Wednesday, July 30, 2003

Tories - party of honesty, efficiency and respect for our soldiers

BACK, back, many years ago, in 1996, the Conservative government sold the Ministry of Defence's married quarters - housing estates for servicemen and their families - to a Japanese bank, Nomura Securities. The deal worked like this. The houses were originally run by a thing called the Defence Housing Executive or DHE. This body sold a 999-year lease (why is it always 999 years and never 1,000?) of all its houses to another thing, called Annington Homes, a company majority-owned by the Japanese bankers. This firm would collect rent from the families of the soldiers and would maintain the houses. But - unlike most landlords - it would also have the right to grab back the cost of maintaining them from the Ministry of Defence. That is, us. Although it's the responsibility of the landlord to maintain the property, and this is usually the running cost of being a landlord, Annington were clearly special. Effectively, that meant every penny of rent above the interest on the cost of buying the houses was clear profit. But that wasn't the clever bit. No. The clever bit was that Annington has the right under the contract to sell several hundred houses every year and pocket the price. In an environment of land frenzy, one can imagine how lucrative this was. That it meant that the stock of houses available to the soldiers' families could only ever go down is just as clear.

Annington's corporate motto is "A completely new way of selling second hand homes".

The division of Nomura involved in the deal was their well-known Principal Finance unit, which specialised in buying up cash-generating but unfashionable assets (famously, several thousand pubs) using either their access to in-house funds or financial engineering (issuing reams of bonds secured on the cash flow to buy the stuff, meaning that the bond holders paid and got the income but Nomura got the capital). This organisation was until recently run by Mr. Guy Hands, a renowned City figure and one of Mr. William Hague's best friends.

The sum brought in by the DHE sale in November, 1996 - £1,662 million - was roughly equal to a 1p overall income tax cut, the cut that was indeed made in the 1996/7 Budget as an election bribe. Mr. William Hague was a member of the cabinet that took these decisions. Mr. Hands was a very close friend of Hague's, at Oxford and McKinsey's - close enough to advise him to "forget about the leadership for 5 years and spend them fucking your brains out".

Some of the houses in Devizes are on sale at the moment. Prices start at £122,950. The original price worked out to around £10,000 each. But Annington and the MoD really, really Care about the people in them. You can clearly tell from the sweet, carin'sharin' corporate social responsbility cool pastel colours on the website! After all, they've given a whole, fat, hyper-generous 2% discount off that 122K to service families.

A private soldier in the Infantry is paid £241.22 a week.

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