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Name a successful privatisation
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neilthewheelFull Member
Just got to thinking, in the wake of the Phones4U news this morning, the phone privatisation is probably one of the most successful and yet everyone moans about their providers, dodgy sales tactics etc.
Gas/electricity? Replaced monopolies with sextopolies. Shocking sales policies, rubbish service.
Water? Replaced a monopoly with a privatised monopoly.
Railways? Buses? Took state subsidy to new levels.
Coal, steel, shipbuilding? All but gone.
Car industry? Gone.StonerFree Memberdefine “success”
And I dont mean “profits for shareholders”, binners et al
Success or failure is surely relative (to the alternative). It’s hard to have “absolute” success because there’s always someone who will have a grumble whether it has economic merit or whether it’s just ideological.
But being relative to an alternative which you cant run side by side makes it hard for either side of the argument to genuinely demonstrate success or failure. The French rail system is held up as an alternative to National Rail, but is heavily subsidised, has very low regional penetration or km of track per user, or rushour usage compared to the UK.
Although Im often labelled some kind of capitalist running pig-dog in here there are plenty of things I think out to be state owned/or financed and PFI is one of the biggest frauds the country has eve come up with. There are though, v good reasons to create competitive markets where possible. Failure of competition is not necessarily failure of the market, it’s usually failure of the state to keep a weather eye on how the market is performing usually from not understanding the underlying processes at work.
LHSFree MemberWater has been a success. Inflation adjusted prices are significantly lower, investment in infrastructure much improved, no low pressure issues. This is helped in part by the success of Ofwat.
BT – overall is a significant success. Could be much better but compared to pre-privatisation it is lightyears better.
Fresh Goods Friday 696: The Middling Edition
Latest Singletrack VideosFresh Goods Friday 696: The Middlin...brakesFree MemberI think the trains work really well now, the only problem is that they’re hideously expensive.
mikewsmithFree Memberis success ending tax payers subsidy of an industry that can’t compete? Resulting in lower taxes and expenditure when we buy from elsewhere?
Is there a nationalised industry that is performing well?binnersFull MemberRichard thinks its been hugely successful!! He referred to the West Coast Mainline contract as “a license to print money”. Which is exactly the kind of attitude you’d want from the owner of a private monopoly of major national infrastructure 🙄
Meanwhile the state owned, re-nationalised East Coast Mainline has been a complete failure in that it makes a profit which it returns to the treasury. And we can’t be having any of that nonsense, as it contradicts the divine preaching of ‘The Market’. So it must be handed over to Richard and his profiteering, subsidy-hoovering chums at the first available opportunity
thekingisdeadFree MemberRolls-Royce?
Car industry? Gone.
Absoulute poppy-cock.
UK has a fantastic car insustry. Its just foreign owned.
StonerFree Memberending tax payers subsidy of an industry that can’t compete
or are there, for progressive reasons, some base utility functions that are such a fundamental part of life that state ownership is the only efficient way of engineering the transfer of wealth from rich to poor users?
edsbikeFree MemberCar industry?
One of the biggest car plants in Europe is in Sunderland.
We are home to a car manufacturer making billions in profits and employing many tens of thousands of people directly, probably hundreds of thousands indirectly though the supply/distribution chain.
DracFull MemberCar industry? Gone.
Nope.
[video]https://www.youtube.com/watch?v=vmcmqTAu6b8[/video]
StonerFree Memberbinners, First Great Western service to Worcestershire and Herefordshire is “subsidised” by the county councils, otherwise FGW wouldnt run intercity services to that there London. That subsidy goes towards FGW running a profit, which in turn means they continue to run that service linking my home county to the capital city. I for one am most grateful they receive a subsidy.
