservative opposition, whose idea it was in the first place. Nor did the other newspapers, now apparently scratching their heads and wondering how this happened. There is no joy in being proved right, just immense frustration.

Risk to a company is not the same as risk to those who own and run it. The executives keep their payoffs. The shareholders take a hit on part of their portfolios, but limited liability ensures they can walk away from any debts. The company might disappear, but ultimately it’s just a name and some paperwork. But the risks imposed on the people – including the company’s workers – are real. We pay for these risks twice: first, when they are nominally transferred to corporations; then again, when they are returned to us. The word used to describe this process is efficiency.

How a tax haven is leading the race to privatise space

Atossa Araxia Abrahamian


On a drizzly afternoon in April, Prince Guillaume, the hereditary grand duke of Luxembourg, and his wife, Princess Stéphanie, sailed through the front doors of an office building in the outskirts of Seattle and into the headquarters of an asteroid-mining startup called Planetary Resources, which plans to “expand the economy into space”.

The company’s engineers greeted the royals with hors d’oeuvres, craft beer and bottles upon bottles of Columbia Valley rieslings and syrahs. In the corner of the lounge stood a vintage Asteroids arcade game; on the wall hung an American flag alongside the grand duchy’s own red, white and blue stripes. Between the two flags was a prototype of a spacecraft designed to roam the galaxy, prospecting asteroids for precious natural resources that would someday – at least in theory – make the shareholders of Planetary Resources very wealthy earthlings indeed.

The nation of Luxembourg is one of Planetary Resources’ main boosters. The country’s pledge of €25m (£22.5m) – which includes both direct funding and state support for research and development – is just one element of its wildly ambitious campaign to become a terrestrial hub for the business of mining minerals, metals and other resources on celestial bodies. The tiny country enriched itself significantly over the past century by greasing the wheels of global finance; now, as companies such as Planetary Resources prepare for a cosmic land grab, Luxembourg wants to use its tiny terrestrial perch to help send capitalism into space.

Space exploration has historically been an arena for grand, nationalistic operations that were too costly, dangerous and complex for civilians to take up without state backing. But now, private companies now want in, raising questions that, until recently, have seemed like mere thought experiments or hypotheticals: who can lay claim to an asteroid and all of its extractive wealth? Should space benefit “all of humankind”, as the international treaties signed in the 60s intended, or is that idealism outdated? How do you measure those benefits, anyway? Does trickle-down theory apply in zero-gravity conditions?

Space is becoming a testing ground for these thorny ethical and legal questions, and Luxembourg – a tiny country that has sustained itself off of regulatory intricacies and tax loopholes for decades – is positioning itself to help find the answers. While major nations such as China and India plough increasing sums of money into developing space programmes to rival Nasa, Luxembourg is making a different bet: that it can become home to a multinational cast of entrepreneurs who want to go into space not for just the sake of scientific progress or to strengthen their nation’s geopolitical hand, but also to make money.

It already has a keen clientele. Space entrepreneurs speak of a new “gold rush” and compare their mission to that of the frontiersmen, or the early industrialists. While planet Earth’s limited stock of natural resources is rapidly being depleted, asteroid miners see a solution in the vast quantities of untapped water, minerals and metals in outer space. And the fledgling “NewSpace” industry – an umbrella term for commercial spaceflight, asteroid mining and other private ventures – has found eager supporters in the investor class. In April, Goldman Sachs sent a note to clients claiming that asteroid mining “could be more realistic than perceived”, thanks to the falling cost of launching rockets and the vast quantities of platinum sitting on space rocks, just waiting to be exploited.

“[Mining asteroids] is not a new idea, but what’s new is state support of the idea,” says Chris Voorhees, the chief engineer of Planetary Resources. “Everyone thought it was inevitable but they weren’t sure when it would occur.” Now, he says, Luxembourg is “making it happen”.

The grand duchy – which has all the square footage of an asteroid and, with a population of half a million, not all that many more inhabitants – has earmarked €200m to fund NewSpace companies that join its new space sector; to date, six have taken it up on the offer. It has sent officials to Japan, China and the UAE to talk about space exploration partnerships, and appointed space industry veterans, including the ex-head of the European Space Agency, to advise them. In May, it took out a glossy supplement in Scientific American magazine to signal it is committed not just to helping businesses, but to advancing research as well.

And in July, the parliament passed its law – the first of its kind in Europe, and the most far-reaching in the world – asserting that if a Luxembourgish company launches a spacecraft that obtains water, silver, gold or any other valuable substance on a celestial body, the extracted materials will be considered the company’s legitimate private property by a legitimate sovereign nation.

