Has privatisation in general been a disaster?

[Oldgaloot]

mods note - split from this thread

I think the privatisations have been pretty much a disaster, whether of rail or power or telecommunications. But if the government wants to renationalise something I believe it should start with the utilities. What was wrong with the electricity and the gas boards? Leaving aside the jokes on the Esther Rantzen TV programme "then we phoned the gas board" and the Flanders and Swann song " 'twas on a Monday morning that the gasman came to call", they did what they did. It was a different time. Look at where we are now. Water boards billions in debt while foreign banks and investors hollow them out.

As it happens I travelled with SWR and Greater Anglia on Monday of last week. SWR ran late as a result of bad weather. Greater Anglia was fine. I'm not sure how renationalisation would improve the service or the recently acquired rolling stock. To the extent that there has already been an effective nationalisation in some cases why not quit while you're apparently ahead?

 

[Chester1]

I think the privatisations have been pretty much a disaster, whether of rail or power or telecommunications. But if the government wants to renationalise something I believe it should start with the utilities. What was wrong with the electricity and the gas boards? Leaving aside the jokes on the Esther Rantzen TV programme "then we phoned the gas board" and the Flanders and Swann song " 'twas on a Monday morning that the gasman came to call", they did what they did. It was a different time. Look at where we are now. Water boards billions in debt while foreign banks and investors hollow them out.

As it happens I travelled with SWR and Greater Anglia on Monday of last week. SWR ran late as a result of bad weather. Greater Anglia was fine. I'm not sure how renationalisation would improve the service or the recently acquired rolling stock. To the extent that there has already been an effective nationalisation in some cases why not quit while you're apparently ahead?

You think privatising telecommunications has been a disaster? We have some of the cheapest mobile and broadband costs in the developed world!

I agree with natural monopolies being state owned and therefore I support state ownership of the rail system (but not necessarily a new BR). There are other areas where the world has moved on since the 80s and older nostaligic people should learn to live with that. Gas supply has no future, why buy it out just has the last homes are being connected to the network? Its down hill from now. Post Office makes sense to stay nationalised but the push within Labour to renationalise Royal Mail has always been about union influence, it's no longer a natural monopoly and is becoming a glorified parcel delivery service as letters volumes continue to decline.

 

[Oldgaloot]

"You think privatising telecommunications has been a disaster? We have some of the cheapest mobile and broadband costs in the developed world!" Well and good but how do you get from the current cost of mobile and broadband to privatisation as a cause of that?

"Gas supply has no future." Let's see where we are in five or six years time.

"Post Office makes sense to stay nationalised." Who'd want to buy it, anyway, as compensation issues won't go away and prosecution of people looms.

 

[43096]

You think privatising telecommunications has been a disaster? We have some of the cheapest mobile and broadband costs in the developed world!

There has been private sector mobile communications from the start: Vodafone (at the time Racal Telecom) got one of the first two licences - BT Cellnet was the other.

 

[Tetchytyke]

You think privatising telecommunications has been a disaster? We have some of the cheapest mobile and broadband costs in the developed world!

No we don’t.

Mobile costs are not low, comparatively or otherwise. And if the proposed merger between Vodafone and Three goes ahead then we’ll be one step closer to having a functional monopoly on mobile telecommunications. Let’s see what happens to prices then.

As for broadband, the underlying infrastructure is again held by a private monopoly. Everyone complains about Openreach prices and Openreach services. Even though there’s a regulator which supposedly monitors both the prices charged and services provided, Openreach are useless.

It’s the same with the other utilities. The gas and electricity network operators are privatised monopolies, they can and do charge what they want. There’s an illusion of choice with suppliers but the infrastructure is all monopoly, hence why the cost of supply is so high.

 

[yorksrob]

No we don’t.

Mobile costs are not low, comparatively or otherwise. And if the proposed merger between Vodafone and Three goes ahead then we’ll be one step closer to having a functional monopoly on mobile telecommunications. Let’s see what happens to prices then.

