[Closed] Name a successful privatisation

define "success"

And I dont mean "profits for shareholders", binners [i]et al[/i]

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.

Water 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.

I think the trains work really well now, the only problem is that they're hideously expensive.

is 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?

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Richard 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 [url= http://www.theguardian.com/uk-news/2014/sep/09/state-owned-east-coast-rail-franchise-paid-225m-pounds-treasury-still-faces-privatisation ]state owned, re-nationalised East Coast Mainline[/url] 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

Rolls-Royce?

Car industry? Gone.

Absoulute poppy-cock.

UK has a fantastic car insustry. Its just foreign owned.

ending 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?

Car 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.

Car industry? Gone.

Nope.

binners, 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.

Defence 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....

Amersham 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!

There are though, v good reasons to create competitive markets [u]where possible[/u].

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.

UK has a fantastic car insustry. Its just foreign owned.

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.

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.

Stoner. 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...

[url= http://www.theguardian.com/commentisfree/2013/jun/10/truth-richard-branson-virgin-rail-profits ]Richard Carpetbagger Branson[/url]

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?

Road Haulage

[url= http://en.wikipedia.org/wiki/National_Freight_Corporation ]http://en.wikipedia.org/wiki/National_Freight_Corporation[/url]

car industry should never have been nationalised in the first place
states making cars is what hitler and co. do

Ignoring 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 Fare

etc etc

Plenty of businesses that government should never have been owners of.

BT - 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.

The 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.

be forced to endure the same expensive rail commute as the rest of us.

In 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?

Interesting 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.

The UK is Europe's 3rd biggest car manufacturer behind German and Spain.

Journey times have reduced under privatised rail
One of the justifications private companies use for their inflation busting increases

Of 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-nationalisation

"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.

I 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?

BT managed to stifle competition for so long by having a stronger regulatory team than the regulator

define "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?

It 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)

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.

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.

ninfan - 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)

The 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

Safety 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.

My money is you work for UU?

that 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?

OP - 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

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.

There seems to be plenty of records showing industrial scale child sexual abuse when the councils were running the homes, no?

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.

Bloody hell binners. As often as I agree with your many points in lots of threads, this is a level of whataboutism too far!

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.

This is the challenge with viewing public services with an individual lens As we all do). The flip side is that when BR ran it, the service was worse and there was still only one provider you could use.

Of course, there are many political reasons for the service being worse at the time (major underinvestment apparently being one), so it's too hard to judge on a fair basis.

As someone who works in a private industry that grew out of a nationalised business (I work for a telecoms company), I find my views are often conflicted: I too want the panacea of public services to be in the hands of the public, but can't help but think how much better telecoms is than if it was solely under the control of BT. Though it's bad nough that the effective monopoly of Openreach is allowed to continue (leaving aside the issues of equivalence).

But telecoms ( I think) is a special case, as it's the domain in which the technology has changed most. BT was copper landlines only, now they are competing with fibre cable, satellite, and other digital communications.
Yes, we get better service on the whole, but look how sporadic mobile reception is in rural areas: there is no mandate for total coverage so those providers are delivering worse coverage than BT did.

Coms has been a success, there is no way it would have pushed on in the way it has under national management.

Rail as well, better trains, quicker and more punctual service. Prices are a bit hit and miss but compared to the other options (cars in may case) it is still cheaper.

As with everyone above you have to define what you mean by success and use that as a yard stick. But also as above, you can't know what the counter factual would have been with the same investment over the same period.

To say trains are privatised is pushing it a bit - rail track is a state owned enterprise and massively subsidised (£14billion a year I think?. The train franchises are also subsidised, the always blame govt for cutting subsidises for price rises. Basically I don't think it's possible to run a train service on purely private income. In that respect for the semi-privatisation to be a success you have to make the case that for any given standard of quality the presumed efficiencies of having a private organisation running the franchise are greater than the level of profit the company extracts and the extra administrative costs of rolling franchising and multi-operators. That is the fundamental logic of all private involved in monopolies, like PFI in NHS and education.

