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Has privatisation ever brought prices down in the UK


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#41 Trojan

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Posted 20 October 2012 - 09:41 AM

Like i said earlier, to work in the interest of the consumer the privatised services need to offer free and open competition in order that service be improved and prices driven down. That's how the free market works. However, in the case of the privatised former nationalised industries there is little or no free and open competition at the point of delivery to the consumer but instead a group of regional monopolies. That is why privatisation has, in my eyes, failed it is an artificial pretence of free market economics. Apart from the telecoms industry, where there has been free and open competition at the point of delivery and choice of goods and services is high, and costs to the user relatively low.

Trying to artificially force one business model onto another, completely different type of business that does not suit that business model never works, it just ends up with confusion and muddle. Just look at schools and the NHS who are currently being forced into the same straightjacket. Schools and hospitals are not profit generating businesses, stop trying to force them into trying to behave like industrial businesses.

Spot on. Basically because telecoms privatisation had been a success the Tories flogged the rest of the privatisations to us on the basis of "two legs bad, four legs good" Thatcher always said she was an admirer of Orwell - and went on to prove it.
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#42 Northern Sol

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Posted 20 October 2012 - 10:20 PM

:lol: oh dear. Do tell me what nationalised industries existed prior to the industrial revolution. The industrial revolution was a time when the majority of the poor lived and worked in terrible conditions, suffered ill health and a the very few became very rich. The Victorian era did see some philanthropic behaviour from some industrialists who saw that treating the workforce well and providing housing and education improved productivity, but these were in the minority and the fact that living conditions have improved since those times is not because of a trickle down effect but because of the liberal movement.

I'll put this in simple terms. Consider two cases where there is x amount of money in the economy. The first case is where an essential service is nationalised. After costs, any additional money that is left over is fed back into improving the service. In the other case of the privatised service, any additional profit goes into the pockets of the shareholders. Trickle down economics does not work and just increases the gap between the rich and poor (e.g. Look at the US). So all privatisation does it make a few richer and takes money out of the service.

I am not a communist, a free market is essential for the economy. What I do think is that essential services should be owned and run by the government and the private sector cannot be trusted with them.


If I did "look at the US", I'd notice that it's an extremely wealthy country and people are literally risking their lives to get into it so that they can work illegally for below minimum wage jobs. And your use of "trickle down" indicates that you don't know what it means, you think it means laissez-faire capitalism but in fact it refers specifically to tax breaks for the rich - that it "doesn't work" is simply a mantra that is repeated without any evidence ever produced to support this point of view. Not that I particularly advocate said tax breaks but I'm pointing out that there is little evidence of no benefit for low paid members of society.

And whilst the liberal movement did a lot of good, they'd have done sod all if it hadn't been for the fact that the economy could afford a certain amount of socialism. India, for example, has always had (since independence anyway) a welfare state and protectionist government but it does very little because the economy is so poor.

What you miss with the Industrial revolution is that it was triggered by the Agricultural revolution which did see publicly held land privatised though that wasn't really my point. My point is that the private sector does generate wealth for the economy and it's not just the elite who benefit, the industrial revolution was horrible but good things came out of it in the end. The living standards of everybody around today are much higher than the working or even middle classes of that time. You make a distinction between the private sector and newly privatised business that doesn't really exist as well.

I'm not a fan of every privatisation that happened but as a general rule of thumb "private good, public bad" is more true than false.

#43 Severus

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Posted 20 October 2012 - 10:40 PM

I agree with much you have written there. Private sector are wealth creators, I'm not denying that. But certain industries (health, education, defence, transport, energy etc. ) should be publicly owned and run. Public good/ private bad is a simplistic and wrong view. Likewise, an opinion that all things public sector being inefficient is equally wrong.
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#44 Northern Sol

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Posted 20 October 2012 - 10:55 PM

I agree with much you have written there. Private sector are wealth creators, I'm not denying that. But certain industries (health, education, defence, transport, energy etc. ) should be publicly owned and run. Public good/ private bad is a simplistic and wrong view. Likewise, an opinion that all things public sector being inefficient is equally wrong.