As for broadband, the underlying infrastructure is again held by a private monopoly. Everyone complains about Openreach prices and Openreach services. Even though there’s a regulator which supposedly monitors both the prices charged and services provided, Openreach are useless.

It’s the same with the other utilities. The gas and electricity network operators are privatised monopolies, they can and do charge what they want. There’s an illusion of choice with suppliers but the infrastructure is all monopoly, hence why the cost of supply is so high.

Don't get me started on Virgin Media !

 

[Russel]

The likes of Virgin did a lot to transform the public opinion of rail travel, we have privatisation to thank for that, however, what we have now is a chaotic, fragmented network where even the most basic of tasks costs eye watering amounts of money...

Will nationalisation fix all of the railways current issues, almost certainly not, but it's very clear that things cannon continue as they are and something needs to be done.

 

[Wolfie]

The likes of Virgin did a lot to transform the public opinion of rail travel, we have privatisation to thank for that, however, what we have now is a chaotic, fragmented network where even the most basic of tasks costs eye watering amounts of money...

Will nationalisation fix all of the railways current issues, almost certainly not, but it's very clear that things cannon continue as they are and something needs to be done.

While l agree l do have to say, as someone who worked in Whitehall for almost 40 years, that HMT will almost certainly be expecting savings.

 

[JamesT]

No we don’t.

Mobile costs are not low, comparatively or otherwise. And if the proposed merger between Vodafone and Three goes ahead then we’ll be one step closer to having a functional monopoly on mobile telecommunications. Let’s see what happens to prices then.

As for broadband, the underlying infrastructure is again held by a private monopoly. Everyone complains about Openreach prices and Openreach services. Even though there’s a regulator which supposedly monitors both the prices charged and services provided, Openreach are useless.

It’s the same with the other utilities. The gas and electricity network operators are privatised monopolies, they can and do charge what they want. There’s an illusion of choice with suppliers but the infrastructure is all monopoly, hence why the cost of supply is so high.

Do you have any basis for your claim they’re not low?

UK mobile and broadband bills amongst cheapest in world – new study reveals - Virgin Media O2

British consumers enjoy some of the cheapest and best value mobile and broadband services – with prices around half of those paid in the United StatesUK household spend on telecoms has fallen by almost a fifth since 2017 while data consumption has surged, speeds have increased and more than £6...

news.virginmediao2.co.uk

When compared with key international markets, UK telcos offer some of the best overall value. Typical UK prices for fixed and mobile services are amongst the lowest in Europe, with Britain second only to Spain in terms of the cost of a typical telecoms package*. The average UK monthly price is considerably less than in comparator countries, with bills 95% cheaper than the US, 45% cheaper than Japan, and 16% cheaper than France.

UK Ranks 5th out of 179 Countries for Mobile Data Affordability

Comparison site Broadband Genie has today published a new 2024 Mobile Data Affordability Index, which explores the global landscape of mobile data (mobile broad

www.ispreview.co.uk

Overall, the United Kingdom was found to rank 5th most affordable for mobile data out of 179 countries, putting it ahead of “global powerhouses” such as Germany (13th), Italy (20th), the USA (35th) and China (51st).

Would seem to be the exact opposite.

There are multiple providers of underlying infrastructure. Although Openreach are the biggest player, the switch to fibre has provided an opportunity for alternatives like CityFibre to run their own networks.

 

[Krokodil]

No we don’t.

Mobile costs are not low, comparatively or otherwise

Do you have any basis for your claim they’re not low?

UK mobile and broadband bills amongst cheapest in world – new study reveals - Virgin Media O2

British consumers enjoy some of the cheapest and best value mobile and broadband services – with prices around half of those paid in the United StatesUK household spend on telecoms has fallen by almost a fifth since 2017 while data consumption has surged, speeds have increased and more than £6...

news.virginmediao2.co.uk

Tetchytyke lives in the Isle of Man. He'll be paying more than twice what we are (but still less than the average German), and presumably isn't aware that his experience isn't comparable to the UK. The UK comes at No. 58 in this map of 237 territories, about midway if you were only considering European countries:

The Cost of 1GB Of Mobile Data in 237 Countries

A global league table of mobile data costs. The average cost of one gigabyte (1GB) compared from over 5,600 mobile data plans in 237 countries.

www.cable.co.uk

 

[Tetchytyke]

Would seem to be the exact opposite.

