Reply to post: You forgot the smoke and mirrors...

Why OH WHY did Blighty privatise EVERYTHING?


You forgot the smoke and mirrors...

You pointed out that the Govt hated investing anything in the utilities as it became part of the government debt. (and in retrospect there's one of the real reasons for privatisation - massive investment required due to new technology or crumbling infrastructure)

But the mantra of privatisation e.g. 'All OPEX is bad, all CAPEX is good' has lead to (been gamed) to hide the actual costs of everything.

For example, assume an electricity substation is worth £1M (I appreciate saying 'is worth' to Worstal is asking for trouble)

Under a nationalised system all planning, design, and much of construction (say 20% of build cost) are carried out by in house staff... paid from OPEX, and therefore in the mind of the regulator 'pissed up against a wall'

Under privatisation all planning, design and all construction is subbed out, with a 100%(at least) uplift charged by the hiring agency. (hiring back the same bods that used to work for said leccy company to do the same job) result; 40% of construction cost goes on labour, BUT it's CAPEX, so our '£1M' substation has a book value of £1.2M - which is treated as investment, which influences the profit the regulator allows the owner to make. And creates the illusion of a better performing system than the old way where the £1M investment only added £800k to the value of the network

The company makes more profit, the regulator sees increased investment, the guys with their boots on the ground see a better performing network, the customers see higher reliability, so everybody's happy, but it cost two hundred grand more, hardly efficient.

This is also what lead to, for eg, Thames water's approach to dealing with leaks in the naughties by spending a shitload of cash increasing storage capacity (CAPEX) to make up for the leaks, the repairing of which is OPEX, and didn't get done.

Truth is that either system can perform badly, and there is in that respect no hard and fast case to be made. Of course the orgy of privatisation did just happen to transform hundreds of thousands of jobs from the public sector into contractors, abet expensive contractors. And contractors, being mortgage holders and having private pensions, and earning a shitload more cash than the council house dwelling, final salaried lot from the nationalised industries are more likely to vote tory.

and there's your real reason for privatisation :-)

let the downvotes commence....

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