"Selling the Family Silver" by Colin Chapman (Hutchinson Business Books, 198 pages, £15.99).
Review by Nick Crafts.
The heart of this book is a highly critical view of the privatisation programme in the UK. Chapman's belief is that "the Thatcher government has missed a wonderful opportunity" (page 178) and his account is written seemingly both in sorrow and in anger from a perspective somewhere on the radical right. The result is a highly readable, occasionally amusing but ultimately very superficial volume - likely to please Daily Mail rather than Financial Times or Guardian readers.
Chapman's main objections are to the way in which British privatisation has been implemented. He deplores the lack of priority given to ensure that privatised companies find themselves in as competitive an environment as possible, and the weakness of the regulatory restraints on abuse of monopoly power. He deeply resents the profits accruing to chief executives, public relations firms, advertising agencies and financial institutions coming, he claims, at the expense of the public, and especially the taxpayer. His tale is one of manifest incompetence on the part of Government ministers and civil servants, conned by the City into blatant underpricing of the family silver, with at best doubtful gains in the way of greater efficiency or a much better quality of service.
Chapman's most scathing comments are reserved for the conduct of British Telecom and the British Airports Authority (BAA), but he is also deeply critical of strategy in the privatisations of British Airways and British Gas. Lord King and Sir Denis Rooke are seen as outsmarting the Government to the detriment of competition. The tone is set by the glee with which he recounts a denial by Directory Enquiries of the existence of Oftel (Office of Telecommunications), and the vitriolic judgement that "The directors of the BAA seem to get much more joy from the tinkling of the cash registers on the shopping parades than from the prompt departure of a flight" (page 92). By contrast, the achievements of British Steel are glossed over and the National Freight Corporation (NFC) is not even mentioned. The regulators do come in for some well deserved praise, however, particularly in the cases of Oftel and Ofgas (Office of Gas Supply).
Most of this critique will be very familiar to readers of serious academic literature where writers like John Kay, Colin Mayer, John Vickers and George Yarrow have made similar but better argued and less assertive assessments. Nevertheless, many of the charges are important, basically correct and deserving of a wide audience.
At the same time this is a polemical rather than a balanced account of UK privatisation and the criticism is cheap and destructive rather than deep and constructive. In particular, there is no attempt at a proper discussion of how the privatised companies should be regulated. Little credit is given to the skill with which some privatisations have been designed - for example, water; too much advantage is taken of hindsight not available in the pioneering days of the early 1980s; and the obvious gains in efficiency which have accompanied some of the transitions to the private sector are unfairly slighted.
Similarly, Chapman argues that it is not so much being in the private or public sector which matters but the quality of management. No doubt this is true, but despite failings in the design of some privatisations it surely should also be recognised that on average the life expectancy of bad management teams after privatisation has been reduced and managerial incentives in general have been improved.
Although not for the academic reader, this book is well written and it would do members of the Cabinet no harm at all to reflect on Chapman's arguments.
(Nick Crafts is Professor of Economic History at the University of Warwick.)