The Times newspaper last week noted how the bill that is currently being footed by the British taxpayers for the Northern Rock debacle equates to the building of 30 – yes, 30 – Millennium Domes. It was the acting Liberal Democrat leader – Vince Cable – who pointed out to Alistair Darling:
“Tony Blair was widely criticised for advancing £800 million for the Millennium Dome. In the last few weeks this Government has provided the equivalent of 30 Millennium Domes to this bank without even the prospect of a decent pop concert at the end of it.”
Given that it is highly unlikely that the public purse will get this money back, and that profits are likely to be up for grabs for some people at least, it is no surprise that Richard Branson – a man who wears a staggering amount of make-up on his face or at least did when I had the pleasure (or displeasure) to meet him – is sniffing around.
With a consortium fronted by his Virgin Group – a ruthlessly capitalist organisation that people have bought into as being the complete opposite – Branson has now been established as the ‘preferred buyer’ for the beleagured bank. Great.
But should we be surprised?
Despite the ‘action-billionaire’ attempting to tell us that he will be investing his own money and that he is in it to ‘build things’ rather than ‘shrink’ them, and that it is ‘good news for the man on the street’, Branson is an extremely shrewd business man and will not being doing this purely to help the ‘man on the street’. Of course, he’s in it to make money…money that is, at the expense of others. As opposition politicians have warned, the Virgin boss’s proposals could saddle taxpayers with billions of pounds of Northern Rock liabilities for years. But why should we be surprised? This is not the first time that the Virgin Group has benefited from Government subsidies gratefully received from the taxpayer (and that’s without the proposed £650m he wants from Northern Rock shareholders too).
Take for example in 2006 when Virgin Trains reversed the industry trend of paying billion pound windfalls to the Government by securing a £1.4bn subsidy for its West Coast franchise. Over the course of the five-year franchise to March 2012, Virgin will receive £1.36bn in state funding – equivalent to £10 per taxpayer and three times the amount that British Rail received from the state for the entire network. Back in 2002, Branson had previously negotiated a £100m subsidy because Railtrack failed to update the track required by Virgin to run its Pendolino trains at their full 140mph limit.
Think that to be bad enough? Well what about this published today:
Sir Richard Branson’s Virgin train companies have, in effect, been taken over by the state and are receiving more than £1bn in subsidies from taxpayers…The arrangement could last until 2012, ministers say.
The Government set up the state-backed Network Rail to run the infrastructure after the privately-owned Railtrack went bankrupt. At Virgin Trains the company’s managers are running services on behalf of the authority with Sir Richard’s business receiving a set fee above costs. The West Coast franchise began running on a “cost-plus” basis a year ago and last week the SRA started to operate the Cross Country network under a similar regime…
…The infusion of taxpayers’ money comes partly as compensation for the delays to the modification of the London to Glasgow line and much of the rest is to help Virgin run the Cross Country network. Under the plan drawn up at the time of privatisation in 1996, Sir Richard’s rail interests should have been making contributions to the Exchequer, rather than the other way round. Virgin received £394m from taxpayers in 2002-3 and £514m in 2003-4 but the SRA hopes to cut the figure in the current financial year to £234m.
What is interesting is that when taxpayers money is available, Branson seems to be able to get things right. When it isn’t – Virgin Vodka, Virgin cola et al – he doesn’t seem to get much right (and there are many more of these failures – just have to look).
The irony is that the financial turmoil that provided Branson a window of opportunity to become the ‘saviour’ of Northern Rock (a ‘saviour’ that is as annoying as the ‘saviour of radio 1’, namely Chris Moyles), earlier this year also forced him to hit the brakes on his attempts to offload the Virgin Media behemoth to private equity. Note: Virgin Media is not going to win any awards for its customer ‘service’ despite those customers being the ‘men on the street’.
Amazing how he was able to turn this dire situation around to his own benefit whilst keeping that wonderful smile slapped firmly on his made-up face, something that must be particularly reassuring to Northern Rock’s worried customers.
Whilst I have nothing against the Rock’s customers – in fact I have a lot of sympathy for them – there would be some satisfaction in seeing the Branson balloon finally burst (if you pardon the pun that is).