EDIT: I so love that video, Drac. Brings a tear to one’s eye, so it does.
aPFree MemberDefence R&D – made 5 people extraordinarily rich
Airline – ??, half Spanish…
Post – Can’t be long before it goes yellow
Car industry – still one of UK’s biggest exporters, just not UK owned any more
Rolls Royce – apparently successful, but much carried out in long term partnering/ JV’s
Electricity/ Water/ Busses – privatised, but all owned by foreign nationalised industries….nickcFull MemberAmersham International
Even on the limited scope of how much a share is worth £100 in 82 now worth £2500, compared to BA where £100 bought in 87 now worth £115!
zokesFree MemberThere are though, v good reasons to create competitive markets where possible.
And emphasis on that last bit… Water, gas, elec, BT, trains are all examples of where this isn’t possible, or only in a very compromised sense, as they rely on fixed infrastructure that can’t be shared easily (only one gas pipe to your door, only one phone line, only one train track, etc). Even if someone else sends the gas or phone signal down those connections, there’s still a monopoly of some description on the hardware – hence why you have to pay line rental to BT for a phone even if you only want ADSL from another provider.
Things like the PO and public transport more generally are also problematic as there is a tendency (if left to the market) to focus only on profitable areas, excluding more costly regional markets.
As an example of an industry that has worked well after privatisation, I give you airlines.
jambalayaFree MemberUK has a fantastic car insustry. Its just foreign owned.
Sorry don’t agree at all. We have some niche manufacturers Aston, Land Rover and the Mini. the mainstream UK car manufacturers where appalling that’s why they’ve all gone. Ford and Vauxhaul where foreign companies that set up here.
I am struggling to think of a single good privitisation.
The ultilities have proven a licence to print money for their private owners
As a commuter for 30 years I can vouch for the fact that rail privitisation has been a disaster (aside from an ex colleague who made close to £100m personally from it). Public transport is exactly that, its a service for the public not a profit orientated business.mikewsmithFree MemberSorry don’t agree at all. We have some niche manufacturers Aston, Land Rover and the Mini. the mainstream UK car manufacturers where appalling that’s why they’ve all gone. Ford and Vauxhaul where foreign companies that set up here.
Privatisation no but Nissan, Honda etc have come in and proved you can make cars in the UK just not the way the UK used to make cars.
binnersFull MemberStoner. Virgin Rail receives huge taxpayer subsidies. As do all the rail operators. Hence Richards statement about it being ‘A License to Print Money’. He gets to bang the fares up to exhorbetent levels, and we pay him millions, through taxpayer subsidies, for the privilege…
Its ironic that a succession of British governments have privatised everything in sight, saying state control of the utilities doesn’t work, yet these utilities are then bought by foreign, state-owned concerns. But thats ok?
andytherocketeerFull Membercar industry should never have been nationalised in the first place
states making cars is what hitler and co. domeftyFree MemberIgnoring the ones that have been successful but people quibble about. Loads
BP
ICL
Lunn Poly
Rolls Royce
Thomas Cook
Amersham Internatinal
ABP
BA
British Sugar
British Transport Hotels
Britoil
Cable & Wireless
Enterprise OIl
Ferranti
TSB
Sealink
Travellers Fareetc etc
Plenty of businesses that government should never have been owners of.
footflapsFull MemberBT – overall is a significant success.
I wouldn’t call that a success eg BT were incredible slow to bring broadband to the UK as investing in new technology would hit short term profitability. As a result the UK was laggard in BB for many years, which probably affected overall productivity.
PJM1974Free MemberThe car industry is a bit of a controversial one…overseas businesses who’ve set up factories here have demonstrated that the problem wasn’t with the workforce. In truth, the old British Leyland management structure and working practices had to go.
That said, I’d really like to see every MP who voted in favour of privatising the railways lose their pension and be forced to endure the same expensive rail commute as the rest of us.
mikewsmithFree Memberbe forced to endure the same expensive rail commute as the rest of us.
I commuted Glasgow to Warrington weekly it was great value and worth it over driving. I assume you are referring to a london centric commute on overcrowded trains
ninfanFree MemberIn truth, the old British Leyland management structure and working practices had to go.
