The Official History of Privatisation- Volume II
Emeritus Professor David Parker
Steve Macaulay
Hello I’m Steve Macaulay and I am interviewing Professor David Parker
about his book The Official History of Privatisation. Now David this is the
second volume, what does it cover, give me some background.
David Parker
Well the first volume covered the period down to 1987 and the end of the
second Thatcher government. This volume covers from 1987 to 1997 so it
includes the last Thatcher government, the Major government and stops
with the election of Tony Blair.
Steve Macaulay
Now these covered the more, what I would call the tricky privatisations, the
low hanging fruit had gone and now we are starting to look at some more
ones with individual problems which areas are we covering here?
David Parker
It covers the privatisations which really back in the early 1980s were
considered to be out of bounds because of the technical problems the scale
of the privatisations, we are looking at companies like British Leyland, British
Steel and more specifically in terms of difficulties water, electricity, coal and
railways and when you talk about low hanging fruit of course coal and
railways were very low hanging fruit.
Steve Macaulay
Yes. So if we look then at the privatisation programme I think I was surprised
and I think many people will be that there wasn’t a predetermined central
strategic plan with clear objectives to privatisation.
David Parker
No and indeed as I demonstrated in volume one, privatisation began in a
very tentative fashion, I mean the 1979 Conservative Party election
manifesto included no promises on what was at that time called denationalistion, the word privatisation came into vogue in the early 1980s and
the programme sort of developed on a relatively small scale but proved to
be probably more successful than ministers could have possibly hoped in
terms of the ability to sell these businesses, I mean that was a big issue
nationalised industries did not have a good reputation and therefore there
was always an issue of would private sector investors be all that interested
in buying the equity of these businesses. When it proved to be the case then
of course Government could begin to extend the sphere of privatisation into
other areas, into the low hanging fruit as you described it and this came
about very, very gradually and was done on a departmental basis. We never
had a Ministry of Privatisation, the Treasury did some central guidance but
essentially it was down to each department, Department of Transport,
Department of Trade and Industry and so on, to do their own privatisations.
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Steve Macaulay
So as time went on it was quite clear that there were some key objectives in
all of this, can you describe what they were.
David Parker
Yes I mean I think the initial objectives as much as anything were to raise
money for a government struggling as we are today with budget deficits.
This was in the early 1980s. There was a intention that the industries would
be more efficiently run in the private sector and that became more of an
explicit objective let’s say from about 1982/83 onwards and certainly during
the period of the volume two and then there was unstated, certainly
unstated publicly objective which was of course to sort of bring the trade
unions down to size because the nationalised trade industry unions had
caused a number of problems during the 1970s and then we have the
popular capitalism which is of course part of the title of volume two and
certainly there was a view amongst a number of Conservative ministers that
by selling shares in these companies to ordinary households you would
increase the if you like the support for capitalism and the support for
privatisation.
Steve Macaulay
You’ve got the benefit of looking through official papers, talking to people
involved, looking at memoires and so on, if you looked at the successes and
failures what would you pick out?
David Parker
Well that’s a good question because privatisation wasn’t quite as successful
as ministers stated at the time. Some privatisations have gone very, very
well, they were very smoothly done, there were relatively few difficulties
and after privatisation the enterprises performed quite well but there were
others which were tricky to do, where a lot of backwards and forwards went
on during the planning of the privatisations and afterwards the businesses
didn’t do all that well I mean if you are looking for example at shipbuilding,
shipbuilding was declining before privatisation, it continued to decline after
privatisation in Britain, similarly the coal industry. The coal industry was
privatised with no great expectation that there would be anything other
than a major rundown, continuing rundown in the pits and then we have
others where government had hopes that they would do well like Jaguar but
Jaguar struggled as an independent business and was bought by Ford within
four or five years of privatisation.
Steve Macaulay
So if we take a look back at all of these and I know you have got a chapter in
your book where you have done that where you reflect on these and you
pick out some key themes what particularly stands out for you?
David Parker
Well I think there are a number of themes. Firstly going back to the issue of
how successful these businesses were after privatisation, certainly the
position is patchier than was recognised at the time by many. Secondly the
popular capitalism was temporary, yes the percentage of shares held by,
sorry the percentage of the households holding shares rose to about twenty
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percent at one point in the early 1990s but if you look at the situation today
only about ten percent of the equity in the stock market is owned by
individuals and the decline in individual ownership of equity has continued
right through for most of the post war period. Privatisation did not reverse
that so we did not get the popular capitalism. The third issue really was this
question of whether the enterprises were under priced when they were sold
I mean there was a lot of criticism at the time that the government
purposely sold these businesses off cheaply to benefit its chums in the City.
Now there’s no doubt that the City did make huge gains but there is no
evidence I found in Government papers that ministers or civil servants did
not try their best to get the best price for these enterprises. The difficulty
was that you were selling businesses which were quite unique in the stock
market in many cases and there was nothing really to pin the issue share
price to so it was perhaps understandable that mistakes were made and to
be fair to ministers and officials over time the methods used to sell these
businesses did become more sophisticated and I think it is fair to say the City
the big gains made by the City were made in the earlier years of privatisation
not in the later years.
Steve Macaulay
This was volume two and I guess at the time that this was commissioned
that was thought to be the end of it but it looks to me like there could well
be at some point a volume three. Can you look ahead and this is obviously a
personal view and see what volume three might contain.
David Parker
Well I was commissioned by the Cabinet Office to look at the privatisations
down to the election of the Labour Government in May 1997 so there is no
plan at the moment to have a volume three of an official history but clearly
there is ample scope for someone whether it will be me or someone else to
look at the privatisations in the Labour Government because although the
Labour Party strongly opposed each and every privatisation as it went
through Parliament in the 1980s and 1990s after it was elected it continued
the privatisation programme. Now it was probably a step too far for
ministers and Labour politicians to call it privatisation so instead they
frequently called it PFI and PPP schemes which is Private Finance Initiative,
Public Private Partnerships but we have seen a continuing stream of what
everyone else would call privatisations occurring so there is a lot of room I
think a lot of scope for someone to write up that period again mistakes were
made, why were mistakes made, and what learning actually occurred during
that period.
Steve Macaulay
So I guess one of the hopes that you and I might share is that the lessons
contained in your books actually gets put into practice.
David Parker
Well that’s the hope. I mean we undertook quite a novel privatisation
programme in Britain because no-one had undertaken a privatisation
programme on the scale that we did, we made mistakes, we introduced a
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number of innovations in the selling of these businesses which have been
used elsewhere in the world so there was a lot of learning and so yes
hopefully the issues that I have been able to bring out in the volume will
help when we come to sell the newly nationalised industries including the
banks.
Steve Macaulay
David thank you very much.
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