The presence of royalty at Planetary Resources HQ ahead of the passing of the law was a canny part of the country’s space incursion. The young couple was there to dazzle, charm and lend gravitas to the operation – European aristocracy doesn’t show up in suburban office parks any old day – but the mission’s greater aim was to impress upon Silicon Valley executives, the bemused Luxembourgish press and space scientists around the world that mining asteroids was no longer science fiction. To that end, the royals were accompanied by about 40 of their subjects, all of whom had a role to play in this emerging industry.

Etienne Schneider, Luxembourg’s congenial deputy prime minister, led the delegation. With his easy manner, excellent English and penchant for fancy cars, he cuts a Macronian figure: a product of European socialist political parties, sure, and a social liberal to his core – Schneider is married to a man – but one who will willingly play handmaiden to global capitalist interests should the right opportunity arise. He announced recently that he would be running for the role of prime minister in 2018.

With Schneider came a delegation of scientists, trade attaches, bankers, lawyers and local journalists who switched between German, English, French and the local language, a consonant-heavy mix of Flemish and German with the occasional foreign word thrown in to supplement: “meeting”, “framework”, “brunch”. (“We don’t have all the words,” a member of the delegation told me sheepishly.) In French, the language is known as Luxembourgeois, which pretty much says it all; the duchy’s 500,000 citizens, who have a GDP per capita of $104,000 (£78,800), are the wealthiest in the world after Qatar’s, according to the International Monetary Fund.

The Planetary Resources team took their benefactors on a tour of the labs where its hardware is built. The company isn’t mining asteroids yet, but to benefit from Luxembourg’s concessions, it opened an office in the grand duchy this year. Up close, its Arkyd 6 spacecraft – which is ready for launch – looks just like satellites look in the movies, only smaller. It had multiple flaps and appendages, including an infrared sensor, a star tracker to orient the craft in space and a GPS unit, which works only in the earth’s orbit.

Once the tour was complete, cocktail hour began. Schneider, who owns a vineyard, bounced from one conversation to another, brimming with enthusiasm. To end the visit, Chris Lewicki, the CEO of the company, gave a toast praising Luxembourg’s contributions “to an abundant future for all of humanity”. As a parting gift, he presented her royal highness with a necklace. Instead of jewels, it was studded with tiny fragments of asteroids.

It is reasonable to wonder what, exactly, a marginal European monarchy, egged on by a vivacious gay socialist, was doing telling American entrepreneurs on the cutting edge of innovation that their hamlet-sized state could propel humanity – and capitalism – into deep space. The grand duchy has no national space agency, no launching sites, and only modest research capabilities. It opened its first and only university in 2003 and its military consists of 1,008 troops. Luxembourg does not fit the image of a spacefaring nation; in fact, some have questioned whether it should even be a nation at all.

Yet Luxembourg’s very essence – as a speck in the heart of Europe – allows, even requires, it to partake in such ambitious ventures. Its national motto is “We want to remain what we are” and, over the centuries, this independent spirit has endured occupations by the dukes of Burgundy, the kings of Spain and France, the emperors of Austria and the king of the Netherlands. Today, the state, which only gained full independence in 1867, occupies a curious position in the global imagination: a country with an outsized economic influence that everyone has heard of, but that no one can quite locate on a map.

According to Gabriel Zucman, assistant professor of economics at UC Berkeley, the country is hard to miss in the financial world. “Luxembourg has private banks like Switzerland, it has a big mutual fund industry like Ireland’s, it’s used for corporate tax avoidance like Bermuda or the Netherlands, and it also hosts one of the two international central depositories for securities, so it’s active in euro bonds,” he says. “It’s the tax haven of tax havens, present at all stages of the financial industry.” Tony Norfield, a former banker in the City of London who now writes on global finance, has described Luxembourg as “a paragon of parasitism”.

The story of how a marginal and relatively powerless country has survived world wars, economic crises and cataclysmic technological advances to become a banking and finance powerhouse tells us a lot about how far a small country can go if it devotes itself to anticipating and accommodating the needs of global capital. It’s a contentious business: for every happy shareholder praising Luxembourg’s business-friendly rules and money-saving loopholes, there’s a critic condemning Luxembourg’s willingness to expedite the regulatory “race to the bottom”.