VirginO2 say VirginO2 are cheap.

Well that's me convinced!

 

[sor]

I think the "privatisation made phones cheap and got waiting lists down" argument is relying on the fact that BT's privatisation occured right as digital technology came on stream - with the GPO's former research project being turned into an actual product (System X) as well as BT's subsequent decision to seek a second vendor for telephone exchange equipment. There is no reason why that wouldn't all have occured had BT remained in state ownership, just as it did in other countries that never privatised.

Early privatised BT wanted to get fibre in the ground too, but Thatcher decided we had to have "competition" and blocked anything that could have hindered the progress of the cable companies.

I'm not sure we can take lectures on telecoms pricing from someone whose local monopolist charges several times what any Openreach-based ISP does, including BT themselves. A wallet busting £57 a month for a 30Mbps connection ("boosted" to 100Mbps. The website is not that clear). Gigabit for a mere £165/month.

Openreach's monopoly can and has been busted in many areas of the country, first by the cable companies and now by the so called "alt nets" - though one wonders how you can call it competition when they get to lease Openreach's ducts and poles at regulated rates.

 

[Yew]

Do you have any basis for your claim they’re not low?

UK mobile and broadband bills amongst cheapest in world – new study reveals - Virgin Media O2

British consumers enjoy some of the cheapest and best value mobile and broadband services – with prices around half of those paid in the United StatesUK household spend on telecoms has fallen by almost a fifth since 2017 while data consumption has surged, speeds have increased and more than £6...

news.virginmediao2.co.uk

UK Ranks 5th out of 179 Countries for Mobile Data Affordability

Comparison site Broadband Genie has today published a new 2024 Mobile Data Affordability Index, which explores the global landscape of mobile data (mobile broad

www.ispreview.co.uk

Would seem to be the exact opposite.

Were any of the countries studied, developed western nations that have a similar geographical distribution and density, and have a nationalised operator?

I feel like the logic of "we studied a whole load of privatised systems, and ours is the best, therefore privatised systems are the best" doesn't really stand up.

 

[thenorthern]

One thing to remember is that the railways were the last major industry privatised by the 1979-1997 Conservative government so it makes sense that it would be the first one to be renationalised. Think about it how many people are calling for British Sugar or Dairy Crest to be nationalised?

 

[JamesT]

VirginO2 say VirginO2 are cheap.

Well that's me convinced!

The hired an independent agency to write the report. There was also the other non-Virgin article I linked to.
Where's your evidence?

 

[LNW-GW Joint]

One thing to remember is that the railways were the last major industry privatised by the 1979-1997 Conservative government so it makes sense that it would be the first one to be renationalised. Think about it how many people are calling for British Sugar or Dairy Crest to be nationalised?

Or British Airways or BT. These are (successfully) too far down the global market to consider renationalisation.
I'd say much the same for the energy industry, as HMG can't afford the massive capital investment going into renewables, let alone the repurchase costs.
It also has its hands full with state-owned nuclear (mostly operated by EDF, the French state utility).
Water is a bit different, and might well be heading back to public control.

I hear British Steel (the Chinese-owned Scunthorpe company that produces rails for NR) is potentially to be nationalised if they cannot agree a route forward to electric arc furnaces.
But that might be a "NatWest" transaction with the government not involved in day to day operation and keen to sell off once stabilised.

Railways - we lurch from private to public, in contrast to the rest of Europe which is still contracting out more services.
In any case, the issues here are about organisation and management, not ownership.

