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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

#451

Post by youngtaff »

lotsofpulp wrote: post #308
youngtaff wrote: post #299

Earlier quoted context omitted.

In the case of the UK water companies the parent fund was often involved in getting or making the loan e.g. Water company does a debt bond issue, parent owning fund takes a % of the issue (enough so that the bond issue is a success at a good price), parent fund extracts all the funds raised as a dividend, and sells the % of the issue it own too All while extracting management fees etc too

Right, so the “parent” posts a profit, and it comes (either tomorrow or next year) from revenue earned by the “child” that borrowed, trading revenue tomorrow (going to lenders) in exchange for cash today (going to “parents’” owners). Without getting into the weeds, my point was that in order for owners to end up with cash in their pocket, the business has to earn a profit, at some point. And that profit must come fro…

No the business doesn’t have to make a profit it just needs enough revenue to service the debt

Of course what happens is many business geared this was don’t make a profit, fail their banking covenants, interest on the bond rises and eventually they go bust leaving lenders out of pocket

It’s happened to many PE owned businesses

Re: Privatisation has been a costly failure in Britain

#452

Post by toyg »

scott_w wrote: post #270
danuker wrote: post #107

Earlier quoted context omitted.

> load the company up with debt and pay yourself a nice dividend I am new to this. Doesn't a dividend come from profits? What profits are there if you need debt? And who will loan to you if your business plan is to exit scam?

> What profits are there if you need debt? And who will loan to you if your business plan is to exit scam? If you’re a water company, after government bailed out the banks, chances were good you’re not going bust. What are they going to do? Let the entire population of London die of dehydration?

And since a lot of investors in large utility companies are international, should the government somehow not make them whole (or worse, just expropriate), there would typically be repercussions - with international arbitration courts adjudicating reparation with processes that are typically stacked in favour of businesses.

It's a sham market.

Re: Privatisation has been a costly failure in Britain

#453

Post by ClumsyPilot »

iso1631 wrote: post #418
ClumsyPilot wrote: post #362

Earlier quoted context omitted.

Have you ever tried to get off the train in a wheelchair? Or find out which stations have wheelchair access?

Ticket office staff won't help you there.

they literally tell yoy which stations are accessible and which ones arent.

Re: Privatisation has been a costly failure in Britain

#454

Post by pydry »

somsak2 wrote: post #147
pydry wrote: post #120

Earlier quoted context omitted.

Even in markets with competition, competition from the public sector is an excellent way of exerting market discipline on dysfunctional markets. If you compare the average quality of housing in, for example, Singapore (where 90% of housing is public) and the UK it's like night and day. UK private landlords are among the laziest and most entitled in the entire world, the land use efficiency is terrible and the buildin…

i always cringe when i see Singapore used as a comparison point with developed nations. it's a single city and has an authoritarian government. how is that at all an apples to apples comparison?

Because the reason they implemented the HDB mass housing program had nothing to do with them being authoritarian or a city state. They are just nice commieblocks.

Lee Kuan Yew was afraid of the domestic communist opposition. This was a popular policy of theirs and they were getting dangerously close to power,so he ripped it off. It's a formula for staying in power that served him well.

Back when western leaders were deathly afraid of communists they used to build public housing as well. Then they stopped. Singapore continued.

Re: Privatisation has been a costly failure in Britain

#455

Post by Qwertious »

dffdsa432 wrote: post #186
ben_w wrote: post #176

Earlier quoted context omitted.

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.

US consumer rail way is a quasi public corporation (Amtrak) that has lost money for decades and is still funded to the tune of over $1 billion per year. You are confusing that with private US rails.

US private rails own the railways and, while in theory they are required to give way to passenger rail, are so long and take so much time to cross that in practice passenger rail is forced to adhere to the time-schedule of private rail.

This is arguably illegal and only exists because the govt refuses to enforce the obvious interpretation of the agreement.

Meanwhile, the US DOT has historically always taken the approach of "the solution is more highways. What's the problem?", losing far more than $1B/year.

Re: Privatisation has been a costly failure in Britain

#456

Post by friendzis »

spacebanana7 wrote: post #337
friendzis wrote: post #279

Earlier quoted context omitted.

> But what is the definition of a public good? Whatever the populus via government decides that to be.

I don't think it's so subjective. If a democratic government decided that policing, clean air or firefighting weren't public goods they'd be incorrect. Even if polling supported it.

Well, there two distinct questions: what should be treated as public good and what is a public good. In my view "what is public good" is defined by the very act of public funding and availability. What should be public good is entirely different, moral/political discussion.

Re: Privatisation has been a costly failure in Britain

#457

Post by raffraffraff »

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 think that the differences between your experiences at government vs private might be correlated with the size of the organisation. I've worked at very large publicly traded companies that operate kinda like government institutions: too big to fail, tons of bureaucracy, endless meetings, silos / walls / not-my-job.

Re: Privatisation has been a costly failure in Britain

#458

Post by hgomersall »

gnfargbl wrote: post #117
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…

> I believe the best way to make this work is by keeping the network itself in public hands and then having a competition of contributors to the network - e.g. electricity providers that add energy to the grid. One area -- in fact, the only area that I can think of -- where privatisation has mostly worked in the UK is the telecommunications market. Here the networks are in private hands, but the providers are forced…

One thing that can be done for all these services is to allow any private company to offer the customer facing front end (payment, bundling, support etc) which plug into a common wholesale backend.

Re: Privatisation has been a costly failure in Britain

#459

Post by asdajksah2123 »

Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition.

Even then it can be a challenge to structure this correctly, but if a government and populace are willing to tolerate an iterative approach an optimal solution can be reached. I'm not entirely convinced it's better than the public alternative, especially since most of the public failures were prior to the internet and the increasing popularity of freedom of information acts, which have allowed the public to gain knowledge and influence the operations of public agencies in a way they, for better or worse, couldn't before. But at the very least such a solution could come functionally close enough to operating optimally.

But none of this is true in the way the UK privatized its water networks. The water privatization is an embarrassment of how to do privatization as wrong as possible. Alternatively, considering a primary goal of the Thatcher govt was to transfer public wealth to private purses, one could argue this privatization was done as efficiently to achieve that goal as possible.

Re: Privatisation has been a costly failure in Britain

#460

Post by iamflimflam1 »

asdajksah2123 wrote: post #459

Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition. Even then it can be a challenge to structure this correctly, but if…

    Privatization can, and has, worked well in several monopoly utilities, where the privatization is structured appropriately. Forced percentages to be set out for infrastructure improvements, profits capped by regulation, debt cannot be piled on willy nilly but has to be approved by a regulatory body, and finally common access allowing for competition.
Can you give some examples?
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