The truth about Richard Branson's Virgin Rail profits

I once called Richard Branson a carpetbagger. A new report reveals that I was correct to say he built his business empire with millions from the taxpayers – only it's worse than I thought

• 
• • Aditya Chakrabortty
  • The Guardian, Monday 10 June 2013 20.00 BST

Richard Branson: 'subsidy junkie'. Photograph: Sipa USA/Rex Features

Just over 18 months ago on this page, I called Richard Branson a carpetbagger. Surveying his greatest business hits, from trains to planes to cable, my piece noted a common method: the Virgin boss liked to move into industries sheltered from too much competition, pull subsidies out of taxpayers and then cash out.

That was the story of Virgin Rail (now 49% owned by Stagecoach); of Virgin Atlantic (where the same role is played by Singapore Airlines) and it certainly fits Virgin's takeover last year of Northern Rock, where Branson was really the frontman for the serious money from America and Abu Dhabi.

Sir Richard was not best pleased. Faster than you could say "stroppy tycoon on the phone", a response in his name appeared in the Guardian, accusing me of a "vicious" attack full of "vitriol". But admirable hand-waving aside, he did not rebut my argument: that for all of his talk of enterprise and getting employees "really motivated and steamed up", Branson has built his business empire with millions from you, me and other taxpayers.

Well, last Friday a report was published that, I'm sorry to say, proves me wrong. He's an even bigger subsidy junkie than I thought.

Produced by academics at Manchester University's Centre for Research on Socio-Cultural Change (Cresc), and published by the TUC, the study looks at how Britain's railways have fared over two decades of privatisation. It's a hefty publication – more than eight months in the making, running to 166 pages and with more detail on the rail network than any commuter will ever need.

But it boils down to one key finding: the only way Branson and the vast majority of train barons make their profits is through handouts from the taxpayer. And while you may know about the direct payments taken by Virgin and others, the Cresc team has also analysed another, indirect transfer from the public purse to private hands. By now, it's worth £30bn – yet it is barely acknowledged either by Network Rail or Westminster.

Let's deal with the open-air subsidies first. If you tot up all the direct subsidies Branson's west coast mainline service received between 1997 and 2012, and convert them to today's prices, you get a sum of £2.79bn handed over by us – before a single ticket has been sold. And it is certainly before you factor in the service's upgrade (worth around £9bn, and paid for by the public), and the fleet of Pendolino trains (again, largely subsidised by the government).

By 2012, Virgin Trains enjoyed spanking new rolling stock, a more frequent service and a superfast line that whisked passengers from London to Manchester in just two hours. With all that going for it, plus a booming economy up till 2007 and rising fuel prices, the company couldn't help but pull in the customers.

Most of the improvements were subbed by taxpayers, with Virgin paying the state an agreed amount in the last two years of the franchise. Yet Branson and his shareholders could declare a cumulative net profit of £538m and trouser £499m in total dividends. No wonder some canny infants like to play with train sets.

These sums are what got Virgin interested in rail in the first place. In his biography of Branson, Tom Bower records a phrase used by the billionaire's lieutenants while weighing up the west coast deal: "It's a licence to print money. Can't go wrong."

But there is another undisclosed source of cash enjoyed by Virgin and the rest of the industry. Network Rail has been cutting the track access charges levied on the train companies. Under its predecessor Railtrack, the fees were worth around £3bn a year; they're now nearly half that, at just over £1.5bn a year. This is an indirect subsidy given by the public to the train operators, and Virgin is the third-biggest recipient. So important is the handout that, were it taken away, Cresc estimates the company would have made a loss of up to £257m last year alone.

Just so there's no doubt on the numbers, the Cresc report was shown to the Association of Train Operating Companies weeks before it was published. The trade body had time to dismantle the maths; but while it evidently doesn't like the conclusions, it hasn't repudiated the figures. Years of indirect subsidies have left Network Rail £30bn in the red. This is debt guaranteed by the public, although very few people know about it.

What all this resembles is a looking-glass version of capitalism. The public are handing money to private businesses for them to take a clip and pay us back the rest. Just in case that wasn't ludicrous enough, remember that Virgin's parent company is listed in British Virgin Islands, a sunny tax haven that is a stop pretty far from Wigan. And as we've seen repeatedly with the east coast line, the ones who don't make a profit can simply walk away, dumping their service back in public hands. Heads they win, tails you lose.

