Thayer Watkins
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The Privatization Movement in the United Kingdom

As was the case in most Western European nations the government of the United Kingdom acquired after World War II a great many public enterprises, enough to make the public enterprise sector comparable in size in terms of output and employment to the private enterprise sector. Some were acquired in the belief that public enterprise would be more effective in promoting the general welfare of the country than private enterprises. Others were acquired when important private enterprises went broke and the government was unwilling to see them go out of production.

By the 1970's there was increasing conviction that the public enterprise system was not working and the organizational structure of the quasi-socialist economy had to be changed. With the victory of the Conservative Party in the 1979 elections and the Prime Ministership of Margaret Thatcher the privatization movement commenced. In addition to the objectives of increasing efficiency in the British economy and providing revenues for government finances there was also the objective of reducing the power of the unions. Public enterprises have a more difficult time saying no to union demands because the cost of granting those demands is merely passed onto the tax payers.

The motivations for privatization were thus many and complex. Here are some the objectives that propelled privatization:

One of the aspects of the social democratic orientation of the British governments after World War II was the construction and management of public housing. There were not the same incentives for the occupants of this rental housing to maintain it that are for owner-occupied housing. The Thatcher Government started to undo the involvement of government in housing. Between 1979 and 1983 nearly six hundred thousand public housing units were sold, more than in all of the previous 35 years. All the number of housing units sold seems large it was only a few percent of the total of housing in governments hands. The revenues raised helped alleviate the public deficit which was running at about £ 10 billion per year.

The Thatcher government also sold major public enterprises as the following table indicates:

EnterpriseIndustrySale DateNet Proceeds
£ millions
British Petroleum (BP)Petroleum10/79276
British AerospaceAerospace2/8143
British Sugar Corp.Sugar Refining7/8144
Cable & WirelessTelecommunications10/81182
National Freight Co.Trucking2/825
Associated British PortsPort Operations2/8346
International AeradioAviation Communications3/8360
British Rail HotelsHotels3/8351
Wytch FarmPetroleum4/8482
Enterprise OilPetroleum6/84380
SealinkHarbor Ferries7/8466
British Telecom (BT)Telecommunications11/843600
Others  716

The above table only includes the privatizations up to 1985. The sale of British Telecom (BT) involved an interesting innovation. At the same time that BT was sold a regulatory agency, the Office of Telecommunications, was created. Thus BT went from being a public enterprise to a regulated public utility.

(To be continued)

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