21st October 2021

Was Sid missold, musings on privatisations

British Telecommunications was privatised in 1984, becoming British Telecommunications plc, with some 50 percent of its shares sold to investors. The Government sold its remaining stake in further share sales in 1991 and 1993.

A massive promotional campaign for British Gas followed in 1986, yes that long ago, TV and press adverts urged people to "tell Sid" about the chance to buy shares in companies they in fact already kind of owned as the taxpayer at "affordable" prices. 

In 1989 the 32 water companies became privately-owned in England and Wales. 

The first parts of the electricity sector were privatised in late 1990, when the 12 regional electricity companies in England and Wales were sold. 

Then, between 1994 and 1997, British Rail was privatised, not by Thatcher (she was not that stupid) but by John Major as track and infrastructure passed to Railtrack in 1994 and, later, passenger services were franchised in 25 blocks to private-sector operators. Freight services were sold outright. 

This saw a cash bonanza for the governments of the day. They had in effect successfully sold capitalism to the masses who saw owning shares in infrastructure companies like suppliers of gas, electricity, water, railways as a very positive thing.

This was a new, ‘loadsamoney’ type of Britain. Proud to take a stake in these companies for an instant benefit to themselves when they sold those shares shortly after launch and a lot more for the government.

Many took up these hugely promoted ‘opportunities’ in an era of mass privatisation by Conservative governments led by Margaret Thatcher and then John Major. But, with the benefit of hindsight was it such a good idea?

Fast forward to 2021 and now very much in the news, very large numbers of energy companies, your gas and electricity that used to be a separate nationalised infrastructure, have closed with more to follow as they just could not make it work when the going got tough. 

Sixteen energy suppliers have gone bust in 2021, fourteen since September alone, impacting some 2.4m  households now looking for a new home for their energy supply.

The government will almost certainly not step in with bailouts. 

The benefits of rail privatisation forecast by politicians never, ever materialised.  

In 1994, the British government began a sectional privatisation of the network, leading to the existing franchise system under which 25 companies, including British Rail, operate trains across the country. 

Track, signalling and stations was maintained by Railtrack and freight operated by six others.

Railtrack oversaw a deterioration of the tracks and, of course, inevitably, some very serious accidents. Public outcry saw the government to take over Railtrack’s operations. 

The rail network today is symbolised in the British psyche by dirty, crowded, hot trains in summer, cold in winter, unreliable, cancelled services, and high fares. 

In fact, everything privatisation was supposed to put an end to. The coronavirus pandemic further exposed the fragile state of the network. 

Nationally, rail travel journeys dropped to 4-6 percent of pre pandemic levels between April and May, making it unprofitable for the private players. The government had to spend £3.5 billion just to keep the trains running for essential services and workers. And only last month, South East Trainsfranchise was removed and the running taken over by the government.

It will not be too long until the government ends up bowing to the obvious re-nationalising now needed. Under new “recovery” contracts granted to rail companies from September 20^th 2020, the government will cover the losses made by operators for 18 months ahead of what the Department for Transport calls a “simpler and more effective structure” that will replace the franchising system.

On February 7 2021, the Welsh Government brought back the Wales and Borders franchise into public ownership. Similar measures are being anticipated elsewhere in the UK.

And for telecoms, BT is not what it was. At one time it had over 90% of UK fixed lines, it is now closer to 38%. The telephony infrastructure is operated by Openreach, wholly owned by BT. They look after the copper wires and fibre cables that connect homes and businesses to phone and broadband. 

Their customers are the hundreds of communications providers who sell phone and broadband services to these households and businesses. 

Of all the sell off’s, BT is the only one that has got better, spurred on by the competition or threat of mobile operators. They have their own problems such as interconnectivity issues with other operators.

A Which survey in April this year found that the UK’s biggest mobile providers fell short of consumers’ expectations during the pandemic, with each of them being outperformed by smaller rivals that piggyback on their networks.

So, was nationalisation the right thing with the benefit of hindsight.

Telephony, possibly.

As for the rest,  

No.

Was Sid miss-sold? 

Nationalised infrastructure resources, utilities and power should never have been sold off, and certainly no to those who already owned it- the taxpayer.  Threats to gas and electricity supplies are just a start.

• Source Energy Scanner

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