Debate: Is privatisation good for Britain?

Margaret ThatcherOne of the most provocative legacies left by Margaret Thatcher was one of her core economic values - privatisation. Under her leadership, the government sold off utilities including British Steel, British Telecom of course British Gas.

The results of privatisation divided many and had mixed results. Even today, it's still a burning issue for many with the privatisation of the Royal Mail.

Has it benefited the country? Or will privatisation be remembered as the worst thing Baroness Thatcher ever did? %VIRTUAL-SkimlinksPromo%
Sarah Coles in the 'yes' camp explains just how much privatisation improved our lives and Chris Wheal in the 'no' camp argues that it has been a crashing failure for Britain.

Privatisation has changed our lives for the better

There will always be heated debates on the subject of privatisation. As the energy companies hike prices, and rake in profits, there will always be people who highlight that we wouldn't be the victims of profiteering capitalists at all if the companies had remained in public hands.

However, this argument is too simplistic. It ignores three vital benefits that the wave of privatisations which started in 1979 brought to the UK.

Better services
The first is that the market brought competition to organisations that were in many cases abject failures before privatisation. The turnaround in the fortunes of British Airways after privatisation, for example, was staggering.

The changes also immeasurably improved life for customers. There have been substantial cuts in the sums we pay for phone services, and until the wholesale price of gas and electricity started rising in 2003, there were major cuts in these costs too.

Where privatisation was accompanied by the opening up of an industry to competitors, businesses lost the ability to charge what they liked and work to whatever low standards they set themselves - they had to improve or lose business. As a result, service standards have dramatically improved.

This last point is key - because there are serious limitations on what privatisation can achieve where there is no competition - as we can see from industries which continue as private monopolies - where arguably pricing is not improving as much as anyone expected.

British GasShares
The second benefit was that it opened up share ownership to a generation. One cornerstone of Margaret Thatcher's ideology was popular capitalism, where we all own shares in companies and we all benefit when they do well. Privatisation, and the Tell Sid campaign, single-handedly achieved this for millions of people in the UK.

Many have gone on to become long-term investors with a range of shares or funds - having seen how well their privatisation shares did and realising the difference it could make to a proportion of their savings. Many more failed to ride the crest of the wave, but privatisation at least offered them the opportunity.

And third, there's the fact that in private hands, politicians can no longer interfere in the business. There's a strong argument that governments do not make good business managers. They may take a short-term view, and fail to invest in order to balance the country's books without angering customers with price increases. The privatisation of the water industry may have seen costs rise, but it has also seen a £85 billion investment since 1989 - something that would have been impossible as a state-run industry.

Privatisation has been a crashing failure

Privatisation is good for Chelsea fans because it creates millionaires who can then invest their fortunes buying expensive footballers.

Privatisation is good for accountants, economists, bankers and lawyers who earn millions from the fees involved in both the privatisations themselves and the competition or regulatory battles that follow.

Privatisation is good for meddling civil service-types who get to take on the role of "regulator" for the newly privatised industry – not regulating the companies or the quality of their products and services, of course, but only regulating "competition" within the sector.

For the rest of us privatisation is daft. And we don't half do it the daftest in the UK.

Off the rails
Take rail privatisation – possibly the daftest of them all. The rail industry was split into chunks so that there were 25 train operating companies (TOCs) that were not allowed to own trains but instead leased them from three rolling stock companies (ROSCOS). The TOCs then ran the ROSCOS' trains on track owned by a monopoly privatised company, Railtrack.

To oversee all this (and the freight companies that were separate) rail privatisation created not one regulator but two:
  • The Office of Passenger Rail Franchising (OPRAF) - overseeing the sale of franchises
  • The Office of Rail Regulation (ORR) - ensuring competition rules between TOCs operated fairly

We all know that the railways are a natural monopoly and that having competition every seven years for a franchise is not the same as having two or three firms running the same services and competing with each other. Rail fares have risen and the costs of government subsidy for rail firms has risen too. Only the shareholders are better off.

Potters Bar train derailmentTrain crash
But the biggest problem with rail privatisation was that the fragmentation led to a lack of clarity over who was responsible for what. That directly contributed to major rail disasters, such as at Potters Bar (pictured), with a terrible cost in human life.

Railtrack was renationalised and became National Rail. One regulator has gone. Some franchises have had to be renationalised too. It has been a disaster.

