Privatisation & de-regulation
What is privatisation?
Privatization means the transfer of assets from the public sector (government) to the private sector. In the United Kingdom led the process to a significant reduction in the size of the public sector in the economy. State-owned enterprises now contribute less than 2 per cent of GDP and less than 1.5% of total employment. Privatization has become a common feature of microelectronic reforms in all parts of the world, particularly in economies in transition in Eastern Europe because it has made progress toward market economies become incomplete.
Major privatisations
There have been major privatization operations in the United Kingdom over the past twenty-five years with the following companies (the year of privatization is in brackets).
v Associated British Ports (1983)
v British Aerospace (1980) – eventually merged with Marconi Electronic Systems
v British Airports Authority (1986)
v British Airways (1987)
v British Coal (1994) – in 1994, UK Coal’s assets were merged with RJB Mining to form UK Coal plc
v British Gas (1986) - In 1997 British Gas plc de-merged Centrica plc and renamed itself BG plc (later BG Group plc). in Britain it is used by Centrica, while in the rest of the world it is used by BG Group
v British Petroleum - In August 1998, British Petroleum merged with the Amoco Corporation (Amoco), forming "BP Amoco
v British Rail (privatised in stages between 1994 and 1997)
v British Steel (1988) – British Steel merged with the Dutch steel producer Koninklijke Hoogovens to form Corus Group on 6 October 1999
v British Telecom (1984)
v Cable and WirelessNational Power and PowerGen (1990) - 1990 the Central Electricity Generating Board was split into three generating companies (Powergen, National Power and Nuclear Electric plc.) and electricity transmission company, National Grid Company.
v Regional water companies
Represent early examples of privatization such as the sale of British Telecom to the private sector in 1984 as a simple transfer of ownership of shares where offered for sale through the stock exchange. Has recently become a more complex process of privatization. Shift the focus to break the current monopoly of legislative power through the process of deregulation and market liberalization - designed primarily to introduce competition where it was well-established monopoly power once.
What remains of the public sector?
Privatization and reduced drastically the size of the public sector or government sector in the economy, although the Labour government since the current came to power, there was a significant increase in total employment in the public sector, in part due to a significant increase in government spending on national health services . The following actions remain part of the public sector:
v British Nuclear Fuels plc - an international company, owned by the British government, concerned with nuclear energy. View company data.
v Network Rail - Network Rail is "not for profit" company that owns the fixed assets of the railway system in the United Kingdom which formerly belonged to British Rail, the now-defunct British-owned rail operator of the state. Network Rail owns the infrastructure itself, and the rail tracks, signals, tunnels, bridges, level crossings and most stations, but not rolling stock. Took over the rail network through the purchase of the ownership of Railtrack PLC, who was in "railway administration", £ 500 million Railtrack Group plc.
v Royal Mail - the Royal Mail was the state-owned company since 1969 and remains a public limited company wholly owned by the Government of the United Kingdom. Organized by the Royal PostComm Putt, who has the power to grant licenses to new competitors entering the market liberalization of the postal service domestic and commercial. Opened the market to full competition in January 2006. Royal Mail's commitment to maintain universal service.
Delivering competition
On January 1, 2006, the market opened to full competition-mail. This means that it is now possible to Royal Mail organizations - if it has been licensed by Postcomm - as did the postal operators and collect, sort and distribute mail in the United Kingdom. Postcomm will protect universal service, which is provided by the Royal Mail. This means that everyone - regardless of where they live - will continue to enjoy affordable day delivery. Universal service and also includes a "one price goes anywhere" character, as well as groups and delivery services and for each address in the country, every working day.
The main economic arguments for privatisation and deregulation
Proponents of privatization believe that the private sector and discipline of free market forces are the best incentive for companies to be run efficiently and thus achieve improvements in economic well-being. The argument is that the additional competition in the markets will lead to a reduction in the levels of prices for consumers, and improvements over time in dynamic efficiency.
Privatization was also seen as a way to reduce the energy trade, and encourage an increase in the Union capital investment, companies are now free to raise additional capital through the financial market securities. .
Privatization was also seen as a way to reduce the energy trade, and encourage an increase in the Union capital investment, companies are now free to raise additional capital through the financial market securities. .
The main economic arguments against privatisation
Opponents argued that the privatization of state owned companies have already faced competition when a part of the public sector and that in several cases of transfer of ownership of just replacing the public sector monopoly with private monopoly.
There was criticism of the assets that were sold outside the State by the government at a very low and that the consequences of privatization there was a decline in investment and large-scale reductions in employment, such as the privatized companies have sought to reduce their operating costs.
There was criticism of the assets that were sold outside the State by the government at a very low and that the consequences of privatization there was a decline in investment and large-scale reductions in employment, such as the privatized companies have sought to reduce their operating costs.
