Privatisation – The last refuge of a spendthrift?


The Government’s aim to raise £16 billion through such sales seems optimistic, unless there are plans to sell large stakes in either RBS or Lloyds. Given the £220 billion gilt issuance programme for this year - funded mainly by the money-printing Quantitative Easing policy - even £16 billion is a comparatively modest sum.

Around £11 billion is expected from Local Authority sales: the remainder is targeted from business disposals. Various candidates have been suggested. Most were discussed in last year’s ASI publication: Privatisation – Reviving the Momentum. Subsequently, the Government’s 36% British Energy stake was sold – and the cupboard is getting rather bare.

In reality, it is £billions of proceeds – not £millions – that are now desperately needed. Selling the Royal Mail, ex its burgeoning pension fund deficit, would raise several £billions despite the company’s putative value falling daily as strike action continues.

The Government apparently lacks the political will to privatise Scottish Water, whilst Network Rail is not yet ready to re-enter the private sector. The 33% Urenco nuclear stake could raise c£1 billion, but agreement with the two other shareholders is necessary. The Channel Tunnel rail link may be a viable candidate, along with the CDC Group.

But the plunge in media valuations means that any sales proceeds from selling BBC Worldwide, or especially Channel 4, would be lower than previously. The Tote has long been an obvious target but its valuation keeps slipping. Leading bidder, Gala Coral, is struggling: even Ladbrokes has recently been driven to a rights issue.

British Waterways’ operating returns remain very low, despite its attractive asset portfolio, whose value has fallen of late. Other names in the frame are distinctly small-time. None of the Royal Mint, the Meteorological Office, Ordnance Survey or the Queen Elizabeth Centre is going to generate sizeable sales proceeds.

Which will the Government choose?