 

Luxembourg City. Photograph: Design Pics Inc/Rex/Shutterstock

Then again, there aren’t many options for a country like Luxembourg besides exploiting its most valuable resource: its national sovereignty. And Luxembourg has done this more and better than any other country in the world. By crafting innovative rules, laws and regulations that only it could (or would) put on offer, Luxembourg has attracted banks, telecommunications companies and consulting firms before any of these industries came to dominate the global economy. Now, by courting asteroid miners before anyone else takes them seriously, it may very well end up doing the same thing for the commercialisation of space.

Luxembourg’s first significant attempts at liberalisation began in the late 1920s and early 1930s. As radio grew popular, the grand duchy decided not to create a publicly funded radio service like its neighbours. Instead, it handed its airwaves to a private, commercial broadcasting company. That company – now known as RTL – became the first ad-supported commercial station to broadcast music, culture and entertainment programmes across Europe in multiple languages. “By handing the rights to a public good to a private company, the state commercialised, for the first time, its sovereign rights in a media context,” notes a 2000 book on Luxembourg’s economic history. The title of the book, published by a Luxembourgish bank, is, tellingly, The Fruits of National Sovereignty.

Then, just three months before the stock market collapsed in 1929, Luxembourg’s parliament passed legislation exempting holding companies – that is, parent firms that exist solely to own parts of or control other companies – from paying corporation taxes. In the first five years after the law’s passing, 700 holding companies were established; in 1960, there were 1,200, and by the turn of the century, some 15,000 “letterbox” firms – one for every 18 citizens – were incorporated in Luxembourg. (In 2006, the European commission found that this exemption violated EU rules, so Luxembourg promptly created a new designation, the “family estate management company”, that complied with the country’s EU treaty obligations while offering many of the same money-saving advantages.)

Throughout the first half of 20th century, Luxembourg’s main industry was steel, but by 1980, that business all but collapsed. Even before its iron ore mines shut down, though, the grand duchy came to represent a discreet but powerful regulatory freedom. A homegrown economic model began to take shape: over the next decades, it would make a name for itself by passing legislation “designed to tempt the world’s hot money,” notes the Tax Justice Network, an anti-tax-evasion advocacy group.

The country’s policymakers also realized that less could really be more. According to Georges Schmit, a lifelong civil servant who has played a big role in shaping the country’s economy since he joined the ministry of the economy in 1981, a key component of Luxembourg’s early success was the fact that it did not have its own central bank. The country had been in a monetary union with Belgium since 1921, and didn’t impose reserve requirements on financial firms. This meant banks could lend or spend the money that they would have had to keep on deposit in other jurisdictions. In Schmit’s words, Luxembourg’s biggest draw “wasn’t our doing; it was the lack of our doing anything”.

Over the years, the government managed to coax over foreign financial institutions, from complex securitisation vehicles to Islamic banks. And on the consumer level, the state’s low taxes drew Europe’s tax-averse petty bourgeoisie. Starting in the 1960s, “Belgian dentists” and “German butchers” – the prevailing stereotypes cited in the international financial press – began taking daytrips to the grand duchy to deposit money to avoid tax at home. The Luxembourgish state even lowered fuel costs to attract the daytrippers, and in 1981, introduced legally binding bank secrecy comparable to Switzerland’s.

In the next century, the dentists would give way to Qatari princes, Chinese princelings and other global members of the global super-rich – or at the very least, their investments. “When a country is small, the rest of the world is big,” says Schmit. “Since independence we needed to find larger economic spaces, be they regional or continental.” By serving as a hub for investors, companies and markets during decades of rapid deregulation and globalisation, Luxembourg turned itself into an indispensable cog in the machinery of international finance.

In 2009, Schmit embarked for California to continue his life’s work: finding new ways for his country to attract money, this time as the general consul and trade envoy in Silicon Valley.

Since he had joined the ministry of the economy to devise new innovation strategies almost three decades earlier, his country seemed to have defied all odds and made virtues of its apparent weaknesses. Its small size had not prevented it from becoming the largest centre for investment funds in the world after the US. Its tiny population had not deterred multinationals and EU institutions such as the court of justice from basing their headquarters there. It had parlayed its status as a neutral country and founding member of many European organisations into sending three of its politicians – more than any other country – to preside over the European commission. And by marketing its easy access to Europe, an educated workforce, bank secrecy (which it voted to ended in 2014 under pressure from other countries and the OECD) and myriad regulatory advantages, the country built an outsized financial sector.

Crucially, Luxembourg never seemed to let an opportunity pass it by. Following its support for commercial radio 50 years prior, the country was the first in Europe to privatise satellite television. In 1985, the grand duchy granted a company called Société Européenne des Satellites (SES) the right to broadcast TV directly to viewers’ homes from a satellite positioned in space. “The big innovation is that this was a privatisation of space,” says Schmit, who served for 17 years on the SES board. “All the other operators were owned by governments through international agreements. This was the first commercial company that set out to use space for broadcasting.” When SES grew profitable, Luxembourg’s bet paid off: the tiny country became home to a telecoms giant, and, as an early investor, received a piece of the pie.