I think there was a complex buggers muddle of both
can you imagine trying to bring the first robot welder or CNC machine into a UK factory in the 80’s, and telling the union rep that it would replace 5 people?
muddy@rseguyFull MemberInteresting list there mefty.
Rolls Royce Aero Engines:nationalised to avoid bankruptcy in the early 1970’s when developing engines for the L1011 as it was viewed (rightly) as being in the national interest, privatised in 1987, now seems to be doing really rather well and making very good products.
BT seems to be doing rather well: My mum used to be a civil servant in the late 60-early 70s and was assigned to the Post Office. Her job entailed telling people why they couldn’t have a phone line installed in their houses as they didn’t have any spare capacity to expand the network…
I lived in Germany in the mid 1990s, Deutsche Telekom seemed to operate in exactly the same way! According to colleagues who are still out there they still do.
However, I do agree that a great many PFI’s are a total waste of money although those chickens will only come home to roost in about 10-20 years time.
dragonFree MemberThe UK is Europe’s 3rd biggest car manufacturer behind German and Spain.
kimbersFull MemberJourney times have reduced under privatised rail
One of the justifications private companies use for their inflation busting increasesOf course a lot of that’s thanks to network rail improving the infrastructure
Unfortunately it was renationalized quietly last week so that the tax payer could take on its £34bn debt it had built up making bransons trains go faster
http://www.theguardian.com/business/2014/aug/28/network-rail-piublic-sector-dont-call-it-nationalisationrobdixonFree Member“Meanwhile the state owned, re-nationalised East Coast Mainline has been a complete failure in that it makes a profit which it returns to the treasury. “
This kind of misses the point that the East Coast Mainline isn’t paying a franchise fee of c£1Bn which was the thing that sunk the last franchise holder. The other key issue is that East Coast has effectively inherited rolling stock without having to finance it. If all of the franchises were renationalised the Treasury would then need to borrow £billions more for rolling stock, and take the operational risk.
A more interesting comparison, albeit one the Unions haven’t trotted out for a while now (for good reason) is that the rail systems that have the highest number of fatalities in Europe are those that are publically run, despite also having fewer miles per passenger.
mudsharkFree MemberI wouldn’t call that a success eg BT were incredible slow to bring broadband to the UK
I remember in the 90s the Gov’t restricted what BT could do in order to aid competition from the likes of Mercury Communications, at the time the perception of some was that BT could be one of the best communications companies in the world if let loose – e.g. they wanted to put in a fiber optic infrastructure for the UK but were stopped. I can’t remember the detail though – anyone else?
djgloverFree MemberBT managed to stifle competition for so long by having a stronger regulatory team than the regulator
vondallyFree Memberdefine “success”
And I dont mean “profits for shareholders”,
you mean someone looking for a fiscal return living anywhere in the world versus a person/people with a shared interest in a well run organised socially equitable country/nation designed to work for and behalf of the denizens?
rob2Free MemberIt all depends what lens you look through.
For example, Anglian Water’s shareholders got all their equity back in about 3 years from 2009 to 2011. good for them, but their customers?
Also, perhaps most importantly, business sectors will go through cycles.
So take water. Done pretty well for the last 25 years but currently going through a process of “unbundling” to reveal information to help make better decisions as the issues at privatisation are now all but gone.
With the exception of Welsh Water which is now all but nationalised (its not technically).
The big problem with privatisation of utilities (in my opinion) is on the intergenerational effects of decision making in a private company. The discount rate of private equity is different from the social time preference so you get different decisions not in the customer interest. whether that is offset by the efficiency savings privatisation gives, who knows.
(gets off soap box)
ninfanFree MemberThe big problem with privatisation of utilities (in my opinion) is on the intergenerational effects of decision making in a private company. The discount rate of private equity is different from the social time preference so you get different decisions not in the customer interest. whether that is offset by the efficiency savings privatisation gives, who knows.
