Financial structure of Public Investment Corporations PICs
Government takes back control of industries that are national assets and natural monopolies.
Government does not buy back an industry as such but invests in the industry concerned.
The investment is converted into government shares giving the government a majority shareholding. Only the government holds these 'PIC G' bonds and they cannot be sold. However the government may raise more shares or reduce shares as investment increases or decreases in a Keynesian cyclical model
The current owner operators remain in place. The privatised owners can sell their shares with government permission to an approved buyer. But these PIC A shares can only be bought and sold to an approved buyer. These approved buyers could be operators. The government can buy these shares.The government can take full control of the PIC if needed or desired, The owner operators receive dividends based on performance. There might be times when the government is owner and operator and there may be times when the government wants to appoint a contracted operator. In these circumstances the operator is never the owner. The government maintains ownership and ultimate control.
Banks, pension funds and other financial sectors can and are encouraged to invest in the PIC. These shares - 'PIC B' shares can be bought and sold in financial markets as normal but can never equal the government shareholding and are separate from the owner/operator shares. Private and institutional capital can invest but never own, operate or control the PIC. But it would be a sound investment almost like a government bond.
Members of the public can buy shares in the PIC as a form of saving through banks and building societies. This public shareholding 'PIC P' can only be bought and sold by members of the public. Institutional organisations cannot buy these shares. However banks and building societies might be allowed to bundle them into some form of ISA or similar savings or pensions instrument.
Employees can buy shares - 'PIC E' shares. These shares can be sold back to the PIC on leaving, become part of a pension arrangement on retirement and can be bought and sold but only to other employees. The PIC may also bundle employee shares into savings schemes.
The primary role of PICs is to run natural monopolies as efficiently as possible.
But I would like to introduce a new Keynesian idea of ‘notional efficiency’’.
The price charged to users may vary from strict market based pricing to adjusted pricing based on need and ability to pay.
Would like to mention that this flexible ‘market based pricing’ is a valid aspect of a marketing strategy and isn’t that radical.
Staffing levels will vary depending on the economic cycle.
This is where ‘notional efficiency comes into play.
A secondary aim of PICs is to create as many well paid jobs as possible.
In a recession or down turn of the economic cycle the government has to pay unemployment benefits. Regardless of what it is called it has to be enough for a family to survive.
It would be possible to calculate how many extra employees a PIC could take on with the minimum of cost to general taxation. Let's keep in mind the British worker pays between 70% to 80% of his/her pay in one form of tax or another so the whole wage isn’t accounted for when calculating notional efficiency of employee numbers. At a guess I would say 15% overstaffing in an economic downturn or recession would not increase the tax burden when applied against unemployment benefits. Governments can make decisions about how much overstaffing can be borne by the PIC and the taxation system.
The Aerospace industry of the late 1960s and 1970s ran on a model very similar to what I’m proposing and from experience I know how 100 000s of good jobs can be created.
A problem arises when the economy is in an upward cycle. Keynesian principles say employees should be let go at this time. But no-one will want to leave. Reduced recruitment is a partial answer. I can’t as yet provide a full answer to this problem.
Perhaps an equilibrium staffing level.
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