FacebookTwitterPinterest Prince Guillaume and Princess Stéphanie of Luxembourg. Photograph: Didier Baverel/WireImage

In the early 2000s, Luxembourg pounced at the chance to court retailers such as Amazon and Apple with tax incentives. There were the perks the state was happy to publicise – the lowest VAT in Europe, for instance – and there were case-by-case deals with large companies that it kept rather quieter. The companies flocked in, but in the aftermath of the financial crisis, with awareness of wealth inequality growing and austerity measures bruising ordinary Europeans across the continent, Luxembourg could only keep these arrangements under wraps for so long.

In late 2014, the grand duchy went from relative obscurity to complete infamy when the details of these “tax rulings” – versions of which were also carried out by Belgium, Ireland and the Netherlands – were disclosed by the International Consortium of Investigative Journalists. Known as the “Lux leaks”, the massive trove of leaked data revealed that, from 2002 to 2010, the country’s tax agency approved a series of confidential deals that allowed AIG, Ikea, Deutsche Bank and more than 300 other large firms to save billions of dollars they might have otherwise owed to other countries.

The rulings weren’t necessarily illegal, and they weren’t unique to Luxembourg, but they did cause a scandal, provoking damning reports in the media, protests around Europe and promises for tighter regulation from within the EU. Investigations on both sides of the Atlantic on related matters followed, and lawsuits revealed information on more companies still. (One memorable detail: Amazon’s 28-step tax-restructuring arrangement in Luxembourg was named Project Goldcrest after the country’s national bird.)

Around this time, Zucman, a recent Paris School of Economics PhD who studied with Thomas Piketty, began looking into Luxembourg’s role in international tax avoidance and evasion. His focus was not on the multinationals, but on Luxembourg’s thriving fund industry, which through niche regulations and loopholes allowed investors to avoid certain taxes, too. Luxembourg was a well-known financial centre, but the statistics Zucman dug up while researching his book, The Hidden Wealth of Nations, took him aback: in 2015, national data showed $3.5tn worth of shares in Luxembourgish mutual funds were domiciled in the grand duchy, while data from other countries accounted for only two of those trillions. The missing $1.5tn suggested to him that the money – which, he notes, was probably accumulating interest by the day – had no identifiable owner. That meant the countries to whom tax was owed on these ungodly sums were unaware of their existence.

Globally, Zucman calculated almost $8tn in financial wealth – which does not include real estate, luxury goods, gold or other commodities – has been stolen from countries and taxpayers in this fashion thanks to “secrecy jurisdictions” such as Luxembourg, the Virgin Islands or Panama working “in symbiosis”. In his book, Zucman described Luxembourg as an “economic colony of the international financial industry” and challenged its right to its greatest asset: its sovereignty.

“Imagine an ocean platform where the inhabitants would meet during the day to produce and trade, free of any law or any tax, before being teleported in the evening back home to their families on the mainland,” he wrote, referring to the country’s unusual demographics: 47% of Luxembourg’s 500,000 residents are foreign, and 44% of the workforce commutes in across nation-state lines each day for work. “No one would dream of considering such a place, where 100% of its production is sent abroad, as a nation.

“The trade of sovereignty knows no limits,” Zucman continues. “Everything is bought; everything is negotiable. Luxembourg is not the only country that has sold its sovereignty, far from it … but it is the one that has gone the furthest.”

Scrutiny of Luxembourg’s tax practices – from the press, the public and the EU – spread at an awkward time. At the end of 2013, the country elected a new prime minister, Xavier Bettel, whose coalition government of democrats, socialists and greens wanted to distance themselves from the economic policies of former prime minister Jean-Claude Juncker and play by the EU’s rules. “Honestly, I am fed up with being accused of being a defender of a tax haven and a hotbed of sin,” Bettel said in a speech to the Luxembourg Bankers’ Association shortly after taking office. “We need to work on our image … we have much changed in the last years, now it is time to make sure that everybody knows.”

Etienne Schneider, then economy minister, was part of this effort, too. But instead of being applauded for breaking with the past, from the moment they took power the politicians were constantly reminded of their country’s indiscretions. The new government needed to square the Luxembourgish model of economic development with new political realities. It had to keep looking ahead. Most of all, it wanted to change the conversation.

