We need to talk about profit

Accounting profit is necessary for publicly traded companies to survive; it's not a sign of extortion.

Profit is seen as a pretty ugly thing for public services to be dealing in. Take the Guardian's Terry Macalister in April (only picked because it's the most recent I can find):

The big six energy suppliers have been accused of "cold-blooded profiteering" after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills.

To be clear, the profit motive is a fair target. There's a real debate to be had over whether or not companies providing public services should be operating under a legal structure which requires them to try to maximise the amount of cash (over the long term) they can return to shareholders, rather than, say, maximising the quality of service provided for a given investment, or providing a set level of service at the minimum cost possible.

But given public services are frequently run by private companies, attacking the amount of profit they actually make is concerning, for one simple reason: money costs money.

It's a basic fact of the economy, one which explains why it takes so long to pay off credit card bills, why the bank pays you if you've got a savings account, and why Greece is finding things tricky at the moment.

But while we're all familiar with debt finance – the act of borrowing a sum, and then paying it back with interest – corporations have an alternative way of paying for the money they need: equity finance. Rather than paying interest on top of borrowed cash, they return a share of the money they make with their loans to the people who loaned to them in the first place.

That money being returned – the equivalent of the interest which we all have experience paying – is profit.

If companies don't earn some profit, then the shareholders are likely to cash out, safe in the knowledge that they can earn more by putting their money elsewhere – maybe by buying shares in another company, or putting it in a high interest savings account. The amount of profit that companies have to earn to stop this happening will vary based on the perceived riskiness of investing in them, as well as the value of investments elsewhere, and is known as the "cost of capital".

Power companies need to be able to make investments, frequently valued in the billions of pounds (Macalister quotes one industry analyst who estimates £50bn is needed just to hook up new gas supplies). It's only by making profit today – that is, by rewarding the shareholders who bought in to the companies before – that they can ensure that they have enough funding to carry on paying for investments tomorrow.

None of this is to say that there can't be such a thing as "too much" profit; if Thames Water were to suddenly make Apple-sized margins, we could be pretty sure that they were overcharging or underinvesting. But simply making accounting profit, even at the same time as pleading penury and raising prices, is not a sign of underhandedness. It's just a sign of a business working as normal.

Companies which deliberately and continually make no profit do exist. But they aren't traded on the open market, and have no access to equity finance. That's fine for some, but worrisome if they suddenly need to find large amounts of cash to invest – or to stave off the creditors.

Perhaps public services should be run as non-profits, or not be run privately at all; but if they are, attacking them for making profit is foolish.

Hinckley Point nuclear power station. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Let's face it: supporting Spurs is basically a form of charity

Now, for my biggest donation yet . . .

I gazed in awe at the new stadium, the future home of Spurs, wondering where my treasures will go. It is going to be one of the architectural wonders of the modern world (football stadia division), yet at the same time it seems ancient, archaic, a Roman ruin, very much like an amphitheatre I once saw in Croatia. It’s at the stage in a new construction when you can see all the bones and none of the flesh, with huge tiers soaring up into the sky. You can’t tell if it’s going or coming, a past perfect ruin or a perfect future model.

It has been so annoying at White Hart Lane this past year or so, having to walk round walkways and under awnings and dodge fences and hoardings, losing all sense of direction. Millions of pounds were being poured into what appeared to be a hole in the ground. The new stadium will replace part of one end of the present one, which was built in 1898. It has been hard not to be unaware of what’s going on, continually asking ourselves, as we take our seats: did the earth move for you?

Now, at long last, you can see what will be there, when it emerges from the scaffolding in another year. Awesome, of course. And, har, har, it will hold more people than Arsenal’s new home by 1,000 (61,000, as opposed to the puny Emirates, with only 60,000). At each home game, I am thinking about the future, wondering how my treasures will fare: will they be happy there?

No, I don’t mean Harry Kane, Danny Rose and Kyle Walker – local as well as national treasures. Not many Prem teams these days can boast quite as many English persons in their ranks. I mean my treasures, stuff wot I have been collecting these past 50 years.

About ten years ago, I went to a shareholders’ meeting at White Hart Lane when the embryonic plans for the new stadium were being announced. I stood up when questions were called for and asked the chairman, Daniel Levy, about having a museum in the new stadium. I told him that Man United had made £1m the previous year from their museum. Surely Spurs should make room for one in the brave new mega-stadium – to show off our long and proud history, delight the fans and all those interested in football history and make a few bob.

He mumbled something – fluent enough, as he did go to Cambridge – but gave nothing away, like the PM caught at Prime Minister’s Questions with an unexpected question.

But now it is going to happen. The people who are designing the museum are coming from Manchester to look at my treasures. They asked for a list but I said, “No chance.” I must have 2,000 items of Spurs memorabilia. I could be dead by the time I finish listing them. They’ll have to see them, in the flesh, and then they’ll be free to take away whatever they might consider worth having in the new museum.

I’m awfully kind that way, partly because I have always looked on supporting Spurs as a form of charity. You don’t expect any reward. Nor could you expect a great deal of pleasure, these past few decades, and certainly not the other day at Liverpool when they were shite. But you do want to help them, poor things.

I have been downsizing since my wife died, and since we sold our Loweswater house, and I’m now clearing out some of my treasures. I’ve donated a very rare Wordsworth book to Dove Cottage, five letters from Beatrix Potter to the Armitt Library in Ambleside, and handwritten Beatles lyrics to the British Library. If Beckham and I don’t get a knighthood in the next honours list, I will be spitting.

My Spurs stuff includes programmes going back to 1910, plus recent stuff like the Opus book, that monster publication, about the size of a black cab. Limited editions cost £8,000 a copy in 2007. I got mine free, as I did the introduction and loaned them photographs. I will be glad to get rid of it. It’s blocking the light in my room.

Perhaps, depending on what they want, and they might take nothing, I will ask for a small pourboire in return. Two free tickets in the new stadium. For life. Or longer . . . 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times