privatization

Policy or process of selling or transferring state‐owned or public assets and services (notably nationalized industries) to private investors. Privatization of services involves the government giving contracts to private firms to supply services previously supplied by public authorities.

Supporters of privatization argue that the public benefits from theoretically greater efficiency from firms already in the competitive market, and the release of resources for more appropriate use by government. Those against privatization believe that it transfers a country's assets from all the people to a controlling minority, that public utilities such as gas and water become private monopolies, and that a profit‐making state‐owned company raises revenue for the government.

In many cases the trend towards privatization has been prompted by dissatisfaction with the high level of subsidies (financial support by the government) being given to often inefficient state enterprise. The term ‘privatization’ is used even when the state retains a majority share of an enterprise.

The policy has been pursued by the post‐1979 Conservative administration in the UK, and by recent governments in France, Japan (Nippon Telegraph and Telephone Corporation in 1985, Japan Railways in 1987, Japan Air Lines in 1987), Italy, New Zealand and elsewhere. By 1988 the practice had spread worldwide, with communist countries such as China and Cuba selling off housing to private tenants. Deutsche Telekom, Germany's state‐owned telephone company, offered shares to the public in October 1996 in the biggest privatization to date in Europe.

In the period 1980–93 the UK government paid consultants more than £258 million for advice on how to sell off nationalized industries and government services, and wrote off £15 billion of debt 1979–95 in order to make state‐owned companies more attractive before privatization.

In November 1994, approval of a 75% pay increase for the chief executive of British Gas led to a public outcry and calls for regulation of the salaries of executives of recently‐privatized companies.

Plans to privatize Britain's nuclear‐power industry – the last remaining state‐owned energy utility – were unveiled in May 1995. British Energy, the UK's largest generator, was privatized in 1966. The state‐owned British Nuclear Fuels was part‐privatized in 1999.

industries in the UK privatized since 1979:

British Telecom

British Gas Corporation

British National Oil Corporation

British Airways

British Airports Authority

British Aerospace

British Shipbuilders

British Steel

British Transport Docks Board

British Water Board

Enterprise Oil

Jaguar

National Freight Company

Rover Group

Water Supply

Electricity and gas companies

British Rail

In 1997, privatizations worldwide were expected to go beyond the $100 billion mark for the first time, up 14% from the 1996 record and up 28% from 1995. This was announced in Paris in a report by the Organization for Economic Cooperation and Development. The largest privatization in 1996 was Deutsche Telekom ($13.3 billion) and the largest expected for 1997 was France Telecom.