Certain industries - yes though I'd exclude energy from this list but not for the reasons that you suggest.

For instance the health industry is different from the general "public bad, private good" because of the huge scale economies available to the NHS. It is a rare instance of a public sector provider that has a lower cost base than the private sector and thus ironically the largest provider of private health care in the UK is the NHS.

The poit I was making previously is that there is no particular distinction between the private sector generally and a company that used to be public but is now private, they would both behave in the same way and be subject to the same rules.

#45 Wolford6

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Posted 21 October 2012 - 01:33 AM

Privatisation has improved efficiency but brought down the price and value of a working week's wage.

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#46 JohnM

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Posted 21 October 2012 - 06:49 AM

I recall the days of nationalised electricity, nationalised gas, nationalised telecommunications, nationalised steel industry just one broadcaster, and yes, nationalised road transport. High prices, low efficiency, over-manning, poor customer service, no product development.

#47 Severus

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Posted 21 October 2012 - 07:26 AM

I recall the days of nationalised electricity, nationalised gas, nationalised telecommunications, nationalised steel industry just one broadcaster, and yes, nationalised road transport. High prices, low efficiency, over-manning, poor customer service, no product development.

Take the Nationalised Health Service. It is more cost effective and efficient than compared to the private health care system used in the US. Privatised public transport in the UK is very expensive and offers poor service. Public transport doesn't need competition. Bus companies neglect routes that aren't profitable. Train fares are through the roof. Privatised Energy suppliers artificially drive up costs. The BBC is the finest broadcasting service in the world although I this is an industry that needs competition.
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#48 Shadow

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Posted 21 October 2012 - 07:43 AM

I recall the days of nationalised electricity, nationalised gas, nationalised telecommunications, nationalised steel industry just one broadcaster, and yes, nationalised road transport. High prices, low efficiency, over-manning, poor customer service, no product development.


The truth of the matter I suspect is somewhere between the two, private industry is not as exploitative or innovative as some would claim and nationalised industry is not as inefficient and bloated or as socially responsible as others might claim.
Nationalised industries of the past reflected the times in which they existed. In the sixties GB was still suffering the financial shock of World War 2, as a nation we were virtually bankrupted which meant money for investment was pretty hard to come by. Over manning is a subjective view, If you want a BT engineer at your house tomorrow you need to have a lot of BT engineers, if you're providing an essential service (gas, water, electricity) and are operating in the days when materials and equipment were not as reliable or robust as we have come to expect you are going to get a greater incidence of failure, if you are also operating in times before widespread mechanisation of labour you need a lot of blokes with shovels. Poor service was by no means confined to nationalised industry, it was endemic to the UK throughout the sixties and seventies, early closing Wednesday? Did anyone ever visit a doctor or bank before the 1980s?

Many of the nationalised companies (BMH which became part of British Leyland for example) were struggling badly under private ownership and were only brought into public ownership in part to try to rescue the business and safeguard jobs, yet I wouldn't suggest that is evidence of the benefits or superiority of public ownership all I would say is that you need to judge circumstances by the standards of the times.
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#49 JohnM

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Posted 21 October 2012 - 08:04 AM

Nationalisation is outdated political dogma that is designed to favour the state not the customer. Nationalised industries covered their losses by taxing you and I. The problem is that not too many on here have practical experience of life under Clause 4 - and a good thing too -

One of the issues post de-nationalisation has been the need for the privatised utilities and this includes the railways, to invest in infrastructure, plant and equipment to meet the needs of the customer, an area neglected by these industries during state ownership.

In any case its the National Health Service not the Nationalised Health Service. Thankfully, developments under governments of all leanings over the last 20 -30 years has dragged the service into the modern era, resulting in a huge drop in the use of leeches and witchcraft. The NHS is now very much patient focussed rather than as used to be, run for the benefit of Doctors and Consultants. My first NHS hospital experince at Salford Royal in 1959 or so was not pleasant and my wife's experience as a nurse in Bolton in the mid 1960s made her long to be in the Paras.