Branson is not the sole offender here; he's simply the most flamboyant representative of a completely rotten system for siphoning money from the public into private hands. The entire industry, as Treasury adviser Shriti Vadera put it in 2001, is peopled by "thinly capitalised … profiteers of the worst kind". And as a former investment banker, she'd know what those looked like.

But the Virgin boss also loves to shout about the virtues of private ownership of public good. At the moment, he's lobbying hard to take control of the east coast mainline. If successful, he'll doubtless try to replicate his previous sweet deal, state-subsidised Pendolinos and all. And just like now, it will be us paying for it.

Mark Steel: You can't just shut us up now that Margaret Thatcher's dead

Maybe a more modern way of broadcasting the news would have been for Davina McCall to announce it, saying: “She’s gone, but let’s have a look at some of her best bits.” Then we could see her denouncing Nelson Mandela as a terrorist and befriending General Pinochet.

Instead it began as expected, with the Hurds, Howes and Archers phoning in their “remarkables” and “historics”, and we were reminded how she brought down the Berlin Wall and rescued Britain, then an article in The Times claimed she was responsible for ending apartheid, and it seemed by today we’d be hearing she stopped Gibraltar being invaded by Daleks and made  our goldfish feel proud to be British and took  8 for 35 against Australia to win the Ashes.

“Even those who disagreed with her, respected her as a conviction politician”, it was said many times, as if everyone would participate in the mourning. But soon it was impossible to pretend there was a respectful consensus, not because of the odd party in the street, but from a widespread and considered contempt. In many areas it must have been confusing for Jehovah’s Witnesses, as every time they knocked on a door and asked, “Have you heard the good news”, they’d be told “Yes mate, I have, do you want to come in for a beer?”

Before long came the complaints, such as Tony Blair saying: “Even if you disagree with someone very strongly, at the moment of their passing you should show some respect.” Presumably then, when Bin Laden was killed, Blair’s statement was: “Although I didn’t agree with Osama’s policies, he was a conviction terrorist, a colourful character whose short films were not only fun but educational as well. He will be sadly missed.”

The disrespect was inevitable, as millions were opposed to her not because they disagreed with her, but because she’d helped to ruin their lives. If someone robs your house, you don’t say: “I disagreed with the burglar’s policy, of tying me to a chair with gaffer tape and stripping the place bare, even taking the pickled onions, which I consider to be divisive. But I did admire his convictions.”

For example, a Chilean woman living in Britain was quoted in The Nationmagazine, saying: “The Thatcher government directly supported Pinochet’s murderous regime, financially, via military support, even military training. Members of my family were tortured and murdered under Pinochet, who was one of Thatcher’s closest allies and friend. Those of us celebrating are the ones who suffered deeply.” Yes, but she was able to buy shares in British Gas so she was better off in other ways. In so many areas, the party that insists we show compassion for their departed heroine made a virtue of showing none when she was their leader. She didn’t just create unemployment, she gloried in it. Her supporters in the City revelled in their unearned wealth all the more because they could jeer at those with nothing.

But this week Thatcher fans have been unrestrained in their abuse for anyone not displaying “compassion”. Maybe we should give them the benefit of the doubt and accept they’ve just discovered it. They’re all going to the doctors saying: “I’ve been getting this strange sort of caring feeling towards someone who isn’t me. Do I need antibiotics?” If they’re puzzled as to why there isn’t universal sadness this week, maybe they should visit Corby. It’s a town that was built in the 1930s, entirely round a steelworks, and thousands of unemployed Scots moved there for the work. As a result its people still have a strong Scottish accent, even though it’s in Northamptonshire.

But in 1980 Margaret Thatcher’s government shut down most of the steel industry, as part of her plan to break the unions, and the effect on Corby was like someone taking control of the Lake District and concreting in the lakes.

I was there to record a radio show about the town, and met Don and Irene, both in their seventies, at the Grampian Club. Don’s father had walked to Corby from Larkhall, near Glasgow, in 1932. I mentioned the steel strike and plant closure to Don, but he gestured as if it had somehow passed him by. It would have to be mentioned in the show, so I tried to find someone in the town with a story, an anecdote, something. But no one wanted to say a thing about it. During the recording, I asked if anyone had a story to tell from those days, but no one did, until it felt as if the whole audience collectively passed a motion that went: “I think you’d best move on to another subject, Mark.”