A curious possibility had emerged the previous summer, when Georges Schmit visited Nasa’s Ames research centre in Palo Alto and found himself in conversation with Pete Worden, a former director of the centre. Over coffee, Worden told Schmit about the emerging NewSpace sector and about his dream of finding life on other stars and planets.

Schmit sensed Worden would hit it off with Schneider, so he introduced them. At first, asteroid mining struck Schneider as crazy. “I listened to him and wondered what this guy might have smoked this morning; it sounded like complete science fiction,” he recalled. But the more he listened, the more it made sense. Worden persuaded Schneider that “it’s not if it will happen, it’s when it’ll happen. And the countries who’ll be the pioneers will be the ones that’ll get the most out of it later on.”

From 2014 to 2016, a series of meetings between the Americans and the Luxembourgeois took place. If they resembled April’s trade mission, they will have involved tedious tours of technology companies, self-aggrandising speeches about how space would bring about Earth’s “third industrial revolution”, and many hours stuck in traffic – but also genuine wonder at what might happen if humankind made space their own.

Schneider hung his hopes – and his political future – on the stars. Here was a chance to change the conversation away from taxes and towards space; to establish an industry for Luxembourg’s future; to contribute to science and human knowledge, even. Besides, in such trying times, who didn’t like talking about the wonders of exploring the great unknown? NewSpace companies were certainly eager to work with Luxembourg. They were thirsty for funds and attention, and felt invisible in the US. Luxembourg was a place where they could get meetings with high-level politicians in minutes; where everyone spoke great English; where the bureaucracy was minimal, and the promise of low taxes remained. As one NewSpace executive told me this year: “We just want to work with a government who won’t get in the way.”

The only catch was the ambiguity of space law: companies wanted assurances that the fruits of their extraterrestrial labour would be recognised here on Earth. This is not a given. Unlike on Earth, where a country can grant a company a mining concession, or a person can sell the right to exploit their land, no one has an obvious legal claim to what’s outside our atmosphere. In fact, the Outer Space Treaty, signed by 107 countries at the UN in 1967, explicitly prohibits countries from claiming sovereignty over celestial bodies. The question now is: if nobody owns or governs the great unknown, who is to say who gets to own a little piece of it?

Since the emergence of the NewSpace sector, individual countries have attempted to lend some clarity to eager entrepreneurs, reasoning that the prospect of private property in space will encourage hard work and innovation. The American Space Act, passed in 2015, is the first “finders, keepers” law that recognises ownership of space resources, but it only does so for companies owned by US citizens.

In October 2015, Luxembourg commissioned a study on whether it could fill that legal void. The report, completed in 2016, noted that “while legal uncertainty remains, under the current legal and regulatory framework, space mining activities are (at least) not prohibited” and concluded that Luxembourg should pass legislation that gives miners the right to keep the extraterrestrial bounty they extract.

Such a law was drafted shortly after the study’s completion, and on 1 August 2017, it went into effect. Luxembourg’s bill does not discriminate by nationality, or even by the location of a company’s headquarters. In fact, the law indicates the country’s willingness to serve as a sort of flag of convenience for spacecrafts, allowing them to play by one country’s futuristic rules in the absence of universal, binding agreements. Rick Tumlinson, of Deep Space Industries, another space exploration company in which Luxembourg has invested, told me that there was value in Luxembourg’s law because it saw no citizens and no borders: just one blue planet from high above.

Six weeks after the trade mission in California, I disembarked from a tiny plane on the runway of Luxembourg City’s airport in a melee of grey suits and black carry-on roller bags. I walked past large wealth-management and equity-fund advertisements into the car park, where I caught the bus into the city centre, passing dozens of huge new building projects, a tramline under construction and two enormous yellow towers that, in the afternoon light, resembled twin gold bars reaching for the sky.

Luxembourg City. Photograph: Rex/Shutterstock

Within an hour, I was sitting at a table outside a dive bar opposite the old city’s bathhouse with Lars Schmitz, 29, and Gabrielle Taillefert, 21, two members of a local theatre and art collective called Richtung22 (Direction22). Over the past few years, the group has staged a series of performances lampooning their country’s mercenary modus operandi. Instead of writing their own scripts from scratch, the collective makes dramatic collages almost entirely out of primary documents: laws, press releases, speeches, transcripts from parliament, promotional videos and so on.

One of Richtung22’s early works satirised Luxembourg’s nation branding committee, which was set up in March 2013 to promote the country abroad. The play, which was financed in part by the culture ministry, was entitled Lëtzebuerg, du hannerhältegt Stéck Schäiss (Luxembourg, Vicious Pile of Shit). Since then, Schmitz says, state funds for Richtung22’s work have dried up.