Similarly other privatisations like utilities, there is some competition, but ultimately all buy of the same wholesale market so prices will converge - ultimately its whether you think the small amount of competition holds prices down and private sector efficiency more than compensates for profit taking.

I am somewhat sceptical about this and it was the failure of will of Government to properly run state industries than caused problems

We have some niche manufacturers Aston, Land Rover and the Mini.

Joke, yes?

Water 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.

Isn't water privatised in a competition-free environment? I'm still struggling to see how that works.

Another point: if privatisation is making out lives better, why is the gap between the rich and poor getting larger (when a lot of the rich have fingers in the privatisation pie)?
http://www.huffingtonpost.co.uk/2014/03/24/uk-inequality-pay-gap_n_5020036.html

... oh I was just thinking a bit more about the counter factual.

The NHS is massively improved since the 80s and 90s - in terms of quality and speed of treatment, but still very much public sector. Who is to say trains wouldn't have been the same in public hands, given the right investment - and don't fool yourselves that there hasn't been massive public investment in the railways during the privatised era.

I think health and safety on the railways was mentioned post privatisation - hasn't that also happened in the building trade too - which has always been private sector. Isn't improved H&S something that has just happened with tighter rules and inspection regimes.

Ultimately, I think you end up with ideological arguments because there is so much else going on that muddies up the water

Basically - I'm just saying you can't say a privatisation is a success because certain good thinks have happened - you need to demonstrate that the same or better wouldn't have happened under public ownership - the good stuff may have happened anyway.

Freedom.

olddog - Member

To say trains are privatised is pushing it a bit

As with all the best privatisations, the profit is privatised, the taxpayer has to worry about everything else

British Airways seems to have done quite well

I don't really think my point was whataboutery. Privatisation encompasses much more than telecoms, railways and utilities. It now reaches into all aspects of life that in the past were the responsibility of the state. And in this case a system that failed so spectacularly, and continues to do so, with such devastating consequences for such a large number of the most vulnerable in society, is still generating huge profits for the people responsible for this systemic failure.

If you look into the whole structure of privately run children's homes, it's an absolute disgrace. But it's a very profitable disgrace. And I personally think that's an obscene state of affairs. But this represents the change in priorities and culture dictated by privatisation. Which doesn't bode well for the increase in the use of private companies within the NHS and other areas (ie: the probation service - a recent bonkers privatisation proposal) where providing dividends to shareholders should be pretty far from the highest priority objective, which experience has shown us it inevitably becomes.

Coms has been a success, there is no way it would have pushed on in the way it has under national management.

Why do you say that? I thought BT was a pretty big innovator in its day.

I don't really think my point was whataboutery. Privatisation encompasses much more than telecoms, railways and utilities. It now reaches into all aspects of life that in the past were the responsibility of the state.

That I do agree with. There is a line that a lot of people don't want to be crossed which, when taken as a whole is being crossed - but individuals don't see it that way as they only come into contact with limited parts of the whole.

In my eyes, care is something the state - as the formalised representation of our social order - ought to be directly responsible for.

Binners - I agree. But I also think it worth arguing against the illogic of - sector x is better than the 1970s/80s therefore privatisation = good.

Ultimately, it is ideologically driven, based on a belief that any amount of market is better than the best run public services. Now the obvious candidates have gone it's time to move onto the direct delivery of public services - already been partly done with prisons as well.

The model is state commissioned often state fronted, but with the delivery outsourced - stealth privatisation

Then we're pretty much in agreement fella. I think the States ownership of areas like manufacturing cars, etc, which rely on constant innovation, is absolutely bonkers! As it proved. But there are certain areas that should remain free of the demand to make a profit.

Privatisation encompasses much more than telecoms, railways and utilities. It now reaches into all aspects of life that in the past were the responsibility of the state.

Removal companies for example...

Serious question here, where do you stop?

NHS is a very good example, Which of the following should be reserved for public sector, and which is it acceptable to purchase from/contract to the private sector:

Paper tissues (eg kimberly clark type stuff)?
Medicines?
Laundry services?
Catering?
Cleaning?
Generator servicing and repair?
Ambulance servicing and repair?
CAT scanner servicing and repair?