Afterwards in the bar, Irene told me: “We weren’t being rude, love, when we didn’t have a lot to say about the closure. But it wasn’t an easy time. Don marched from Corby to London with a banner. It made him angry about everything, we split up for a year because it was too much to live with. But we were lucky, two of our closest friends committed suicide in the months after the closure. So people would rather forget about those times really. But apart from that we really enjoyed the show.”

Still, even those who disagree with her policies, will surely commend her achievements.

Strangely, it’s now her supporters who are insulting her memory, with a funeral paid for by the taxpayer. Surely it would be more fitting to leave her where she is, and say: “If you can’t stand on your own two feet, you can't expect help from the state.”

When corporations bankroll politics, we all pay the price

Letting taxpayers fund parties directly could revive our rotten system – and at £1 per elector, it would be cheaper too

• 
• • George Monbiot
  • The Guardian, Monday 29 October 2012 21.30 GMT

‘Despite attempts to reform it, US campaign finance is more corrupt and corrupting than it has been for decades.' Illustration: Daniel Pudles

It's a revolting spectacle: the two presidential candidates engaged in a frantic and demeaning scramble for money. By 6 November, Barack Obama and Mitt Romney will each have raised more than $1bn. Other groups have already spent a further billion. Every election costs more than the one before; every election, as a result, drags the United States deeper into cronyism and corruption. Whichever candidate takes the most votes, it's the money that wins.

Is it conceivable, for instance, that Romney, whose top five donors are all Wall Street banks, would put the financial sector back in its cage? Or that Obama, who has received $700,000 from both Microsoft and Google, would challenge their monopolistic powers? Or, in the Senate, that the leading climate change denier James Inhofe, whose biggest donors are fossil fuel companies, could change his views, even when confronted by an overwhelming weight of evidence? The US feeding frenzy shows how the safeguards and structures of a nominal democracy can remain in place while the system they define mutates into plutocracy.

Despite perpetual attempts to reform it, US campaign finance is now more corrupt and corrupting than it has been for decades. It is hard to see how it can be redeemed. If the corporate cronies and billionaires' bootlickers who currently hold office were to vote to change the system, they'd commit political suicide. What else, apart from the money they spend, would recommend them to the American people?

But we should see this system as a ghastly warning of what happens if a nation fails to purge the big money from politics. The British system, by comparison to the US one, looks almost cute. Total campaign spending in the last general election – by the parties, the candidates and independent groups – was £58m: about one sixtieth of the cost of the current presidential race. There's a cap on overall spending and tough restrictions on political advertising.

But it's still rotten. There is no limit on individual donations. In a system with low total budgets, this grants tremendous leverage to the richest donors. The political parties know that if they do anything that offends the interests of corporate power they jeopardise their prospects.

The solutions proposed by parliament would make our system a little less rotten. At the end of last year, the committee on standards in public life proposed that donationsshould be capped at an annual £10,000, the limits on campaign spending should be reduced, and public funding for political parties should be raised. Parties, it says, should receive a state subsidy based on the size of their vote at the last election.

The political process would still be dominated by people with plenty of disposable income. In the course of a five-year election cycle, a husband and wife would be allowed to donate, from the same bank account, £100,000. State funding pegged to votes at the last election favours the incumbent parties. It means that even when public support for a party has collapsed (think of the Liberal Democrats), it still receives a popularity bonus.

Even so, and despite their manifesto pledges, the three major parties have refused to accept the committee's findings. The excuse all of them use is that the state cannot afford more funding for political parties. This is a ridiculous objection. The money required is scarcely a rounding error in national accounts. It probably represents less than we pay every day for the crony capitalism the present system encourages: the unnecessary spending on private finance initiative projects, on roads to nowhere, on theTrident programme and all the rest, whose primary purpose is to keep the 1% sweet. The overall cost of our suborned political process is incalculable: a corrupt and inefficient economy, and a political system engineered to meet not the needs of the electorate, but the demands of big business and billionaires.