Fair points
The counter argument of course is the difficulty of reinvestment in a nationalised industry – history points us towards this being very difficult, since a government is met with competing priorities and a constant electoral cycle, a vital £200million reinvestment in the water network whilst closing down a hospital somewhere else in the country is never going to be an popular decision for any politician to make.
rob2Free Memberninfan – true, but its because of the form of the regulatory regime. It is set up to reduce costs and solve current problems, not make investment ahead of need.
Investors are happy to pump money in to the regime (see low cost of capital), but there is no incentive to go further than the minimum.
basically we are f***** in this country and living off a victorian legacy :o)
cookeaaFull MemberThe interesting thing reading all these comments is the differing measures of “Success” some view it as operating profitably, some see it as unburdening the state, a slim few see it as continuing to deliver the required service(s)…
The fact is that when an organisation moves from public to Private sector it’s own measures of Success fundamentally change overnight too…
From talking to my missus/her colleagues I reckon the local authorities are about to see mass “Privatisation by the back door”, many are in the process of idenifying any and all services that can be “Comissoned” rather than provided in-house, and I don’t think much will be off limits, we already have friends who are social workers, effectively made redundant and then re-employed via agencies, that essentially means someone somewhere is now deriving profit from a state funded service intended to protect the vulnerable and at risk…
Your local council will ultimately get whittled down to two basic departments “Procurement” and “Complaints”, Public sector procurement always goes swimmingly I’m sure you’ll agree, and complaints are really there to document the shit-storm after the fact for which private agencies will never allow themselves to be held responsible… Of course once you do this it’s nigh on imposible to reintegrate service providers back into the public sector…
It’s a brave new world folks
igmFull MemberSafety incidents down by 80% (and we count more rigorously that we did as a nationalised industry)
Cost to customers down by 50% in real terms
Reliability of service improved – how much we don’t know because we never really used to count it.
Investment up.
Training staff like nobody’s business
Profits re-invested in the company not spirited away overseas.
I’d claim to be part of a successful privatisation. Unfortunately we’re closely associated with one that hasn’t hone so well in popular opinion at least.
binnersFull Memberthat essentially means someone somewhere is now deriving profit from a state funded service intended to protect the vulnerable and at risk…
The ‘care’ system is a prime case of this. Council children’s homes have all been closed down, and private equity firms have moved in, set up companies to provide children’s ‘care’ homes. They pay the lowest wages, locate them in the cheapest possible areas (Rochdale is where a lot of councils all over the country send/dump their ‘problem’ children), then charge exorbitant fees. For each child, the costs billed to each local council is between £250,000 and £400,000 per year.
It was this level of ‘care’ provided that has allowed the industrial scale of child sexual abuse we’ve seen in various places around the country.
But the companies involved happily boast in their prospectuses about the enormous returns for investors. Thats where the priority lies. And they are making an awful lot of money. So its all good, right?
brooessFree MemberOP – you did know there was no answer to your question and that we’d all just run to our pre-existing prejudices didn’t you? 😀
a) what’s success? prices, cost to the taxpayer, quality of service?
b) if, somehow, you were able to split the service part public, part private and run both at the same time, under the same conditions, then you could look at the outcomes and make some kind of evidence-based judgement…As someone who believes in the free market I’m not sure what we have in the UK is proper privatisation as there isn’t true competition in many of the privatised services ie: if the supplier doesn’t meet my needs, I can’t take my business elsewhere.
For e.g. if I want to get the train to Liverpool from London and Virgin run late or are too expensive, I don’t actually have much choice, I’m stuck with Virgin.
That said, the journey’s way quicker and in much better trains than it was back in the late 80’s/early 90’s so something’s got better… we just don’t know if it would have been better or worse if it hadn’t been privatised
ninfanFree MemberIt was this level of ‘care’ provided that has allowed the industrial scale of child sexual abuse we’ve seen in various places around the country.
There seems to be plenty of records showing industrial scale child sexual abuse when the councils were running the homes, no?
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