Deregulation of markets
Other policy is important in industries that may be affected by welfare and efficiency through the dominant market power in some suppliers is to open markets and encourage the entry of new suppliers - a process called de-regulation of product markets. Examples in the United Kingdom with the opening of markets for household energy supply, and the liberalization of postal services, home and freedom from financial constraints that affect all banks and building societies.
Accelerated expansion of the European single market in the process of market liberalization. Market and one seeks to promote the four freedoms - the free movement of goods and services, capital and labor. In the long term we can expect to see the effects of the partial EU market and one is working their way through many of the British market and the general expectation is that competitive pressures for all companies operating within the European Union will continue to intensify.
Product market liberalization to break the barriers to entry in industries and make them more appeal. Goal is to increase supply in the market, lowering prices for consumers, and encourage greater competition and investment and productivity, leading to an increase in economic efficiency. In the long run, if product markets become more competitive and investment flows in these industries, there are the macroeconomic effects, for example, increase in the rate of economic growth, the underlying trend of economic growth that can contribute to improving the living standards of average
Accelerated expansion of the European single market in the process of market liberalization. Market and one seeks to promote the four freedoms - the free movement of goods and services, capital and labor. In the long term we can expect to see the effects of the partial EU market and one is working their way through many of the British market and the general expectation is that competitive pressures for all companies operating within the European Union will continue to intensify.
Product market liberalization to break the barriers to entry in industries and make them more appeal. Goal is to increase supply in the market, lowering prices for consumers, and encourage greater competition and investment and productivity, leading to an increase in economic efficiency. In the long run, if product markets become more competitive and investment flows in these industries, there are the macroeconomic effects, for example, increase in the rate of economic growth, the underlying trend of economic growth that can contribute to improving the living standards of average
Utility regulators
Utility regulatory oversight on the activities of companies that were privatized during the past two decades. And organizes the previous state-owned facilities to make sure they do not exploit its monopoly. The main objectives of the organizers to create and simulate the disciplines that companies will face in a competitive market. In the long term, the trend has been to organize to promote competition by facilitating entry of new suppliers and make markets more challenging.
(water services regulation authority) – Ofwat is the body responsible for economic regulation of the privatised water and sewerage industry in England and Wales. Key issues for Ofwat at the moment include the threats of water shortages, the problems of leaks and rising water bills.
The Office of Communications is the UK's communications regulator
The Office of Gas and Electricity Markets is the government regulator for the electricity and downstream natural gas markets in Great Britain. Its primary duty is to “promote choice and value for all gas and electricity customers".
ORR is the UK government's agency for regulation of the country's railway network.
The roles of an industry regulator – the case of Ofgem
Seeks to protect consumers by promoting effective competition, wherever appropriate, and effective organization for companies that run a monopoly on gas pipelines and electricity wires
Ofgem seeks to help secure Britain's energy supplies by promoting competitive gas and electricity markets - and the organization so that there is sufficient investment in networks
Another role for Ofgem is to assist and encourage gas and electricity markets and industry achieve environmental improvements efficiently as possible to take into account the needs of vulnerable customers, particularly the elderly, the disabled and low-income
Ofgem is funded by energy companies that are licensed to run the infrastructure of electricity and gas.
Ofgem seeks to help secure Britain's energy supplies by promoting competitive gas and electricity markets - and the organization so that there is sufficient investment in networks
Another role for Ofgem is to assist and encourage gas and electricity markets and industry achieve environmental improvements efficiently as possible to take into account the needs of vulnerable customers, particularly the elderly, the disabled and low-income
Ofgem is funded by energy companies that are licensed to run the infrastructure of electricity and gas.
Price Capping for the Utilities
The eighth, capping a dominant feature of the organization in recent years - although this is now being phased out as most markets become more competitive tool. Download the fact, and a ceiling price, and regulate the industry and is usually considered "satisfactory rate of return on capital employed" for each business.
Basics of price capping
Maximum price regulation is a form of interference in the price mechanism that was applied at different points in time for all the companies privatized utilities in the United Kingdom. Price capping is an alternative to rate of return regulation, which allows it to utility companies to achieve a certain rate of return (or profit rate) on capital. In the UK, has been defined as price capping "RPI - X". This takes the rate of inflation, as measured by the consumer price index and decrease of the expected efficiency savings X. in the water industry, and the formula is "RPI - X + K", which is based on K on the requirements of capital investment aimed at improving water quality and meet the EU standards the quality of water. This means an increase in the real cost of water bills for millions of families in the United Kingdom. In fact, the distinction may be lost between the ceiling price and rate of return regulation, regulators may end up making decisions on the implied acceptable rates of return on real working capital in order to reach decisions Price
The mean price capping in most cases, the average prices for consumers have fallen in real terms despite the fact that this was not the case for all industries privatized. The assumption is that productivity growth will help to absorb the price caps. And can be higher profits for utilities, which provides improved levels of efficiency (ie, companies are able to reduce the unit costs of their business)
Arguments for and against establishing a limit to the prices of public utilities.
