Privatisation Paper 1: Key Question: What impact did Thatcher’s government (1979 – 90) have on Britain 1979 – 97?

Key Terms Contracting Out: Popular Capitalism: Public-private partnership:

Timeline of Privatisation 1979 – 1987 British Petroleum 1981 – 1985 British Aerospace (the government kept a £1 share to veto foreign control of the company) 1981 Cable and Wireless British Sugar January 1993 British Telecom 1984 Jaguar British Airport Authority 1987 Rolls Royce (nationalised in 1971) British Airways (nationalised in 1972) Rover Group 1989 Water companies 1990 John Major replaces Thatcher as prime minister 1980 – present Council houses sold under the Right to Buy scheme 1982 – 1985 Britoil 1983 Associated British Ports 1986 – 1988 National Bus Company 1988 British Steel (nationalised in 1967) Municipal bus companies 1994 British Coal (nationalised 1947) 1994 – 1997 British Rail (nationalised 1947)

Privatisation Under Thatcher Thatcher saw the sale of state-owned companies, the removal of government monopolies and the contracting out of services as key parts of her crusade to cure Britain’s economic stagnation. It would cut government expenditure on loss-making industries and cut the number of civil servants by replacing them with private employees. More than this, privatisation would reinvigorate the British economy by promoting competition and innovation. The revenue generated by the sale of state assets would also fund a education in tax, allowing entrepreneurs to invest more wealth in job-creating ventures. Lastly, the sales would help to create a wider ownership of shares; ordinary people would have greater incentive to work harder, knowing that they owned a slice of the company for which they worked. While there is no doubt that Thatcher was successful in terms of the pace and extent of Privatisation, historians are divided over the long-term success of this policy.

Privatisation Privatisation proceeded slowly at first, but then gathered pace in Thatcher’s second term in office. Before 1983, British Aerospace, British Sugar and British Petroleum had all been sold off. However, it was the sale of Brtish Telecom in 1984 and of British Gas in 1986 that really saw the lauch of what Thatcher came to call ‘popular capitalism’. Shares were sold cheaply to ensure a quick sale and wide take-up; between 1979 and 1990, the number of shareowners increased from three million to 11 million. However, the distribution of these shares was far more uneven than the conservatives made out in their 1987 election manifesto: while it spoke of the start of ‘a profound and progressive social transformation – popular capitalism’, only nine percent of unskilled male workers owned any shares, compared to half of all male professionals.

Privatisation More damaging to the long term success of popular capitalism was the rapid sale of most shares for a quick profit to large pension or investment firms: individuals owned 38 percent of shares in 1975, but only 20 percent in By far the most successful aspect of ‘popular capitalism’ was the sale of council houses: over a million were sold between 1979 and 1988.

Long-Term Impact of Privatisation The longer-term impact of privatisation is disputed and it is clear that the process had had more success in certain sectors than others. The sum of £19 billion was raised by the sale of state assets, something that the former Prime Minister Harold Macmillan compared to ‘selling off the family silver’. This money was used to pay for tax cuts. While competition has driven innovation and better customer service in telecoms for example, there was little appreciable difference in the quality of water or gas supply while prices increased faster than inflation to the benefit of shareholders and chief executives with huge salaries.

Privatisation After Thatcher The privatisation of British Rail between 1994 to 1997 (which even Thatcher felt was a ‘privatisation too far’) led to a highly confused situation where the government continued to subsidise private firms that operate the trains; government spending on trains has doubled since 1994, while most commuters would argue that the service hasn’t improved. A further way in which privatisation was increased after 1990 was the launch of the Private Finance Initiative under Thatcher’s successor, John Major, in Public-private partnerships were designed to inject private funding and expertise into traditionally state-run concerns such as hospitals and schools. While the initiative led to the construction of some impressive buildings, it became clear by 1997 that the future generations of taxpayers would have to pay huge amounts of money to the private firm who put in the initial investment.

Impact of Privatisation 1. Why was privatisation beneficial to the government? How could it be argued that the benefits of privatisation were short term? 2. Interpretations: Find some opposing historians viewpoints on the long term success of Privatisation.