4.1.8.8. Advantages and Disadvantages of Privatisation

lower prices, increased efficiency, more innovation/consumer choice, reduced gov. spending

What are the advantages of privatisation?

competition forces companies to improve services and cut prices

How does privatisation lead to lower prices for consumers?

competition => firms are profit maximisers => pressure for better management => more efficiency

How does privatisation lead to increased efficiency?

1987, privatisation of British Airways led to it cutting losses and improving its international reputation

Application for increased efficiency

How does privatisation lead to more innovation?

competition => firms are ____ __________ => pressure to modernise to attract more ________ => improved production

profit maximisers, customers

1984, British Telecom invested on new technology after privatisation

Application for more innovation/consumer choice?

How does privatisation lead to reduced gov. spending?

gov. no longer needs to _____ on running org. => gov. saves money => gov. can focus on other areas => reduced _______ on gov. finances

spend, pressure

nationalised car company British Leyland required major gov. support in the 1970s prior to privatisation

Application for reduced gov. spending

job losses, loss of public control, risk of monopolies, profit over service

what are the disadvantages of privatisation?

How does privatisation lead to job losses?

increased efficiency => firms are _____ ________ => look to cut ____ by reducing labour => job losses

profit maximisers, costs

downsizing of British Coal in 1980s and 90s led to job losses, and socio-economic issue in Wales, Yorkshire, and Scotland

Application for job losses

How does privatisation lead to loss of public control?

industry no longer in hands of gov. => private firms(profit maximisers) may not ____ with public needs => essential services cater less to ______ ____ and are harder to _____

align, public needs, regulate

public concern over rising executive pay and lack of investment, despite high consumer bills, after privatisation of English and Welsh water industries

Application for loss of public control

How does privatisation lead to risk of monopolies?

______ ________ => after privatisation => a few large firms may ______ => depends on how well gov can ______ prices and quality

natural monopolies, dominate, regulate

natural monopolies

expensive to have multiple networks in one area for some industries

Concern over the “Big Six” that control UK energy market

application for risk of monopolies

How does privatisation lead to profit over service?

firms(profit maximisers) => get rid of __________ areas, even if they are socially important => uneven ______ to those less profitable to serve, i.e. elderly or people in rural areas

unprofitable, access

privatisation of the railways led to rural and less used routes to be reduced or made more expensive

application for profit over service