In his spare time, Schmitz, who is slight of build with cropped blonde hair, works on antifascist and anti-capitalist organising. He has the droll resignation of a leftwing activist operating in a country whose politics are so abstract and so global that grassroots resistance must necessarily come in the form of farce. Richtung22’s latest play savages the country’s efforts to attract the NewSpace industry. Its title is Luxembourg’s Private Space Explorevolutionary Superfancy Asteroid Tailoring. Schmitz sees space mining as a high-tech spin on an age-old scam: selling sovereignty. “The country’s business model is hidden,” he said. “It’s making laws that companies want, and taking a risk on those companies. But the government uses it to say ‘This is how modern we are! This is something new!”

Zucman shares Schmitz’s view. “Adapting this strategy to the business of space conquest is what being an offshore financial centre means,” he says. “It’s not diversification. It’s just extending the logic of being a tax haven to new area.”

On stage, the entire space enterprise is portrayed as a cynical, money-grubbing, reputation-redeeming debacle dictated by private-sector interests. “We feel bad that our country does this to the world, and no one else here talks about this stuff,” Schmitz told me. He ran off a dozen or so Luxembourgish transgressions, including but not limited to aiding and abetting tax evasion and weaseling its way out of EU banking regulations. In such a small country, it’s hard to be so outspoken against the national interest. “People think we’re traitors,” he said.

Was there anything good about his country, I asked. “It’s beautiful,” Schmitz conceded. He was right: Luxembourg is beautiful, and was particularly charming on that balmy May evening. The city rests on two levels; the smaller “low” city’s quaint little streets and sidewalk cafes skim the river, while the “high” city centre is home to a lively main drag with pricey boutiques, fancy chocolate shops and chains such as H&M. Cafes advertise crémant – a local bubbly wine – and local dishes that borrow their richness from the French and their stodginess from the Germans.

The next day, I went to meet Marc Baum, an MP from the democratic socialist party déi Lénk (the Left). He handed me a policy paper his party published criticising Schneider’s space-mining proposal: they believe his law is inconsistent with Luxembourg’s outer-space treaty obligations, that it creates opportunities for billionaires to further enrich themselves and could be harmful to the environment. Even worse, it enshrines the notion of “competition instead of cooperation” between states. “It’s infinite capitalism!” Baum exclaimed over a cold beer on a terrace.

Baum, as it happened, is an actor, too. When we met, he was preparing to perform Eugène Ionesco’s Rhinoceros, an absurdist play about a town whose protagonists speak exclusively in cliches and end up turning into rhinos on account of their unquestioning conformity. Over the course of the drama, the townspeople justify their decision to “go rhino” by declaring that “humanism is dead, those who follow it are just old sentimentalists”. The play’s sole hero, Berenger, resists succumbing to “rhinoceritis”, but fails to save anyone else: he ends up being the only person in the whole town who does not grow a horn. The analogy between that and Baum’s own predicament seems a little on the nose. He was one of just two politicians who voted against the space law in July.

In June, about a month before his signature legislation was passed by the parliament, Schneider and some of his associates flew to New York for yet another sales pitch – this time, for the benefit of venture capitalists on the east coast.

His speech focused on the financial aspects of Luxembourg’s space race, and the country’s intention to get in on the ground floor of commercial space exploration. “Under the US Space Act, your capital has to be majority US capital,” he said, referring to US willingness to recognise property rights in space for its citizens. “We don’t really care where the money comes from in our country, as long as the money is clean.”

On Schneider’s telling, Luxembourg could do for the space-resource trade what it had done for the eurodollar market, international holding companies and multinationals: provide a safe, reliable base where they could operate in tandem with a keen and cooperative – or, by his detractors’ assessment, pliable and sycophantic – state. Schneider announced that after passing its law, Luxembourg would create its own space agency. This would not be a copy of Nasa, but would instead “focus only on commercial space resources”. He told the audience that Luxembourg would solicit private funding to capitalise NewSpace companies, and seek the advice of venture capitalists to decide what companies to invest in. If asteroid mining does, in fact, take off, Luxembourg will be what Schneider’s friends in Silicon Valley might call an “early adopter”.

It’s a gamble, for sure. But it’s difficult to imagine where Luxembourg would be had it not deployed this ingenious development strategy continuously over the past century. The global economy offers few alternatives than to serve it, and rewards its enablers richly. Perhaps a mercenary spirit is what it takes to succeed as a small country in the world – and that “we want to remain what we are” is just Luxembourgeois for the old French saying: plus ça change.