Another natural monopoly is water. And that has just leaked the public's money out of the system. The average water bill at privatisation in 1989 was £120. It was £376 in 2012. Even allowing for inflation – the way the toothless regulator Ofwat prefers – bills have risen 45% above inflation or £116.

Water, water everywhere
Meanwhile – and this was in the middle of a hosepipe ban – the privatised water companies made a combined operating profit of £3.5bn in 2009-10, an increase of 7%. The companies' pre-tax profits jumped from £1.8bn to £2.8bn – or up by 55%. The regulator decided to stop publishing profit figures – presumably because they were so embarrassing.

You could pick virtually any privatisation and show a similar catalogue of disaster, with soaring profits for the shareholders, pay hikes for the bosses, but for customers only higher bills coupled with no improvement in services standards. It's the electricity companies that are in the news for ripping us off now while their profits soar.

Privatisation is pants.

What do you think? Has privatisation been good or bad for Britain? Let us know in the comments below.

10 consumer rights you should know
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Debate: Is privatisation good for Britain?

The law states that any goods you buy from a UK retailer should be of satisfactory quality, as described, fit for purpose and last a reasonable amount of time.

This applies even if you buy items in a sale or with a discount voucher. You may have to insist on these rights being respected, though.

Useful phrases to use when you want to show you mean business include, "according to the Sale of Goods Act 1979" and, if it's a service, "according to the Supply of Goods and Services Act 1982".

Some shops will allow you to exchange goods without a receipt, but they can refuse to should they wish.

If the goods are faulty, however, another proof of purchase such as a bank statement should work just as well.

If you attempt to return goods within four weeks of the purchase, your chances of getting a full refund are much higher as you can argue that you have not "accepted" them.

After this point, you can only really expect an exchange, repair or part-refund.

The updated Consumer Credit Act states that card companies are jointly and severally liable for credit card purchases of between £100 and £60,260 (whether or not you paid just a deposit or the whole amount on your card).

Anyone spending between these amounts on their credit card is therefore protected if the retailer or service provider goes bust, their online shopping never arrives or the items in question are faulty or not as described.

Start by writing to the agency asking it to either remove or change the entry that you think is wrong. It will investigate the matter and find out whether you have been the victim of ID theft or a bank's mistake.

Within 28 days from receipt of your letter the agency should tell you how the bank has responded. If the bank agrees to change the entry, they will authorise the agency to update their records. They should also send updates to any other credit reference agencies they use.

You can also contact your lender directly to query a mistake. If the lender agrees to the discrepancy, ask them to confirm this in writing on their letterhead and send a copy to the agency, asking them to update your file.

The FOS settles disputes between financial companies such as banks and consumers.

If a financial organisation rejects a complaint you make about its services, you can therefore escalate that complaint to the FOS - as long as you have given the company in question at least eight weeks to respond.

The FOS will then investigate the case, and could force the company to offer you compensation should it see fit.

Bailiffs are allowed to take some of your belongings to sell on to cover certain debts, including unpaid Council Tax and parking fines.

They can, for example, take so-called luxury items such as TVs or games consoles. However, they cannot take essentials such as fridges or clothes.

What's more, they can only generally enter your home to take your stuff if you leave a door or window open or invite them in.

You are therefore within your rights to refuse them access and to ask for related documents such as proof of their identity. If they try to force their way in, you can also call the police to stop them.

Private sector debt collectors do not have the same powers as bailiffs, whatever they tell you.

They cannot, for example, enter your home and take your possessions in lieu of payment.

In fact, they can only write, phone, or visit your home to talk to you about paying back the debt. As with bailiffs, you can also call the police if you feel physically threatened.

Thanks to the Distance Selling Regulations, you actually have more rights buying online or by phone than on the High Street.

You can, for example, send most goods back within a week, for a full refund (including outward delivery costs), even if there's no fault.

You will usually need to pay for the return delivery, though. The seller must then refund you within 30 days.

We enter into contracts all the time, whether it be to join a gym, switch energy supplier or take out a loan.

In most cases, once you've signed a contract, you are legally bound by it. In some situations, however, you have the right to cancel it within a certain timeframe.

Credit agreements, for example, can be cancelled within 14 days. And online retailers must tell you about your cancellation rights for any contract made up to stand up legally.

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