 

[thenorthern]

Or British Airways or BT. These are (successfully) too far down the global market to consider renationalisation.
I'd say much the same for the energy industry, as HMG can't afford the massive capital investment going into renewables, let alone the repurchase costs.
It also has its hands full with state-owned nuclear (mostly operated by EDF, the French state utility).
Water is a bit different, and might well be heading back to public control.

I hear British Steel (the Chinese-owned Scunthorpe company that produces rails for NR) is potentially to be nationalised if they cannot agree a route forward to electric arc furnaces.
But that might be a "NatWest" transaction with the government not involved in day to day operation and keen to sell off once stabilised.

Railways - we lurch from private to public, in contrast to the rest of Europe which is still contracting out more services.
In any case, the issues here are about organisation and management, not ownership.

Also with the deregulated world of open skies it wouldn't make sense to have a state-owned airline. Back in the early 1980s British Airways had a much larger market share and operated from almost every airport in the country. Today British Airways is largely centered on flights to and from London.

 

[Rail_Midlands]

The main reason government went to privatize these services , is to get rid of the debts in its balance sheet to private and reduce its cost. However, this just turned into a financial engineering exercise with no value addition and in fact costing more. The transition from a not for profit public service to for-profit private, and the private sector comes in with an expected margins of at least 10-15% , this can't be achieved just by increasing efficiencies alone. Hence again cost cutting/ short termism comes into picture with no long term vision or value addition. This snow balled over the period and the system comes to halt when something unexpected like covid/work from home makes the structural change in the whole system, it breaks. I really don't know how all these can be reversed even in a decades time.

 

[dangie]

Don't get me started on Virgin Media !

Ok I will.
We have had Virgin Media TV & Broadband for many years. Of course I would like it to be cheaper, but I really can’t fault the service they’ve provided. If you don’t like VM then go somewhere else. I can’t understand why people complain and stay with a service provider when there’s many others available. Or are they even worse?

 

[deltic]

The main reason government went to privatize these services , is to get rid of the debts in its balance sheet to private and reduce its cost. However, this just turned into a financial engineering exercise with no value addition and in fact costing more. The transition from a not for profit public service to for-profit private, and the private sector comes in with an expected margins of at least 10-15% , this can't be achieved just by increasing efficiencies alone. Hence again cost cutting/ short termism comes into picture with no long term vision or value addition. This snow balled over the period and the system comes to halt when something unexpected like covid/work from home makes the structural change in the whole system, it breaks. I really don't know how all these can be reversed even in a decades time.

Which nationalised businesses were run as not for profit? All had financial targets set for them by the Treasury.

 

[LNW-GW Joint]

Also with the deregulated world of open skies it wouldn't make sense to have a state-owned airline. Back in the early 1980s British Airways had a much larger market share and operated from almost every airport in the country. Today British Airways is largely centered on flights to and from London.

All of BA's major competitors are also privately owned.
Alitalia is the most recent case of government interference leading to its near-demise.

There's still the dilemma that UK rail is somehow different to the rest of the transport sector where airlines, coaches and ferries are all in private hands.
Generally in Europe the old centralised state railways have yielded to a devolved structure with mixed public/private ownership, often with "private" meaning next-door's state or regional operator.
Bidding for new contracts is central to this, something we have just jettisoned in favour of permanent public sector ownership (bar open access).

 

[Rail_Midlands]

Which nationalised businesses were run as not for profit? All had financial targets set for them by the Treasury.

Any Business would definitely have financial targets, otherwise even a not for profit business cannot run. It will be in loss very soon and will get bust. But the issue is expected minimum margins of 10-15%, any private business would aspire for.

 

[JamesT]

Any Business would definitely have financial targets, otherwise even a not for profit business cannot run. It will be in loss very soon and will get bust. But the issue is expected minimum margins of 10-15%, any private business would aspire for.

Where do you get that those are somehow target profit margins? The profit margin you can make usually depends on how competitive your market is. The big supermarkets are working on profit margins more like 4-5%, whereas Nvidia's gross margin for the last quarter was around 75%.

