Privatisation is also not a dirty word

Regular readers of this blog may remember my last post, in which I stated private profit is not evil. Well, neither is that other oft-abused word, “privatisation.” The UK led the world in selling off nationalised industries in the 1980s and early 1990s yet today, privatisation is most often used in an entirely negative context, as though the policy were a complete failure. This is simply not true.

Recent polls have shown that many people would support renationalising the railways. Rising energy bills have turned ‘big six’ energy companies into tabloid villains. And we are constantly warned by left wing politicians that the NHS is in danger of being privatised.

NHS “privatisation” is not privatisation

First off, NHS privatisation is a non-issue. Allowing private companies to operate inside the NHS does not mean you will have to pay for your healthcare up front or take out insurance. It does not mean that the UK is moving towards a US-style healthcare system.

The NHS suffers from serious failures in care, and treating preventable illnesses like cancer, because it is a rationed system. A market-based insurance system with taxpayer-funded support for those on low incomes, or suffering from chronic illnesses, would be far superior in my opinion – and this is exactly how France and Germany’s superior healthcare system work.

But no British politician would ever dream of such a thing. Since its inception, the NHS has gained the status of a national cult; to challenge the cult is to commit electoral suicide.

Privatisation does not mean allowing private companies to provide public services if those things are still paid for entirely by taxpayers. It means taking those things out of general taxation entirely and offering them on the free market instead.

Privatisation has for the most part been a massive success

Privatising previously nationalised industries is also one of the most successful policies any British government has ever undertaken. Millions of ordinary people became investors, with share ownership rising from 3 million to 12 million throughout the 1980s.

Before telecommunications were privatised in 1984, you had to use a bulky phone box from the Post Office. To get a new telephone line you had to join a waiting list, which might take several months. The industry was under-funded, over-staffed and hostile to new technology.

Privatisation allowed BT and its competitors to put themselves at the cutting edge of innovation. Now we have high speed broadband and smart-phones instead, and getting hold of both is easy.

Other privatisations followed. Today, British Airways, Rolls Royce and Jaguar are all bywords for quality. All were privatised in the 1980s. So were airports, energy and steel. Railways and coal were taken out of public ownership in the 1990s.

Where privatisation was accompanied by reforms to open up markets to competition, the policy was a huge success. Where competition has been restricted, it has been less successful. For example, privatisation has often been blamed for failure in railways and energy, but the damaging role of Government is usually obscured.

Rail privatisation

Railways are second only to the weather as a common topic of complaint among British people. And, by any standard, the Major Government’s privatisation of British Rail was a botched affair.

Trains and track were split up for the first time and Tony Blair partially reversed the process by nationalising the track again. So, today, we have private train companies running on publicly-owned railways.

When you look at the problems facing the industry, it is not the private train companies but the nationalised railway infrastructure that is failing. More passengers are travelling by rail today than have done since the 1920s. Yet investment in new railway infrastructure lags behind.

Ticket prices are expensive and trains run late because more and more people want to pack themselves into trains. Obviously, only so many trains can run on a single stretch of track over any period of time without endangering lives. In economics terms, demand exceeds supply.

To cut rail costs means building more railway lines – which means negotiating with council planning departments, home-owners and the powerful green lobby. No wonder it doesn’t get very far.

Energy privatisation

The energy market is similarly blighted by state control. After the energy sector was privatised, prices fell by 30 per cent over the next ten years. But, since Labour came to power in 1997, the energy industry has been increasingly burdened by new Government-imposed regulations and costs.

Investment is state-dictated – the government guarantees nuclear power at twice the market price, whilst companies are required to generate electricity from expensive renewable energy sources like wind farms. Without these government interventions, energy bills would be much cheaper. But Ed Miliband, the architect of many of these “green laws,” doesn’t want you to know that when he’s calling for energy companies’ prices to be frozen.

Privatisation has not failed and we shouldn’t let anyone claim it has

The left argue that privatisation has failed. We on the right too often fail to challenge them, and the public hears only bad things about the policy.

But where privatised industries are failing, it is often because of needless Government intervention. The Government should get out of the railways’ business and stop dictating to energy companies. In both industries, it has held down service quality and pushed up prices.

We need more competition, not less. Much like profit, privatisation is not a dirty word.