I would go much further than the parliamentary committee. This, I think, is what a democratic funding system would look like: each party would be able to charge the same, modest fee for membership (perhaps £50). It would then receive matching funding from the state, as a multiple of its membership receipts. There would be no other sources of income. (This formula would make brokerage by trade unions redundant.)

This system, I believe, would not only clean up politics, it would also force parties to re-engage with the public. It would oblige them to be more entrepreneurial in raising their membership, and therefore their democratic legitimacy. It creates an incentive for voters to join a party and to begin, once more, to participate in politics.

The cost to the public would be perhaps £50m a year, or a little more than £1 per elector: three times the price of a telephone vote on The X Factor. This, on the scale of state expenditure, is microscopic.

Politicians and the tabloid press would complain bitterly about this system, claiming, as they already do, that taxpayers cannot afford to fund politics. But when you look at how the appeasement of the banking sector has ruined the economy, at how corporate muscle prevents action from being taken on climate change, at the economic and political distortions caused by the system of crony capitalism, and at the hideous example on the other side of the Atlantic, you discover that we can't afford not to.

Who came up with the model for excessive pay? No, it wasn't the bankers – it was academics

All the focus has been on bankers' bonuses, yet no one has looked at the economists who argued for rewarding bosses by giving them a bigger financial stake in their companies



Take a big step back. Ignore those sterile debates about how Dave screwed up over Stephen Hester's pay and where this leaves Ed. Instead, ask this: which profession has done most to justify the millions handed over to the boss of RBS, his colleagues and counterparts? Which group has been most influential in making the argument that top people deserve top pay? Not the executives themselves – at least, not directly. Nor the headhunters. Try the economists.




The ground rules for the system by which City bankers, Westminster MPs and ordinary taxpayers live today were set by two US economists just a couple of decades ago. In 1990, Michael Jensen and Kevin Murphy published one of the most famous papers in economics, which first appeared in the Journal of Political Economy and then in the Harvard Business Review. Its argument is well summed up by the latter's title: "CEO Incentives: It's Not How Much You Pay, But How."



The way to get better performance out of bosses, argued the economists, was by giving them a bigger financial stake in their company's performance. You couldn't have asked for a better codification of bonus culture had you stuck a mortar board on Gordon Gekko's head. So popular, so influential was Jensen and Murphy's work that it opened the door to a new corporate culture: one where executives routinely scooped millions in stock options, apparently justified by top research that they were worth it.



The usual criticism of economists is that they missed the crisis: they preferred their models to reality, and those models took no account of the mischief that could be caused by bankers running wild. Of all explanations, this is the most comforting; all academics need to do next time, presumably, is look a little harder – ideally with a grant from the taxpayer.



But economists didn't just fail to spot the financial crisis – they helped create it. They provided the intellectual framework and drew up the policies that helped caused the boom – and the bust. Yet rather than a full-blown investigation, their active involvement in this crisis and their motivations have barely got a look-in. As Philip Mirowski, one of the world's leading historians of economic thought, puts it: "The bankers have got off the hook, and gone back to business as usual – and so too have the economists." It's the same discipline that spoke all that nonsense about markets always being efficient that is now deciding how to reform the economy.



A few weeks ago, I described the current economic system as a bankocracy run by the banks, for the banks. Mainstream economists play the role of a secularised priesthood, explaining to the laity just how and why the markets' will must be done. Why are they doing this? Luigi Zingales, an economist at Chicago, calls it "economists' capture". Much of the blame for the financial crisis has fallen on regulators for being captured by the bankers, and seeing the world from their point of view. The same thing, he believes, has happened to academics. When Zingales looked at the 150 most downloaded academic papers on executive pay he found that those arguing that bosses should get more (à la Jensen and Murphy) were 55% more likely to get published in the top journals.



Anyone who saw the film Inside Job will recall the scene in which leading economists are shown puffing financial deregulation, or the outlook for Icelandic capital markets, or whatever – and then revealed to have taken hundreds of thousands, sometimes millions, from the very interests they are advocating. But this goes wider than direct payment; many academics also believe those arguments about how markets work best when they are left alone. As the economist Steve Keen puts it: "Most economists are deluded."



