The electorate had become annoyed at the profit some of the privatised companies were earning, such as BT. It earned a £3 billion profit in a single year in the mid 1990’s and this led to many people feeling like they had been exploited. The voters also became irate over the ‘fat cats’. Directors of these privatised companies were receiving massive salaries and pay rises. This was repeatedly publicised in national papers such as the scandal with Cedric Brown the director of British Gas, who received a 75% pay rise. Also, many of the privatised companies provided poor service. British Gas and many of the water companies were inefficient and some people had not received bills for over three years and then expected to pay the huge bill when it finally arrived. This was linked to the weak regulation bodies, such as OFTEL and OFGAS, which were set up by the Tory government to ensure the public were not being exploited. These bodies were not doing their job efficiently and the companies rising prices but declining service showed this. The electorate also became angry with the government for selling off public companies for very little money like Rail Track as this was sold for only £1.95 billion. All the privatisation led to huge unemployment figures as the privatised companies sought profit. BT alone lost 108,000 jobs between 1990 and 1991.
The Tories believed in privatisation and thought it would increase efficiency, which it proved with the Jaguar Company as it was now making a £10 million profit and not a £121 million loss as it had previously but saw that there were inefficiencies with the system. They still support privatisation and are currently tackling new areas that have previously been taboo areas. These include the new ‘schools passport’ and the idea of Private-Public health care a new Private Public Partnership (PPP).
During this period Labour was suffering from numerous embarrassing electoral defeats due partly to their position on privatisation. Labour was underpinned by socialism and this was characterised by common ownership seen in clause 4. This suggested harnessing material resources for the common good. Labour was hostile to privatisation as it believed that the Tories had no right to sell off what was collectively owned by the people. Former Conservative Prime Minister Lord Macmillan likened it to selling off the family silver. They said you could not sell what the society owned and that the people should not be exploited by ruthless businessmen. Labour said that private companies would offer a worse service and be fraught with price rises and job losses, and this was seen with the 20% price rise with water. It also worried about all the efficient nationalised companies were being sold off for too little and leaving the government with the inefficient ones that would constantly need subsides. In 1983 the Labour Manifesto suggested it would nationalise anything that had been privatised by the Tories (this totalled 9 companies) but did not promise to pay the full value of its shares. As Gerald Kaufman (Labour MP) described it, it was the ‘longest suicide note in history’. It was an electoral disaster as it was so unpopular with the voters. Neil Kinnock, Labour leader (1980- 1994), decided that the party had to shift its ideas about privatisation in line with the electorate’s ideals. Clause 4 was redrafted and this showed the first signs of a commitment to move away from nationalisation and adopt the ideas of a free market. Also the power of the regulatory bodies was to be increased if they were elected. Tony Blair continued this process and by the 1997 election a consensus over the concept of market forces was firmly established. Blair now began to suggest further privatisations under his government if elected.
Since 1997 and the landslide victory Labour have raised several privatisation issues. By 2000 they had embarked on a partially privatised Air Traffic Control Service. 37% would still remain under state control and the rest would be sold off, which is a PPP. The fact that only some of this service has been privatised shows that Labour has retained some of its socialist views. Next, the London Underground was to be partially privatised but this ran into problems with the newly elected London Mayor, Ken Livingstone. He didn’t agree with Labours use of PPP’s and eventually he lost his battle in court and so PPP’s are being used for privatising the London Underground. Labour has also thought about privatising the Post Office but nothing has come about yet. Labour has adopted these policies as they raise money for tax cuts and their new thinking to market forces as a control over the economy fits in with privatisation. Also, even if Labour did want to renationalise the cost of doing so would be colossal and electorally unpopular.
During the 1980’s and the early 1990’s Labour did not agree with the Conservative enthusiasm for privatisation. They believed in their socialist views and thought that privatisation was selling off what people already owned. The Conservatives on the other hand believed privatisation was a brilliant idea, which would improve the efficiency of the companies so they could provide a better service for the public. There are elements of truth in both ideas but the electorate believe in privatisation, as it tends to produce efficient companies such as BT and Jaguar. The problem with some of these companies is that they don’t work as a private company as directors are more concerned with making profits and so the quality of the service decreases. This can be seen with Rail Track which has since come out of administration and a new not-for-profit company, Network Rail, has had to take over the running of the railways. Now since New Labour has evolved there is a consensus between them and the Conservatives over privatisation. Both believed in the free market and have moved away from a Keynesian approach to the economy. Labour are now privatising companies and industries that were left by the conservatives such as hospitals and the London Underground but are doing so using PPP’s and Private Finance Initiatives (PFI’s) rather than the traditional Tory way of public procurement deals.
