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Privatisation has been a costly failure in Britain

economist.com

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Re: Privatisation has been a costly failure in Britain

#171

Post by anonymousDan »

SilverBirch wrote: post #38

I think it's kind of a mistake to focus too much on the principles of this story than on the execution. Sure, we can make arguments about how it should be more efficient to run water privately because of a profit motive, or how it's a natural monopoly. But if you look at the details the claim is very simple - that the water companies charged high prices, didn't invest and paid out huge dividends. Well there's a simpl…

But this is the fundamental problem with the way these privatisation deals are structured. If it relies on a strong regulator to make it work, then as soon as a 'red-tape' cutting government comes in that is being lobbied hard enough the whole thing breaks down.

Re: Privatisation has been a costly failure in Britain

#172

Post by neximo64 »

eigenket wrote: post #67
neximo64 wrote: post #43

Earlier quoted context omitted.

The other side of that coin is, with quality as the main motivator, the prices go up. There's no free ride either way through organising things differently, its a choice between quality or price (as opposed to getting quality at a cheaper price). The other issue of course is in a public setting, there is no motive for efficiency.

> Since then the sector has accumulated £53bn in debt while distributing £72bn to shareholders, the majority of whom are international investors Theres actually a pretty huge amount of "free ride" sitting there waiting to be ridden.

One of the assumptions that may be being made in this statement is funds can be borrowed for free, in a debt or equity setting. Whoever is lending/providing those funds does expect something in return.

Even a government that borrows, needs to pay something back with interest. And an investment by the way of shares the government makes needs something back roughly matching the interest rate too.

I don't really see an argument where a public setting is any more beneficial from what you're saying, if the international investor was the the treasury, it would still want something back by shareholder returns.

Re: Privatisation has been a costly failure in Britain

#173

Post by lostlogin »

dffdsa432 wrote: post #153
giaour wrote: post #77

Earlier quoted context omitted.

Offering shitty, expensive service. It's not like customers can use a competing rail line, so every dollar you invest in customer service is a dollar out of your pocket.

The USA's rail lines are privatized and they're anything but "shitty" and "expensive" considering they're lower cost than trucking.

US rail has been in the news lately, with apocalyptic skies and chemical rain. Safety issues abound. What are you seeing that I don’t?

Re: Privatisation has been a costly failure in Britain

#174

Post by dffdsa432 »

lostlogin wrote: post #157
dffdsa432 wrote: post #138

Earlier quoted context omitted.

Do government unions not try to maximize their profits from the public or am I missing something?

You look at these crappy companies and the problem you see is unionised staff? Have you seen the dividends and bonuses at Thames Water, or read the article posted here?

Thames Water's CEO has a $1.5 million pay package which is lower than CEOs of corporations of the same size. The funding for public unions in the UK is $233 billion. Great comparison there.

Re: Privatisation has been a costly failure in Britain

#175

Post by jacknews »

mrfumier wrote: post #62
juujian wrote: post #25

Earlier quoted context omitted.

It's even simpler than that. All of these privatized entities are incredibly efficient... at extracting profits from the public. Of course their goal is to extract profits. And you don't extract profits from a rail line by offering the best service. Bonus points if you can convince the government to bail you out and provide some extra cash.

"And you don't extract profits from a rail line by offering the best service." So how do you extract profits then?

Just like all PE; take on huge debts ostensibly to fund expansion, efficiency, etc, and then ... give the loaned cash to shareholders.

Re: Privatisation has been a costly failure in Britain

#176

Post by ben_w »

dffdsa432 wrote: post #153
giaour wrote: post #77

Earlier quoted context omitted.

Offering shitty, expensive service. It's not like customers can use a competing rail line, so every dollar you invest in customer service is a dollar out of your pocket.

The USA's rail lines are privatized and they're anything but "shitty" and "expensive" considering they're lower cost than trucking.

My experience of American railways as a tourist is having to show my passport to book a ticket from Davis to Sacramento (I assume I also did that on other trips like to SFO but don't remember), and it being expensive.

My experience in the UK and Germany is show up, pay, go, and it being cheaper.

