Privatisation in the UK

It is the belief of some economists that free market is a superior method of allocating economic resources and that large scale involvement by Government in business activities would hinder economic progress. The UK Conservative Government under Mrs Margaret Thatcher therefore felt that the central control of many industries was no real benefit to the economy, it was therefore decided that it would be better to privatise the public sector as far as possible. Privatisation is the sale of nationalised industries to the private sector of the economy. This was a major element in the economic strategies of the Government.

Other elements of the strategies included giving the right to buy to tenants of houses and flats owned by the local authorities, inviting tenders for the performance of a wide range of services which were within the public sector and contracting over these services to private firms. Privatisation therefore had two main aims, these were to promote efficiency, especially through competition and to widen share ownership. Competition ensures that goods and services desired by the customers are provided at the lowest economic cost, increased efficiency is achieved as a result of sustained pressures on companies coming from market forces.

Organisations that were privatised were in the following industries; gas, electricity, water, transport and telecommunications where competition had been very limited in scope. The nationalised industries that were sold to members of the public between 1979 and 1996 included the following:- Associated British Ports, British Airport Authority (BAA), British Energy, British Gas, British Petroleum, British Steel, British Telecom, Cable & Wireless, Enterprise oil, Jaguar ('British Leyland') Rail track, Sealink (British Rail), Water authorities etc

In disposing of it assets, governments have used a number of options including selling shares to a single buyer, usually another company or consortium (e. g. -the sale of Rover) selling shares to the company's management and workers. (E. g. the management buyout of the National Freight Corporation) and a public floation on the stock exchange for the purchase by individuals and institutions (e. g. -the stock market floatation of British Telecom) In some cases, the process of sale took place in several years and in several stages as a proportion of shares was released on to the market. E. g. -BP

In some other cases, a one-off sale occurred, with investors invited to subscribe for the whole of the equity (e. g. -British Steel). The proceeds from privatisation sales between 1979 and 1997 exceeded i?? 67 billion. In order to ensure that these privatised companies operate like any other private business, the Government set up regulatory bodies which oversee the activities of these companies, protect the interests of the customers and act as a proxy for true competition: OFTEL for Telecom, i. e. -Office for Telecommunications, OFGAS for Gas, OFWAT for water, OFFER for electricity. Lately OFFER and OFGAS were combined to form OFGEM