Free market economics: help wanted
I might have asked this question before but it came back to me again this morning after reading this:
[State-owned] EDF, which is helping to build France’s first EPR at Flamanville on the Normandy coast, is still said to be considering whether to increase its rejected offer to buy British Energy, Britain’s main nuclear power operator.
So, my question is this. Under the terms of the Thatcherite consensus under which it has been decreed we must live for ever and ever, amen, why is the French state allowed to own a chunk of the British power industry but not the British state?
Y’see, it makes no sense.
Posted on July 8th, 2008 at 1:11pm under UK politics
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I think it’s possible to believe that the state ownership of, say, utilities is generally a bad idea, and hence decide to privatise your own ones, without making it actually illegal for foreign partially state-owned companies to then acquire them.
Particularly if you think that state ownership is bad because the tax payer usually ends up paying too much via state subsidies, then I guess the UK might like the idea of the French tax payer subsidising our power generation. But perhaps the French just have some nuclear know-how, state owned or otherwise, that makes them better owners of our nuclear businesses than we’d be.
I don’t know what the Thatcher consensus is, but for what it’s worth, I think there’s plenty of room for more nuanced positions that endorse state ownership in certain sectors, while still being pro free markets in others.
On the railways, SNCF own sections of Eurostar (with the Belgian SNCB), London Midland and Southeastern, Deutsche Bahn own Chiltern, the freight company EWS and co-operate London Overground with the Hong Kong public transport operator. Since the latter deal dates from Ken Livingstone’s day, it’s hard to see where that fits in the Thatcherite consensus, either. In some ways, having more operators and particularly overseas ones means there’s less room for our own home-grown lovelies to divvy things up between them; competition cuts both ways. I don’t think anyone who routinely wonders why things are apparently better Over There is going to argue with them coming Over Here and running things.
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Don’t start me on privatising utilities, still makes me seeth that profit can be found in water, trains and gas.
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Also NedRail (not the name of the Glasgow suburban operator, disappointingly, but the Dutch state rail operator) is JV operator of Merseyrail and Northern Rail.
@ Daniel – while water is a bit different, surely trains and gas have always been for-profit industries, aside from a bizarre interlude between WWII and the 1980s?
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“Don’t start me on privatising utilities, still makes me seeth that profit can be found in water, trains and gas.”
Yup, because running them at a loss has been so immensely successful, eh? I, personally, revel in the massive amounts of funding that went into the railways and water network under state control.
The Beeching Axe was, of course, one of the single most successful railway modernisations of all time; and decades of investment by successive governments into the water and sewerage infrastructure has ensured that there are no leaks and that we are not still using Victorian sewerage systems.
Oh, wait a second…
CY, I don’t believe that we can actually stop EDF attempting to buy British Energy (under EU laws). However, if they do so, they absolutely must take on the decommissioning costs. At present, these costs (estimated at somewhere near £80billion over the next hundred years), are underwritten by the UK goverment, i.e. us.
I have no problem with an experienced company taking on British Energy as long as they are taking on the full costs as well as the profit-making division. And Luis is right: the French have considerably more experience in this area than we do.
And if the French taxpayer ends up subsidising EDF, our correct response is to say, “thank you very much.”
DK
P.S. No, I don’t believe in any governments running companies. But given the situation in which we find ourselves, I would rather the French foot the bill than us.
P.P.S. As I recall, a French company already owns our National Grid.
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Of course, the railways receive rather more state funding now than they did when they were nationalised, but as we know that Privatisation Is Always Right, what does it matter?
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We can’t go back.
All I’m saying is that I didn’t agree and still don’t with the whole raft of privitisation that went on and honestly believe that it would’ve been better off in the hands of the state.
And no, I’m not a Communist…
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Naturally. My dog’s been giving me grief, barking all the time and costing me a fortune in vet bills, so I put it out to private tender.
I wound up with a Chinese slave instead, but he’s very obedient and always on hand with the slippers when necessary. Costs me exactly the same and he’s less pleasant to pet, but when I think of the boost I’m giving to local business I get as stiff as a rolling pin, politically speaking.
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This is where I’m coming from and it ties in with a lot of comments here
It’s an ignorance on my part that I don’t see the difference between the public sector splurging these wodges of cash rather than the private sector. Particularly with the likes of nuclear energy industry where the private sector are bowel-shakingly incompetent and wasteful.
I’m ignorant about this too – so if the private bidder was UK based, they’d have to indemnify themselves? Why? Ignoring this strange difference between overseas and domestic bidders, I suppose indemnification against accident is a reality whether whoever is doing the decommissioning is private or public, so perhaps the right question is to look at the combination of risk and cost offered by private or public alternatives. You say the private sector are bowel shakingly incompetent and wasteful, I assume you think the public sector is less so, I have no idea myself.
I took some classes once about whether private or public ownership is better, and the answer had to do with things like the importance of quality versus cost, how easy it was to observe and enforce quality standards, how effective competitive forces are, and so on and such like. In some sectors private owners will sacrifice quality, in others they won’t (because they’d lose custom). I get the impression that people think view of mainstream economists is that private is always best, but I think that’s a misconception. The nuclear industry strikes me as having many of the characteristics that might make it better in public hands.
Posted by this blogger, who I found on a simple google search:
OK, it was dated in 2006. I suppose the new carrier group will get it all back.
PS: I just checked the homepage of the link above, but that is irrevelant to some of the substantive issues above, ie., business selling the privatised assets that they got a huge bung for, to oversea’s politicians for another bung.
It was also considered a heavyweight in the British defense industry.
Not in 2005, six years after it sold all its defence assets to BAE, it wasn’t. It was a second or third rate network vendor that bet the farm on the .com boom going on forever, IMS taking off, and BT always buying their stuff ‘cos of it had a union jack on it.
Also, what is the guy’s obsession with whether or not they supplied bits of the Spitfire? I mean, why not the Hurricane?
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