Private Schools, Grammar schools and Comprehensives

Public luxury for all or private luxury for some: this is the choice we face

George Monbiot in The Guardian


Imagine designing one of our great cities from scratch. You would quickly discover that there is enough physical space for magnificent parks, playing fields, public swimming pools, urban nature reserves and allotments sufficient to meet the needs of everyone. Alternatively, you could designate the same space to a small proportion of its people – the richest citizens – who can afford large gardens, perhaps with their own swimming pools. The only way of securing space for both is to allow the suburbs to sprawl until the city becomes dysfunctional: impossible to supply with efficient services, lacking a sense of civic cohesion, and permanently snarled in traffic: Los Angeles for all.

Imagine designing a long-distance transport system for a nation that did not possess one. You’d find that there is plenty of room for everyone to travel swiftly and efficiently, in trains and luxury buses (an intercity bus can carry as many people as a mile of car traffic). But to supply the same mobility with private cars requires a prodigious use of land, concrete, metal and fuel. It can be done, but only at the cost of climate change, air pollution, the destruction of wonderful places and an assault on tranquillity, neighbourhood and community life.

This conflict is repeated in financial terms. In order that the very rich can pay less tax, public playgrounds are allowed to fall apart. The beneficiaries might use the extra money to build private play barns for their children. Public toilets are closed so that some people can install gold-plated taps in their bathrooms. Public swimming pools are put on restricted hours so that the very rich can turn up the thermostats in their private pools. Public galleries need to charge for entry so that billionaires can expand their own art collections. Wealth that could be shared and enjoyed by all is sequestered by a few.


Public luxury for all, or private luxury for some: this is the choice we face at all times – especially at this election

It is impossible to deliver a magnificent life for everyone by securing private space through private spending. Attempts to do so are highly inefficient, producing ridiculous levels of redundancy and replication. Look at roads, in which individual people, each encased in a tonne of metal, each taking up (at 70mph) 90 metres of lane, travel in parallel to the same destination. The expansion of public wealth creates more space for everyone; the expansion of private wealth reduces it, eventually damaging most people’s quality of life.

  ‘Look at roads, in which individual people, each encased in a tonne of metal, each taking up (at 70mph) 90 metres of lane, travel in parallel to the same destination.’ Photograph: Matt Cardy/Getty Images


This is a global issue, as well as a national one. According to the Global Footprint Network, every person in the UK uses the equivalent of 5 hectares of land and sea through the food we eat, the products we use and the carbon we release, which has to be absorbed somewhere if it is not to accelerate global warming. Yet the UK’s “biocapacity” (our ability to absorb these impacts) is a little over 1 hectare per person. Our extravagance is a cost that others must bear.

Public luxury available to all, or private luxury available to some: this is the choice we face at all times, but especially at this election. It is the conflict between these two visions that defines – or should define – our political options. There is a significant difference between Labour and the Conservatives in this respect, but I wish it were stronger.

Labour, through its proposed cultural capital fund, will reinvest in public galleries and museums. It will defend and expand our libraries, youth centres, football grounds, railways and local bus services. Unlike the Conservative manifesto, which is almost silent on the issue, Labour’s platform offers a reasonable list of protections to the living world.

But it also promises to “continue to upgrade our highways” (shortly after vowing to “encourage and enable people to get out of their cars”) and to provide new airport capacity. The conflicts are not acknowledged. Progress in the 21st century should be measured less by the new infrastructure you build than by the damaging infrastructure you retire.

Labour also misses a wonderful opportunity in its plans to expand affordable housing, to promote accommodation that both revives community and makes better use of space. In co-housing developments, people own or rent their own homes but share the rest of the land. Rather than chopping the available space into coffin-sized gardens in which a child cannot perform a cartwheel without hitting the fence, the children have room to run around together while the adults have space to garden and talk. Communal laundries release living space in people’s homes. Carpools reduce the need for parking. Isolation gives way to conviviality.

More importantly, and less surprisingly, the Labour manifesto fails to acknowledge the left’s great conundrum: the environmental damage caused by efforts to create jobs through economic growth. Like the Conservatives, like almost every party everywhere (the Greens are a notable exception), Labour’s economic vision is based on the presumption that there are no limits. Both conservative and social democratic parties see the world as a magic pudding that can never be exhausted. They build their economic programmes on a fairytale.