 

[87electric]

The hired an independent agency to write the report. There was also the other non-Virgin article I linked to.
Where's your evidence?

I’m not sure what you mean by being independent. Assembly Research wrote the report. Matthew Howett the CEO is a spokesperson for the communications industry and is the go to person for the BBC for quotes. There is a disclaimer at the end of the report that the collected information has not been independently verified. The report conclusions don’t seem to be robust to me.

 

[Rail_Midlands]

There's difference between profit margin and Return on Equity or Return on Invested capital, based on the Asset turn. The super markets like Costco/Tesco operate at less than 3% margin, but with an RoE of 20%, because of the high volumes and asset turns. Also these private rail companies slice their profit with lot o their own sister companies and their actual margins are far higher.

== Doublepost prevention - post automatically merged: 5 Dec 2024 ==

Nvidia is different, since it has lot of R&D cost and it needs to amortize it, even though production cost is only a fraction (similar to pharma).

 

[Krokodil]

Generally in Europe the old centralised state railways have yielded to a devolved structure with mixed public/private ownership, often with "private" meaning next-door's state or regional operator.
Bidding for new contracts is central to this, something we have just jettisoned in favour of permanent public sector ownership (bar open access).

In many countries they have gone all-in for that, following the intention of the EU rules. However the Netherlands simply awarded the lot to NS apart from a couple of flows that NS didn't want to run so the likes of Arriva took them.

In Switzerland meanwhile (generally regarded as the gold standard of public transport) there isn't much in the way of outsourcing. Some cantons have their own railways but you won't see Arriva logos on anything, the cantonal and federal governments own most of it, with a small minority of private shareholders in some cases.

I'm not convinced that outsourcing rail operations has made the railways any better than outsourcing bin lorries has.

 

[Yew]

One thing to remember is that the railways were the last major industry privatised by the 1979-1997 Conservative government so it makes sense that it would be the first one to be renationalised. Think about it how many people are calling for British Sugar or Dairy Crest to be nationalised?

Indeed, those both are areas where realistic competition can be had, though of course, multiple companies does not necessarily guarantee a competitive marketplace. As seen with the "rocket and feather" effect, companies can be quick to put up prices due to fluctuations in supply, but very slow to reduce them afterwards, often ending in a "Mexican stand-off".

The transition from a not for profit public service to for-profit private, and the private sector comes in with an expected margins of at least 10-15% , this can't be achieved just by increasing efficiencies alone

Such efficiency gains are possible, but they require investment and vision, and that doesn't seem to work well with the "sweat the assets and drive down the working conditions" mindset that is prevalent in the post-Thatcher era.

 

[thenorthern]

Indeed, those both are areas where realistic competition can be had, though of course, multiple companies does not necessarily guarantee a competitive marketplace. As seen with the "rocket and feather" effect, companies can be quick to put up prices due to fluctuations in supply, but very slow to reduce them afterwards, often ending in a "Mexican stand-off".

Not really with British Sugar as British Sugar is the only company that refines sugar beat in the United Kingdom. It's not something people really think about though.

 

[signed]

Generally in Europe the old centralised state railways have yielded to a devolved structure with mixed public/private ownership, often with "private" meaning next-door's state or regional operator.

Which is just dumb as it's ending to be a race to the bottom. Just leave the railways nationalized and you don't have to deal with that nonsense.

If the franchised operator decides that they don't make enough money from the local government they'll make the service as poor as possible to save money.

 

[Sorcerer]

For railways in particular, privatisation wasn't the disaster. The fragmentation and unholy mishmash of public-private mixing resulted in a lack of joined-up thinking and management issues. The private operators running train services using trains leased from rolling stock companies and running on infrastructure owned by a state-owned enterprise and under a timetable set by public bodies. The Japanese model of privatisation where private companies own and operate everything provides a simpler system where it's clear whose responsible for what. Quality of work might not be as good as the UK but that's as more of a work culture issue. Can't speak for how it affects other industries.