Re: Privatisation has been a costly failure in Britain

#177

Post by lhnz »

The UK is increasingly resembling the rest of the world's rentpig. The UK government has made Britain into one massive investment vehicle for foreign capital -- our utilities, leading firms, football teams, landmarks and property all serve to enrich sovereign wealth funds in the Middle East and Asia. These foreign investors have all received lavish incentives and grants, and in return we have been allowed to live way beyond our means for decades.

It's alarming to note the extent to which our resources have been sold off. The Conservative party, for instance, facilitated the sale of nearly 10% of Thames Water to China, and a further 10% to the Abu Dhabi Investment Authority.

Effectively, the country is being turned into a dividend machine for foreign capital, while our government debt continues to soar, now standing at over £110 billion and threatening to surpass our entire education budget [0]. This rampant exploitation of our national resources and the escalating debt crisis are alarming indicators of our economic vulnerability.

The country's economic situation is gravely concerning. Our mounting debt issues are additionally exacerbated by the looming crisis in our public services, which are showing signs of failure and are predicted to become significantly more costly. For example, we currently allocate 38p of every pound spent on public services to the NHS. However, projections show the number of Brits aged 85 and older doubling in the next 25 years [1]. Despite these alarming statistics, nobody in government or the media wants to have an honest conversation with the public about what this means.

There are also limits to how much more redistribution can be done. As per 2019/20 data, the top 1% of income taxpayers, earning above £180,000, received 13% of all income but contributed 29% of income tax receipts. The burden is even more evident when considering that the top 10% of income taxpayers were responsible for approximately 60% of all income tax receipts. In contrast, the lower half of income taxpayers, those earning less than £26,000, accounted for only 10% of income tax receipts, suggesting a significant tax skew towards higher-income earners.

It's really not looking good.

[0] https://i.imgur.com/dxK3pUB.png

[1] https://i.imgur.com/SV909oB.jpg

Re: Privatisation has been a costly failure in Britain

#178

Post by frankfrankfrank »

wolframhempel wrote: post #9

I am a deep believer in free markets as the most efficient mechanism for distributing goods and services, creating better offerings and lower prices through competition and encapsulating risk in innovation. Unfortunately, none of these apply to the privatization of inherently public commodities that run on top of an underlying network infrastructure. This can be streets, railway tracks or water pipes - whenever there…

[dead]

Re: Privatisation has been a costly failure in Britain

#179

Post by jraph »

Kiro wrote: post #164
juujian wrote: post #25

Earlier quoted context omitted.

It's even simpler than that. All of these privatized entities are incredibly efficient... at extracting profits from the public. Of course their goal is to extract profits. And you don't extract profits from a rail line by offering the best service. Bonus points if you can convince the government to bail you out and provide some extra cash.

Isn't that the whole point of privatisation? By introducing a profit maximisation goal you (supposedly) create a more efficient operation. I've worked in both the public and the private sector and can definitely understand the argument. In my government job it was way easier to slack off and no-one really cared about the results. There was no actual pressure from above to hit targets. You had your budget and it didn'…

I've also seen many public places where people are efficient, and also stressed because of the amount of work to do. I feel like your experience is not very applicable to all situations.

What's more, a private company which has monopoly does not really have special incentive to respect deadlines and everything: it is the only choice, so customers won't deal with any competitor and are stuck with this private company.

Re: Privatisation has been a costly failure in Britain

#180

Post by SilverBirch »

anonymousDan wrote: post #171
SilverBirch wrote: post #38

I think it's kind of a mistake to focus too much on the principles of this story than on the execution. Sure, we can make arguments about how it should be more efficient to run water privately because of a profit motive, or how it's a natural monopoly. But if you look at the details the claim is very simple - that the water companies charged high prices, didn't invest and paid out huge dividends. Well there's a simpl…

But this is the fundamental problem with the way these privatisation deals are structured. If it relies on a strong regulator to make it work, then as soon as a 'red-tape' cutting government comes in that is being lobbied hard enough the whole thing breaks down.

Exactly the same problem with public ownership though - as we've seen. All it takes is one libertarian or corrupt government to sell of whatever it is into the private sector and once it's gone it's practically impossible to ever buy back.
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