Once upon a time, a good few of them would have been done through in house staff, others wouldn't - I'd say that some of them are hard to categorise as 'should be'

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.

Other EU countries are well ahead of us because the state invested in these services. It is a level of strategic thinking the UK currently lacks because utilities and transport are private entities, whose aim is short term profit.This is currently coming home to roost in our electricity industry.

Privatisation for the sake of privatisation is lunacy, based on an idealogical dogma that Governments of all flavours over the last 30 years or so have stuck to, chanting the mantra of "small government."

Electricity, Water, Gas, and transport should be brought back under state control, not because they technically can't be competitive, But for their strategic significance. You have to think about a long term national strategy for infrastructure, and invest accordingly, because it is amongst the things businesses need so they can be competitive both nationally and internationally.

I also believe that privatisation should be kept out of social care and the like, but stuff like airlines, car manufacturers, Rolls royce etc, should stay privatised.

Rob2 - not quite but not a million miles away.

Svt?

Re=privatising services would mean taxes go up to fund them. Whichever government did that, you can expect them to be voted straight out again...

However the profits AND dividends would come back into the public purse - assuming there are any.

And the interest payments on the borrowing to invest, Molgrips.

It just ain't that simple, even for a champagne socialist like me.

I think success in this context could be described as bringing a better value and level of service to the end customer and country as a whole than remaining nationalised would have.

It's pretty much impossible to tell, although undoubtedly a lot of improvements in trains, communications etc. are down to advances in technology, and may have come at a lower cost in terms of subsidy and costs to the customer had the industries not been privatised.

However one thing I would say I do see as a benefit of the private sector is that jobs/pay/benefits are no longer a political football. Seeing the way public sector workers have been treated since "austerity" started, I'm glad I work in the private sector.

Apart from the political aspect to public sector jobs, however, I can't see any advantage to privatisation - the issue with public sector inefficiencies is poor management and large sluggish organisations, which are just as possible in the private sector (until the firm goes bankrupt at least).

... Oh yeah, thanks for reminding me. Government can raise capital at a much lower rate than the private sector, so that's another margin that has to be delivered through private sector efficiency...

It just ain't that simple

I know, that's why I added the caveat 🙂

Personally I found the Royal Mail the most successful yet 😉

Ignoring the ones that have been successful but people quibble about. Loads

...
Ferranti

Really? 😯

Plenty of businesses that government should never have been owners of.

Re=privatising services would mean taxes go up to fund them. Whichever government did that, you can expect them to be voted straight out again...

I suppose if you put short term gain ahead of strategic planning that your Children would benefit from, then I suppose a government could be voted out.

It is no longer guaranteed that the population sees Privatisation=good,Nationalisation=bad any more, Unless you are in London/south east of course.

I suppose if you put short term gain ahead of strategic planning that your Children would benefit from, then I suppose a government could be voted out.

Unfortunately that seems to be the way our democracy works.

I suppose if you put short term gain ahead of strategic planning that your Children would benefit from, then I suppose a government could be voted out.

BT? A success? Oh sweet baby jelly babies!!!

How exactly are you measuring success? On a business level would it be the complete inability to get bills right for two consecutive months? Or the ability to provide data links just over old dial up speeds in rural locations? If we are factoring in the mighty Open Reach, maybe it their inability to attend a visit within a month of booking? Maybe their use of sub-contractors? Sub in this context meaning below par. Below par meaning shit. Or maybe it their SLA system which is so heavily skewed in their favour that it is practically impossible for them to fail.

Or the ability to provide data links just over old dial up speeds in rural locations?

Well that's a pretty expensive thing to do so I suppose should be paid by the Gov't.

Power? Over in Oz I'm moving house so the sole monopoly state run power company is charging me £30 to close the account at the old house and £30to start one at a new place, won't take owner readings and charges what they like

Or the ability to provide data links just over old dial up speeds in rural locations?

They do that. Just not everywhere 🙂