Maybe, but it also pays to be deluded. Think about the rewards for toeing the mainstream economic line. Publication in prestigious journals. Early professorships at top universities. The conferences, the consultancies at big banks, the speaking fees. And then: the solicitations of the press, the book contracts. On it goes.



Rob Johnson, director of the Institute of New Economic Thinking, quotes a dictum he was once given by a leading west coast economist. "If you got behind Wall Street," he remembers the professor telling him, "you went to Lake Como every summer. If you left finance alone, you took a nice vacation in California. And if you took on the bankers, you drove a secondhand car."



Were this corruption of analytical philosophy, say, this might not matter so much. But economics shapes our policy and our public debates – and it warps both. Yesterday, I listened to a discussion of Hester's bonus (what else?) on the Today programme. Defending Hester, a journalist quoted some American finding that CEO pay had actually halved since 2001.



Chicago economist Steve Kaplan does indeed argue that "CEO pay in 2006 remained below CEO pay in 2000 and 2001". What's missing there is that 2001 was the height of the US dotcom boom, when bosses were getting crazy money. Kaplan also writes papers about how hard it is to be a chief executive. According to his CV, his consulting clients have included Accenture, Goldman Sachs and a bunch of other Wall Street banks. This is the way such arguments are prosecuted: without full disclosure of either evidence or interests. And in such arguments, it's you that loses.

Policy can trump unpopularity - A way to solve the EU crises

By Martin Hutchinson

As is well known to readers of this column, it is my considered opinion that economic policy and management reached a global all-time apogee (so far - one can always hope) under the British prime ministership of Robert Banks Jenkinson, Lord Liverpool (prime minister, 1812-27). However Liverpool is generally thought to have had one enormous advantage over modern policymakers in not having to deal with a modern democracy. Unlike modern democratic leaders, he was thus only moderately constrained by his policies' temporary unpopularity.

The Greek crisis has however graphically illustrated that popular resentment at unpalatable economic change is very much as it was in 1812-20, and that policymakers responding to that resentment are at least as insulated from popular feeling as were Liverpool and his government. Unfortunately, unlike Liverpool, they are not using that insulation to good effect.

If the European Union's policy elite had possessed Liverpool's depth of economic understanding, the crisis would have been easily solved, and indeed would not have arisen in the first place. Liverpool would have put Europe onto a gold standard; if he had been thwarted in that he might well have supported the euro but would certainly not have admitted Greece into its membership.

He would immediately have spotted the disgraceful discrimination against the private sector involved in the Basel Committee's zero rating of government debt, a principal cause of the crisis because it has favored bank funding of excessive government deficits over productive lending to the private sector. He would have opposed root and branch governments increasing their deficits through "stimulus" spending, pointing out the superior recession-fighting record produced by his own 1816-19 austerity.

Once the crisis had arisen, Liverpool's solution would have been simple and complete. He would have perceived by a simple analysis of relative productivity that Greece had no hope of solving its problems while it remained a member of the euro. He would thus have forced it to readopt the drachma when the crisis first arose, in spring 2010. Following such re-adoption the drachma would have immediately devalued by about two thirds, taking Greek per capita income down to about $11,000 from the $32,000 at which it stood in 2008.

Naturally a further result would have been a Greek debt default, from which Liverpool would have stood back entirely. If the Greek government wished to bail out its banking system with drachma paper (thereby weakening the drachma further) that would be its choice, but not one cent of German and Swedish taxpayer money would be provided to facilitate this process.

Similarly, Liverpool would have allowed the Irish government to default, as a result of its foolish 2008 attempt to bail out its banking system, and would have given Spain, Italy and Portugal the alternative of leaving the euro or adopting austerity programs rigorous enough to keep them members (those austerity programs would have needed to be less rigorous than Latvia's, but in any case their adoption would have been a matter for the national governments themselves, with neither coercion nor extra resources provided by the EU.)

Should Liverpool's rigorous policies have caused problems in Europe's overleveraged and badly managed banks, Liverpool would not have stopped the European Central Bank from providing resources to eurozone banks, but only on the terms eventually prescribed by Walter Bagehot - short-term loans against first-class security at punitively high interest rates. There would have been no bailouts, as Liverpool, with his knowledge of the 1720 Mississippi and South Sea crashes, would have regarded "too big to fail" as being equivalent to "too big to be allowed to live".

