Winners and losers: the great privatisation game

Winners and losers: the great privatisation game
Document type
Report
Corporate author(s)
High Pay Centre
Publisher
High Pay Centre
Date of publication
18 March 2014
Subject(s)
Trends: economic, social and technology trends affecting business, People management: all aspects of managing people
Collection
Business and management
Material type
Reports

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Over the past 30 years, the UK has transferred billions of pounds worth of assets from the public to the private sector. Politicians and business leaders have extolled the benefits of privatisation in terms of improved efficiency and a higher standard of service. However, a thorough analysis of trends in the privatised companies reveals a less convincing picture:

  • The average UK energy bill has risen by 140% in the past 10 years to £1,252 while household incomes have increased by 20%.
  • Water bills have increased by 74% since 1994/95 while leakage rates are up in some cases by nearly 30%.
  • Some rail fares have gone up by 100-200%. Season tickets, which are subject to government controls, have risen just above inflation at 55-80%.
  • Though the sell-off of privatised companies raised £50 billion for Government (at 2000 prices), the Government also had to write-off debts for many of these companies and take on their pension obligations. Many privatised firms have also required subsequent support from the taxpayer.
  • 170,000 jobs have been lost in privatised companies, while pay for the remaining workers has stagnated.
  • The initial increase in individual share-owners has not abated the overall trend towards institutional share ownership.

For the executives of the newly privatised companies, the benefits have been much more apparent. CEOs of privatised firms are paid as much as £5 million, perhaps 50 times what a senior public servant could expect. Similarly, analysis from Brewin Dolphin shows that investors in privatised companies have seen their shares increase in value by 419% since privatisation, compared with a FTSE 100 average of 206% over the same period (suggesting that the sale of these companies at a knock-down price represented poor value for taxpayers). Many shares in privatised companies are now owned by foreign investors, so the gains from the share price increase have gone overseas.

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