GETTING VALUE FOR MONEY IN PRIVATISATIONS
INTRODUCTION
1. For nearly 20 years the United Kingdom has
led the world in the privatisation of state-owned businesses.
During that time over 150 United Kingdom businesses have been
privatised, ranging from major undertakings worth billions of
pounds to small loss-making enterprises. In the process, the proportion
of Gross Domestic Product accounted for by state-owned businesses
has fallen from 11 per cent to 2 per cent.
2. These privatisations have shared a number
of overall objectives, including improving the efficiency of the
business concerned, promoting the development of the market economy,
reducing state debt and increasing state revenues. Government
departments have acknowledged throughout that, in the interests
of the taxpayer, and having regard to the particular objectives
of the sale, they have a duty to do all they can to maximise the
proceeds from each sale. Moreover, the yield from these sales
has been considerable, £90 billion (at current prices) so
far. Departments have, in many cases, become increasingly expert
in their conduct of sales, stimulating external advisers and the
markets to accept an increasingly sophisticated range of sales
techniques aimed at ensuring that the taxpayer gets as good a
deal as possible.
3. In studying and reporting on these sales,
the Committee and its predecessors have, however, noted a number
of instances, often recurring, in which for a variety of reasons
departments have failed to maximise proceeds, or have fallen short
of the care which they are expected to exercise in disposing of
public assets. It is the invariable practice of the Committee
of Public Accounts not to make any judgments about the rights
or wrongs of the policy of privatisations per se but, given
that a policy has been pursued, we do examine the effectiveness,
efficiency and value for money achieved in the operation of that
policy. The purpose of this report is to draw attention both to
the types of cases in which departments could have achieved a
better result for the taxpayer, and cases where, by contrast,
as a result of careful planning and a preparedness to innovate,
they have achieved good value for money.
4. Part 1 of this report sets out key lessons
on which we and our predecessors have reported, including important
general issues relating to sale objectives, restructuring, valuations,
timing, and the skills required by vendor departments. We also
underline important lessons relating to the two main privatisation
methods used in the United Kingdom: first, flotations and share
sales; and second, trade sales, that is the sale of the state-owned
business directly to another business or to its management and/or
employees.
5. Part 2 gives specific examples illustrating
these lessons from sales which we and our predecessors have examined
and on which we have reported in recent years. In the Annex to
this Report we list the relevant reports and Treasury Minute responses.
6. Some of these issues, for example the appointment
of advisers through competition, raise important questions of
propriety. Most, however, are about the difficult choices departments
face in marketing business opportunities while protecting the
taxpayer's interests. They have to take their decisions confronted
by uncertainty and it is not for us, with the benefit of hindsight,
to understate the challenges they face. We recognise that they
have to exercise judgment. Nevertheless, it should be judgment
well grounded in experience and expertise.
7. The privatisation of state-owned enterprises
is, of course, only one aspect of the ways in which the public
and private sectors are working together. The Government have
announced a programme of public private partnerships in which
sales of shareholdings in state-owned businesses are likely to
feature and, as the public sector continues to develop its role
of purchaser as well as provider of public services, new forms
of relationships are developing, including further projects under
the private finance initiative, joint ventures, the disposal of
surplus assets, and the increasingly commercial use of assets
remaining in state ownership. We believe that the lessons set
out in this report will remain of value to departments as they
seek to get the best possible deal for the taxpayer.
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