Liverpool's policies would thus have been dictated neither by sentimentality about the inevitable short-term pain his policies would cause, nor by political considerations of their probable unpopularity, but simply by their likelihood of solving the problem in a market-friendly way and thereby allowing economic growth to resume in the Eurozone as a whole. They would have been basically free-market oriented, but not dictated by free trade or other dogma, as were the policies of the free traders a generation later.

By their apparent harshness, they would have made him highly unpopular, yet they would have stopped economic decay in its tracks and would have allowed Europe to rise above the problems of its periphery, while that periphery led productive existences at the lower living standards justified by their modest output potential.

The Liverpool government's attitude to popularity was best expressed not by Liverpool himself but by his colleague Robert Stewart, Lord Castlereagh, who as leader of the House of Commons bore much of the opprobrium for Liverpool's policies. In 1821, after the 1816-19 "double-dip" recession had lifted, he remarked "I am as popular now as I was unpopular formerly, and of the two, unpopularity is the more convenient and gentlemanlike."

Some years ago I wrote a piece quoting Castlereagh and extolling the virtues of unpopular economic policies. The piece was picked up by the Almaty Herald - it was doubtless to the taste of Kazakhstan president (since 1991) Nursultan Nazarbayev, who felt it proved that his economic policies, being unpopular, must therefore be beneficial. I would like to correct any misapprehension: my extolment of unpopularity was not intended to justify every action of Central Asian dictators by suggesting their economic policies must be superior. The unhappy fact that good economic policies are often unpopular does not imply that unpopular economic policies are ipso facto good.

Liverpool would have understood the EU bureaucracy's desire to insulate itself from populism, and would have been intrigued by the ingenuity of some of the mechanisms by which it achieves this insulation. The idea of a permanent appointed secretariat that was only distantly accountable to the electorate would have seemed to him a plausible alternative to the pre-1832 franchise of rotten boroughs, open vote purchase and limited voting rights.

However, he would have scoffed at claims by the EU leaders that their supposed democratic antecedents gave them a moral superiority and would have correctly pointed out that his pre-1832 franchise was far more accountable than the EU bureaucracy, in that it gave considerable weight to public opinion when broadly held over a prolonged period.

In any case, Liverpool would have had no time at all for the policies the insulated EU bureaucracy pursues. He would have regarded its economics as riddled with error, and the mantra that "economists never agree" as a mere excuse to justify that error - he would have pointed out that the members of the average high school algebra class don't agree on the solution to the week's problems, either, but that's because half of them have bungled their calculations.

He would have regarded EU attempts to impose their lifestyle and ideology choices on the people of Europe as appalling tyranny, which would have reminded him most of the fanatical and cruel Jacobins of Maximilien Robespierre, a movement with which he was very familiar. As I remarked above and Liverpool was well aware, insulation from democratic accountability does not necessarily produce good policies, and in the case of the EU apparatchiks it has bred arrogance and corruption.

Whereas the policies and desires of the EU bureaucracy would have appeared strange and repellent to Liverpool, those of the Greek rioters would have been completely recognizable. His ascent to power, after all, coincided with the Luddite anti-machinery riots. The fury of a populace finding unpalatable change imposed on it by economic forces outside its control would have been entirely explicable, as would the even greater fury of a people losing economically unjustified comforts to which they had become accustomed.

Greek prime minister George Papandreou's claim on Thursday that "We are bearing a cross and we are being stoned", with its extreme biblical overtones, would have appeared very similar indeed to the rantings of "Orator" Hunt and his peers.

Perceiving the Greek problem and anticipating the Greek reaction to policies imposed by the EU bureaucracy, Liverpool would have rightly informed German Chancellor Angela Merkel and French President Nicolas Sarkozy that the correct response to such rhetoric and disturbances is firmness, not handouts.

In the Greek case, firmness, ie forcibly restoring the drachma, is perfectly feasible, since the EU authorities are not in reality subject to significant democratic control. Moreover, the economically superior outcome of a firm policy, as with Liverpool's own firmness in 1816-19, would restore tranquility even to the aggrieved Greek populace within a very few years and would preserve economic stability and growth elsewhere.

In this crisis, there is thus no excuse for Europe's leaders not pursuing policies that actually work.

Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found on the website www.greatconservatives.com - and co-author with Professor Kevin Dowd of Alchemists of Loss (Wiley, 2010). Both are now available on Amazon.com, Great Conservatives only in a Kindle edition, Alchemists of Loss in both Kindle and print editions. 

What's it costing British taxpayers to bomb Libya?

The UK government has shrouded the financial cost of bombing Gaddafi in secrecy and obfuscation

Ian Katz

guardian.co.uk, Sunday 19 June 2011 22.00 BST



This weekend provided sobering reminders of the human and financial cost of the three-month bombing campaign against Muammar Gaddafi's regime: in Tripoli several civilians appeared to have been killed by a Nato strike; while in London the Treasury chief secretary, Danny Alexander, admitted that the bill for Britain's contribution could run to "hundreds of millions of pounds".

Until now the UK government has shrouded the issue of how much taxpayers are spending on bombing Libya in the sort of secrecy and obfuscation you'd expect if you asked the current location of all its Trident submarines.

By contrast, here are a few things I can tell you about how much the US's contribution to the preposterously named Operation Unified Protector is costing: as of 3 June, Washington had spent $715.9m on its military operation and associated humanitarian assistance, $398.3m on bombs and missiles alone. The Pentagon sent 120,000 halal meals ready to eat (MREs) to Benghazi at a cost of $1.3m. And by 30 September it reckons its Libya bill will have risen to $1.1bn. I know all this because it was laid out in a document produced by the Obama administration for Congress last week.

On Friday I tried to find out some equivalent figures for Britain's involvement. I called the Ministry of Defence, where a spokeswoman told me the Treasury was "doing an assessment", but no "actual figures" were available yet. She mentioned a month-old estimate "sort of within the region of £100m", but conceded that since the deployment of Apache helicopters the figure was probably significantly higher.

She thought the Treasury might be able to provide more detail, which did not amuse the Treasury spokesman I reached: "It is currently not possible to pull together real-time figures. Apparently the MoD are working on a breakdown but that's not ready to be released."

Perhaps the Foreign Office could help? Not likely: "The foreign secretary has made clear that we will present accurate costings to parliament in due course. We will not be providing a running commentary."

This from the government that trumpets its commitment on the Downing Street website to being "the most open and transparent in the world".

Fortunately, we do know a little more about the likely bill for Britain's part in the conflict from other sources. This month Nick Harvey, the armed forces minister, said in answer to a parliamentary question that Britain was targeting Libya with £6m worth of munitions a week. A Guardian report in May quoted defence experts who suggested the total bill by autumn is likely to be £400m-£1bn.

Public spending comparisons can be glib, but in times of slashed budgets and brutal choices it is hard – perhaps even irresponsible – to avoid making them. So here are a few striking ones: taking the most conservative estimate, the cost to the UK taxpayer of bombing Gaddafi for six months is four times the cut to the arts budget; three times the sum saved by Ken Clark's controversial sentencing reforms; more than the proposed cuts to the legal aid budget; about the same as the savings from ending the education maintenance allowance (EMA); or three times the amount saved by scrapping the disability living allowance.

Are these reasons to conclude Britain should stop bombing Gaddafi? Of course not: any decision to go to war is a complex equation of morality, risk and national interest, in which financial cost is just one, frequently trumped, consideration. But are they relevant to forming an intelligent view on whether Britain should be involved? Surely.

Yet when it comes to military action there is a curious reluctance to apply the same scrutiny to the bottom line as we do to every other area of public spending. As the New Yorker's Amy Davidson puts it: "There is something almost pathological about the way we don't talk about budgets when we talk about war … as if brave men don't think about things like money."

Anyone who has the temerity to ask how much Britain's Libya campaign is costing is reassured that it is all being paid for from Treasury reserves, so we needn't worry our pretty little heads. But anyone who has lost their EMA or disability living allowance could quite justifiably wonder why cash can be found for bombs but not for them.

At the very least, a democracy ought to ventilate the choices it is making. Ed Miliband has been reluctant to rock the boat over Libya, perhaps because the Labour leader can see no better option. But it's time his party started asking difficult questions about our third war in a decade. And if David Cameron is serious about transparency, he needs to show he can be as open about inconvenient facts as he has been about inconsequential ones.