Rail fares are not through the roof either. SOME rail fairs, such as those you might be asked to pay if you are in first class with a second class ticket are hugely expensive though many advance purchase tickets are very very cheap. It all about supply and demand I guess. Imagine what might happen if the standard class fare from Piccadilly to Euston was £25 return?

In the BR days there were hardly any advance purchase options, hardly any route competition ( look what route competition on the Birmingham - London routes has done for customers. The TRUE cost of a comparable car journey, by the way comes out at around £150. Not just marginal fuel cost but true cost - tax, insurance, service, maintenance, depreciation, interest and fuel cost. Again I recall 1st, 2nd and 3rd class travel under British Rail and the running of expensive, dirty and noisy steam engines when other counties had gone diesel and electric. BTW, rail travel is up something like 40% since (botched) privatisation.

No, trust me, a return to nationalisation would be a disaster. However bad the buses are now, they'd be worse once publicly owned.

#50 Severus

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Posted 21 October 2012 - 08:29 AM

Not buying any of that. Many of your arguments against nationalisation are based upon how thing were at the time. There is no evidence to suggest that things would be better had these services been privatised at the time.
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#51 Derwent

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Posted 21 October 2012 - 09:56 AM

The problem with privatisation of utilities is that the infrastructure costs are so big that it means there are only a handful of companies with the capital to operate in the market. The barriers to entry are massive for new players. So you end up with a small number of operators who effectively become a cartel and prevent a proper free market from ever developing. We do not in any sense have a free market. We have freedom of choice, but that's not the same thing.

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#52 WearyRhino

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Posted 21 October 2012 - 10:09 AM

Isn't it strange how nobody ever suggests privatising the armed forces? Curry's Digital Electrical and Mechanical Engineers, BUPA Army Medical Corps, anyone?

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#53 Trojan

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Posted 21 October 2012 - 10:10 AM

I used to travel to London every month on the train in the seventies, walk up and buy a ticket, the cost was not noticeably expensive. Today to do the same - Wakefield to London would cost at least £100 return.
In my ignorance of this cost increase a few years ago I, my wife and daughter set off for London on a spur of the moment jaunt - it cost a fortune. I was shocked but paid up - just as the train came in. My wife and daughter were on the platform, I rushed to board the train but the doors had been closed. The train was standing there, we were standing there, and, having just taken £300 off me the guard wouldn't re- open the f***ing doors! That's the standard of service you can expect from our privatised railway. I have several more examples I could relate that compare extremely poorly with the way things were under BR including a nightmare journey on a jampacked Virgin train from Wigan to Bristol.
I'm something of a socialist. But I can see that we have benefited from some privatisations. Sometimes privatisation works, best, sometimes public ownership works best. What doesn't work is having a slogan like "Private enterprise works" and sticking to it through thick and thin.

Edited by Trojan, 21 October 2012 - 10:12 AM.

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#54 JohnM

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Posted 21 October 2012 - 11:03 AM

. We do not in any sense have a free market. We have freedom of choice, but that's not the same thing.


but the question was "Has privatisation ever brought prices down in the UK"

#55 JohnM

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Posted 21 October 2012 - 11:05 AM

Not buying any of that. Many of your arguments against nationalisation are based upon how thing were at the time. There is no evidence to suggest that things would be better had these services been privatised at the time.


true, nor is there any evidence that nationalisation now would for example bring down prices. There is evidence though that things are better now that they were and the cost of reverting would have to be borne by...guess who?

Anyway, its not going to happen.

#56 Derwent

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Posted 21 October 2012 - 11:18 AM

but the question was "Has privatisation ever brought prices down in the UK"


In simplistic terms no it hasn't because of the aforementioned creating of self-interested cartels. Additionally, inflation plays a part. Can you name one thing today that costs less than it did in the early 90's ? But prices are only part of the equation.

A better question would be has it brought better value for money for both the consumer and the taxpayer ? Does the utilities consumer receive a better service in terms of uninterrupted supply and quality/reliability of infrastructure ? Does the exchequor receive money in taxes from companies where previously it paid out to subsidise - a net gain that can be used elsewhere ?

