Why do we subsidise wealthy foreign companies?

There is remarkably low levels of scrutiny of the money that the public sector gives to private, commercial interests. Quite often it is difficult to see exactly what the purpose of the funding is, or why it has been given.

This is highlighted by the case of the investment being made in the Inchgreen dock in Inverclyde reported today. This is a private sector port owned by an English-based company. The value of its infrastructure is being greatly enhanced through a major redevelopment programme, but the owner isn't paying. The public is.

This port is supposed to become increasingly competitive as a result of an £11 million project to deepen the the river. The funding for this came from the UK Government (£8 million) and the local authority (£3 million). The private company does not seem to have contributed.

Indeed local activists are particularly annoyed that the dry dock facility (which traditionally drove jobs in the area) has not received any investment. It seems that the private company is to receive public funding to boost its own private assets which it will then use to generate profits which it can keep for itself – with no public benefit strings attached.

There is welcome media scrutiny of this today, as there is of the decision to grant the landlord industry yet another giant exemption from rent controls (rent controls it is increasingly clear the Scottish Government does not really want to introduce).

There was similar scrutiny of payments to firms such as Amazon to subsidise the construction of distribution warehouses (now owned in a tax haven), and of grants to lucrative arms companies. In fact there is fairly regular questioning of what seems, on the face of it, to be unduly generous transfer of public money to private interests purely for the benefit of the private owner.

Or, the public authorities would argue, not ‘purely’ – because of trickle-down economics. The idea is that if the private operator makes a million pounds, then some of that will result in more jobs and some of it will result in more tax paid. But it will be only a small proportion.

What will probably increase (if this works) is GDP. But – and this is the whole point – this raises GDP on a trickle-down basis. The whole concept is predicated on the owner passing on only a proportion of their gain – but with Scotland's aggregate wealth numbers making the Scottish Government look good.

This is the system which has all-but broken down in British (indeed, European and Western) economics and politics. The public spends money, it increases the wealth of the already wealthy, a small proportion of that wealth trickles down to wider society, GDP goes up – but the wealth of citizens does not really gain much noticeable improvement at all and inequality grows.

It is a cynical game the politicians and big business have going on. Between them they have created a number that makes one rich and the other look good. They have persuaded the public that this number is also the source of wealth of citizens. Yet the number is deeply unreliable.

There is no 'trickle-down' from wealth which is exported out of the country. None of Peel Ports profits are banked in Scotland and the shareholders and owners are not here. Neither are Alexander Dennis's (which has just had £4 million to not make people redundant but which looks more like a fund to delay bad jobs news for the Scottish Government).

Neither is Amazon or the defence companies that get generous public funding. And of course neither is any of the other 'Foreign Direct Investment' which we spend so much time and money attracting. All of it is wealth extracting.

There should be some form of public sector guidelines. The whole argument in favour of our privatised public realm is that it brings in private investment. If the private sector isn't investing, we shouldn't be doing it for it without some sort of public pay-off.

First, private assets which are wholly reliant on public infrastructure and which are also essential to the wider Scottish economy (such as ports) should be looked at very carefully. If private owners will not invest in the wider infrastructure needed to sustain the business, is it a business? Should it not be nationalised? Ports are hardly optional for a functioning society.

If it isn't nationalised, why are equity stakes in the companies not taken? Why do these private interests get free public money with no strings attached? Perhaps above all, there needs to be very, very rigorous scrutiny of these deals to understand on what cost-benefit basis they are made. Audit Scotland should look in great detail at whether these deals bring public benefit that wouldn't have occurred anyway or which is worth more than the investment.

The whole case for the endlessly generous treatment of the assets of the rich is eroding democracy. It is time that we looked again at support for private interests.