How successful has privatisation been?

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How successful has privatisation been?

Privatisation involves the transfer of assets or economic activity from the public to the private sector. This is the general definition. There are, however, three specific types of privatisation:

Denationalisation: The sale of public sector assets. Includes industries, companies and local authority council houses. This is the type of privatisation that most people recognise: the selling off of British Telecom and the gas, electricity and water industries.

Deregulation: The removal of legal barriers to entry in a previously protected market to allow private enterprise to compete. Hence, public sector provision (i.e. financing) and production are replaced by private sector provision and production (e.g. the bus services).

Franchising: The public sector continues financial provision but for private sector production. Competitive tenders are requested for a contract to be awarded for a stated period of time (e.g. hospital needs and the railways).

In the private sector, decisions are made on the grounds of efficiency and profit. Politicians may make decisions to further their own political ends and not those of the industry in question.

State monopolies tend to create inefficiency, are poor innovators and restrict consumer choice. The existences of consumer sovereignty in the private sector has the potential for widening consumer choice, increasing quality and, through increased competition, lower prices. Basically, the nation's resources will be used more efficiently. Allocative efficiency and productive efficiency will be striven for, and more likely to be achieved.
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The small budget deficits and occasional surpluses of the late eighties were in no small part due to the revenues gained by the government from the sale of various industries (from 1979-99 the Treasury has gained £70bn from asset sales). It has also to be remembered that these industries, that were often loss makers, no longer needed to be subsidised by the taxpayer. Finally, if these more efficient privatised industries began to record a profit, the government would tax these profits, thereby helping to keep the PSNCR down.

Is this an argument for privatisation or an end ...

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