Using trains as an example, yes the cost of a journey has gone up substantially since BR days. However, on the West Coast mainline you travel on high quality clean trains with comfortable seats and decent facilities (wifi, plug points, decent buffet car etc) and have hugely reduced journey times. In BR days you often sat in cold dirty carriages with torn seats and vandalised toilets etc, you might get a lukewarm cuppa if you were lucky and journey times were longer than expected. The cost of those improvements in infrastructure - new rolling stock, overhead power lines etc - has to be paid for. If I compared a Virgin Trains £100 fare to London with an old BR £30 fare to London then I would say quite categorically that the Virgin fare is better value for money.

Edited by Derwent, 21 October 2012 - 11:19 AM.

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#57 Trojan

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Posted 21 October 2012 - 12:47 PM

In simplistic terms no it hasn't because of the aforementioned creating of self-interested cartels. Additionally, inflation plays a part. Can you name one thing today that costs less than it did in the early 90's ? But prices are only part of the equation.

A better question would be has it brought better value for money for both the consumer and the taxpayer ? Does the utilities consumer receive a better service in terms of uninterrupted supply and quality/reliability of infrastructure ? Does the exchequor receive money in taxes from companies where previously it paid out to subsidise - a net gain that can be used elsewhere ?

Using trains as an example, yes the cost of a journey has gone up substantially since BR days. However, on the West Coast mainline you travel on high quality clean trains with comfortable seats and decent facilities (wifi, plug points, decent buffet car etc) and have hugely reduced journey times. In BR days you often sat in cold dirty carriages with torn seats and vandalised toilets etc, you might get a lukewarm cuppa if you were lucky and journey times were longer than expected. The cost of those improvements in infrastructure - new rolling stock, overhead power lines etc - has to be paid for. If I compared a Virgin Trains £100 fare to London with an old BR £30 fare to London then I would say quite categorically that the Virgin fare is better value for money.

True but then in BR days there was no WIFI. I boarded a Leeds train at Skipton busting for the loo - there wasn't one that worked! I spent a fairly uncomfortable 30 minutes! The same thing apparently happened recently on a Grand Central London to Edinburgh train!!!
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#58 fieldofclothofgold

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Posted 21 October 2012 - 02:41 PM

There was an NHS dept that achieved all that was asked of it,profitable,etc ,but because of this it was sold off.I cant remember the name I think it may be the logistics dept.Private industry is fine and creates wealth,but as Sevvy said the utilities should be in public controll
but you and I weve been through that and this is not our fate.
So let us so let us not talk falsely now.
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#59 John Rhino

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Posted 21 October 2012 - 05:09 PM

Anyone remember the privatisation of British Gas?

The first thing the management did was quaruple their own salaries and continued to run it as a monopoly for as long as they could without a single thought for the customer.

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#60 JohnM

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Posted 21 October 2012 - 07:12 PM

In my view public services should be about providing services to the public, not about finding jobs for people to keep the unemployment figures down. I believe also that the case for the delivery of public services by the private sector is irrefutable, which is why the Labour Govt was so keen on it. What was missing was regulation. In my view, the real issue here is that regulation. the Govt. should be regulating transport, utilities the banks etc much more rigorously that it is.

See here for example :http://www.guardian....vices-authority

The Financial Services Authority could and should have intervened to block Royal Bank of Scotland taking over Dutch bank ABN Amro, the Treasury select committee has said, in a report that makes a "serious indictment" of the former management of the City regulator.The £49bn deal is one of the factors that led to the £45bn taxpayer bailout of RBS in October 2008, because it squeezed the bank's capital buffers to wafer-thin levels and exposed it to more troubled loans.

Anyone remember the privatisation of British Gas?

The first thing the management did was quaruple their own salaries and continued to run it as a monopoly for as long as they could without a single thought for the customer.



You mean the customers who benefited hugely from the share issue? The general public is just as greedy chasing low interest rates to finance the acquisition of assets whose growth as far out stripped the cost of borrowing all at the expense of those in social housing and savers.

Anyway, a small price to pay for the huge improvement in service post privatisation.

Edited by JohnM, 21 October 2012 - 07:20 PM.





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