Adam Smith Institute: Gov't could raise £20bn with new privatizations

With public finances deteriorating, Government should raise £20bn from new wave of privatizations, says think-tank.

The Adam Smith Institute's latest report – Privatization - Reviving the Momentum – calls on the government to embark on a new wave of privatizations, which could net the exchequer in excess of £20bn. Given the worsening state of the economy and the increasing tightness of the public finances, the report notes that such an inflow of funds would be very welcome.

In addition to the revenues generated for the government, a new wave of privatizations would also deliver significant operational benefits, the report says. Previous privatizations have delivered a wide range of improvements, including increased investment, lower prices, greater choice and better service for customers – as well as underpinning billions of pounds worth of economic activity.

The leading privatization candidates identified by the report include the Royal Mail, Channel 4, BBC Worldwide, Scottish Water, Northern Ireland Water, Glas Cymru, the National Air Traffic Control System, as well as government stakes in British Energy and the Nuclear industry.

The report's author, investment analyst Nigel Hawkins, said:

"Privatization in the UK remains unfinished business. The task for Government, of whatever colour, should be to complete it and to reap the many benefits - including proceeds of some £20 billion."


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Privatization - Reviving the Momentum is published by the Adam Smith Institute, 23 Great Smith Street, London, SW1P 3BL

Download the complete report at: http://www.adamsmith.org/images/pdf/privatization_reviving_the_momentum.pdf


Executive Summary:

· The privatization of British Telecom in 1984 heralded a global trend to sell publicly–owned companies. Whilst it has continued internationally over the last 23 years, UK privatization has stalled. Despite nervous stock markets, this paper proposes many privatizations, which could raise c. £20 billion (excluding Northern Rock).

· Irrespective of its c. £5 billion pension fund deficit, the Royal Mail business is an obvious candidate for a public flotation. Its core Post Office division needs additional funds and has real scope both for efficiencies and for expansion — it has trusted access to c. 27 million UK addresses. EU mail delivery deregulation has boosted the overseas activities of both Germany’s Deutsche Post and the Dutch–based TNT.

· Having moved far away from its original Public Service Remit (PSR) and with a need for further funding, Channel 4 is a natural candidate for privatization, possibly via a trade sale.

· Water privatization has delivered a major investment programme — financed partly by higher bills. In Scotland and Northern Ireland, the water companies remain publicly–owned, whilst Glas Cymru in Wales is a not–for–profit business. The case for replicating the 1989 flotations in England — or for trade sales — is strong.

· The government has reaffirmed its plans to sell down its various nuclear industry shareholdings. In particular, it should proceed — at an opportune moment — with the disposal of its residual 35% stake in British Energy, despite the latter’s ownership of the probable sites for UK new nuclear–build.

· On the transport front, NATs, which runs the UK air control network, should be fully privatized, preferably after a revised regulatory regime has been introduced for the aviation sector: the latter could include a slot auctioning system at Heathrow Airport. The larger Trust Ports should also be sold off.

· Further attractive privatization candidates include CDC (formerly the Commonwealth Development Corporation), the Tote (via the proposed auction and excluding bids from William Hill and Ladbrokes), BBC Worldwide, the government’s residual 18.9% holding in QinetiQ and, in time, British Waterways.