In defence of Privatisation

In the wake of the collapse of Carillon and the constant calls from labours frontbench for rationalisation, it is easy to see why many are being swayed. To the ill-informed it seems that, yet again, private industry has failed to complete its contract and now over 1,000 people are out of a job. They can add construction to the likes of the railways and palliative care, all industry in which the public views private sector involvement as a failure. But this view is flawed; under privatisation companies are better managed, safer and more competitive. But things have not gone far enough, it’s time for us Brits to end our sentimental view of nationalisation and begin to promote further efficient private sector involvement and truly exploit the benefits that lower public spending obligations can bring.

The railway is one of the most well-known examples of privatisation and many publicly lampoon it without really grasping the statistics behind it. There have been many clear benefits to privatisation. Firstly according to statistics compiled by Imperial college London, 150 people are alive today that would not be alive had nationalisation fatality rates continued, furthermore¬†England’s railways have the lowest fatality rates in all of Europe, ours is 0.74 per 1 billion people, France’s is 1.52 and Spain’s is 11.52, despite them both having nationalised services. Fares are also less expensive than they would be under public ownership; it has been estimated (by the Association of train operating companies) that train fares are somewhere between 10%-20% cheaper under the privatised system. Efficiency has also increased pre 1994 the government covered 25% of all rail costs whereas now the government covers only 1%.

Clearly privatisation has been a success in the railway industry, it has improved safety, efficiency and kept costs down, and yet it still is not perfect. In order for the free market to operate to its fullest extent government intervention has to be at a minimum including subsidies. The government should not pick up the slack if a company is unable to be profitable no matter the public interest. perhaps to some that is morally wrong but they must remember that where there is demand there will always be supply (the free market provides), so should one industry giant collapse, others will move in to take its place and goods will likely be cheaper under this new firm. Carillion is a perfect example of this, yes it is regrettable that 1,000 jobs have been lost (though it is worth mentioning that 2,300 jobs have been retained by some divisions being brought out by other firms) but Carillion was not profitable and it is right that the government let it fail. If the government does not allow companies who cannot compete effectively to fail then they have removed the incentive to be more efficient and more profitable as well as undermining the principles of a just price. The market determines the price of goods, if a price is too high the goods won’t sell and the business will be forced to lower it, if the price is too low the business will be unsustainable and will be forced to raise it until a comfortable balance is found, however when the government sticks its cumbersome nose into the market it disrupts these processes and prevents correct prices from materializing, undermining many of the true benefits of privatisation.

However this does not mean that the economy should be completely unregulated, if we have learnt nothing else from 2007, let us remember that some regulations are not only healthy, they are necessary. Regulations which prevent certain financial institutions from becoming ‘to big to fail’ for instance or essential antitrust agreements which ensure that fair competition can still exist between Tesco and Petes local grocer. These interventions are a necessary evil to promote the values and benefits of the free market and allow, as Adam Smith so rightly said, the invisible hand to guide us.

Private industry is not the evil many to believe it to be, for too long only one side of this debate has been given any light, any place in the public forum. Well I say enough is enough, it is time that the case for privatisation was made, and it is for this reason that I am proud to stand in defence of private industry.