Renationalisation: Back to the Future?

  • Actual and perceived problems associated with privatised utilities have led to some public disenchantment with these businesses. Polls suggest that there is a popular majority for renationalising them, and there is some cross-party support for this.

  • Examination of these industries suggests grounds for concern over aspects of their recent operation. However, other criticisms are not substantiated,  and there have been significant gains from privatisation which should not be ignored.

  • Many of the problems of these sectors are not intrinsic to private ownership but are the consequence of continued government intervention and  regulatory failure. Some problems – such as the conflict between prices to  consumers and cost to the taxpayer – would persist even in the event of renationalisation, and could get worse.

  • The record of post-war nationalisations was for the most part unhappy. The clamour for taking businesses back into state ownership ignores  important lessons from that period, such as the instability of investment  hen nationalised industries have to compete against other government priorities.

  • The cost of renationalisation would be considerable. The issue of compensation to private shareholders is being treated superficially: wider UK share ownership and the increased involvement of foreign investors  would make it be much more difficult than in the past.

  • Foreign nationals would be in a strong position to challenge attempts to acquire assets at less than market value. Such attempts would damage the  UK’s reputation for upholding property rights and could also lead to retaliatory measures against the UK’s own large stock of overseas investments.

  • Proposed new organisational arrangements for renationalised businesses are untested and may lead to continual politicisation, adversely affecting future performance.

  • It could be more sensible, where necessary, to strengthen the regulation of these businesses with a focus on reinforcing market mechanisms. The aim should be to reduce political interference and reduce disruption to business operations.

  • Notwithstanding political support for renationalisation from several parties, it seems unlikely that there will ever be complete consensus. Future governments might re-privatise, or threaten to re-privatise. The instability created by this sort of ping-pong would damage these industries’ performance, with consequent adverse effects for customers and taxpayers.

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Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.