Kelvingrove Art gallery in Glasgow. ‘Labour, through its proposed cultural capital fund, will reinvest in public galleries and museums.’ Photograph: VisitBritain/Britain on View/Getty Images

And they have another unexamined premise in common: that money legitimately buys you the power to take what you want from the world. There is an almost universal assumption in politics that you have the right to help yourself to as much of the global commons (atmosphere, soil, water, fish) as you can afford, though this reduces what is left for other people to share. You have the right to occupy as much physical space as your money can buy, regardless of the restrictions this imposes on others.

Where does this licence arise? Even if private wealth were obtained through the exercise of virtue (an unlikely proposition at the best of times) or through enterprise and hard work (ever less probable, in this new age of inheritance and rent), it is hard to discern the just principle that translates this money into permission to acquire the space and resources on which other people depend for a decent quality of life. When and by whom was this permission granted? How does it correspond to our notion of equal rights, or our concept of democracy, which is based on an equal power to decide?

You will not find these questions asked in this election or in any other. They are fudged by recourse to the magical belief that there is enough space and resources for everyone to do as they wish, that infinite growth ensures that no one – when the parties’ economic promises are fulfilled – will need to intrude on the interests of others. Yet, on this finite planet, they are the questions that will determine not only the quality of our lives but our security and, eventually, our survival. The primary task of all far-sighted politicians should be to decide first how much we can use, then how it can best be shared.

When the questions that count above all others are beyond the scope of politics, when almost everyone in public life is either too blinkered or too frightened to answer them, when – even in this great, defining election, which at last offers people meaningful political choice – neither large party can even name them, you begin to recognise how much trouble we are in.

Why I want to see private schools abolished

Tim Lott in The Guardian

I am inclined towards equality of opportunity for all children. I am also aware that such a phrase is open to multiple definitions – and with most of them, such equality verges on the impossible. For instance, we can all hold up our hands in pious disapproval at the unfairness of, say, familial nepotism – such as that seen among Donald Trump’s brood – yet most of us are not much better. Anyone who is educated, or from a middle-class background is also operating on a manifestly unequal playing field.
This is largely because of the workings of social capital – of which nepotism is simply an extreme example. At a mundane level, it means having parents who are educated, interested in education, connected within the professions and happy to use those connections – what you might call cultural nepotism. I am not innocent of this. Conscience takes a fall when one’s children are involved.
This kind of inequality is difficult to legislate against. The divide between rich and poor families is growing, and largely inescapable. A new report from the Institute for Public Policy Research thinktank shows that the number of internships has risen 50% since 2010 – another leg-up for those who can afford to take low-paid or unpaid positions.

Add in decent housing, good nutrition and the imparting of confidence and the middle classes have a huge advantage, even before you talk about schooling. There are other ineradicable forms of inequality – genetic capital for instance, since intelligence, is, according to most scientific sources, at least 50% hereditary. But social capital is the most visible.


Middle-class kids will, on aggregate, still come out on top because of their pre-existing advantages

This entrenched and inevitable advantage is, perversely, why I oppose private schools far more firmly than grammar schools (which, at least in theory, could be meritocratic). It is not that I hope to take away from privileged children any unfair head start. I just want to take away the only advantage that is purely down to money and entirely subject to legislation.
Private schools add insult to injury. If you get rid of them and shift all the pupils into the state system, nothing will guarantee the latter’s improvement with more certainty. And the middle-class kids will, on aggregate, still come out on top because of their pre-existing advantages – so it is especially egregious that so many people so staunchly oppose their abolition.

Grammar schools, as envisaged in the 1944 Education Act (with selection based not solely on tests but also on aptitude and past performance) might be the answer to those who suggest the abolition of private schools would result in “dumbing down” – as long as they were a resource for the clever and motivated rather than the privileged and tutored. There would still be inequality, but it would be minimised. Absolutely level playing fields are, and always will be, a myth. However, we can make the fields less ridiculously skewed than they are at the moment.

It is doable, practically. Shame that it just appears impossible to do politically. The fact that Jeremy Corbyn is suggesting charging private schools VAT is a step in the right direction. A few more steps in that direction and he might establish a policy that would make me vote for him.

But I’ll take a (state-educated) guess that it won’t happen. There are too many people with too many fingers in the private-schooling pie – among them a fair number of Corbyn’s shadow cabinet. Because when those who stand against inequality simultaneously take advantage of it, their motivation is sorely undermined – whether or not it would be a vote winner.

Such is the insidiousness of educational inequality – so long as it works for the policy-makers themselves, it has little or no chance of real reform. Those responsible can always tell themselves that it’s just for their children’s sake. It is understandable. It may even be forgivable. But it is a total cop-out.