The mean price capping in most cases, the average prices for consumers have fallen in real terms despite the fact that this was not the case for all industries privatized. The assumption is that productivity growth will help to absorb the price caps. And can be higher profits for utilities, which provides improved levels of efficiency (ie, companies are able to reduce the unit costs of their business)
Arguments for and against establishing a limit to the prices of public utilities.
Advantages
vCapping is the appropriate way to reduce the monopoly power "natural monopolies".
vReductions in the levels of real prices are good for domestic and industrial consumers (leading to an increase in consumer surplus and higher real living standards over the long term).
vPrice capping helps to stimulate improvements in production efficiency because there is a need to cut costs to increase profits overall product.
v Price capping system is a useful tool to control consumer price inflation in the UK.
Disadvantages
vHas resulted in price caps for a large number of job losses in services industries.
vDetermine the price of the various systems capping each industry distorts the price mechanism to work.
Yell and price capping
Is still used as a cover price in the market for telephone directory, where shouting has a dominant position in the market. In June 2006 announced that the shouting will continue to be subject to price capping formula because of the relative absence of competition in the industry. According to a report by the Competition Commission, "exclaims continue to hold a strong position in this market, competition is not working effectively. Prices and culminated in the moment and without this cover price, advertisers have to pay more than the market that work well. At present, Yell is subject to the ceiling of annual price of the RPI less 6% - even in this moment, the real cost of advertising rates decline year after year.
PostComm approves a rise in the price of stamps
The prices of stamps in April 2006 under a compromise deal between regulator Postcomm and Royal Mail. The first class stamps increased to 32p 2P Stamps category and second for 1P 22p, with the possibility of them rising to 36p and 25p respectively by 2010. The Royal Mail wants to pay the postage to 39p 27p to help pay for investment and capital to fill a hole in a box for £ 4bn pensions.
Was privatized railway sector between 1994 and 1997 and since then the average rate of railway fare has risen faster than inflation. The fare changes announced by the Assembly of the train operating companies. Despite continuing high levels of government support, the more companies train those prices that are unregulated by more than inflation, and partly because they have high fees on the rail network to gain access to the track and infrastructure, because they have had to make contribution to improvements to the safety of rail tracks.
Was privatized railway sector between 1994 and 1997 and since then the average rate of railway fare has risen faster than inflation. The fare changes announced by the Assembly of the train operating companies. Despite continuing high levels of government support, the more companies train those prices that are unregulated by more than inflation, and partly because they have high fees on the rail network to gain access to the track and infrastructure, because they have had to make contribution to improvements to the safety of rail tracks.
Changing Role of the Utility Regulators
The organizers pulled out the main instrument of price regulation because of the increased degree of competition in the market. The main focus of the regulatory authorities now is to provide better information on prices for consumers to make prices more transparent the various suppliers to improve the flow of information in the market.
The authorities also want to encourage the free transfer of consumers between suppliers (through monitoring and enforcement of the nature of the supply contracts), and closely monitor the anti-competitive behavior.
In the field of communications, has a key decision in the end is the imposition of Ofcom to dismantle the local loop. The dismantling of the local loop is the process of allowing telecommunications companies to use wireless and phone calls from the telephone exchange's central office or exchange of the customer premises, whether the family or the workplace. In the UK and this means opening up to the telephone switches owned by British Telecom, allowing for broadband projects, such as AOL and Tiscali UK and to develop their own equipment and then provide broadband services in direct competition with BT for families. The vast majority of households within one mile of the phone exchange local currencies. .
The authorities also want to encourage the free transfer of consumers between suppliers (through monitoring and enforcement of the nature of the supply contracts), and closely monitor the anti-competitive behavior.
In the field of communications, has a key decision in the end is the imposition of Ofcom to dismantle the local loop. The dismantling of the local loop is the process of allowing telecommunications companies to use wireless and phone calls from the telephone exchange's central office or exchange of the customer premises, whether the family or the workplace. In the UK and this means opening up to the telephone switches owned by British Telecom, allowing for broadband projects, such as AOL and Tiscali UK and to develop their own equipment and then provide broadband services in direct competition with BT for families. The vast majority of households within one mile of the phone exchange local currencies. .
Summary comments on privatisation
Has changed the face of the privatization of the British economy over the past twenty-five years. More than twenty companies have been transferred from the public sector to the private sector and government sector many of the remaining companies are now subject to market disciplines. The property was transferred from one part of the economy to another, in many cases, not superficial change. There have been changes of a more substantial when it was breaking down the monopoly powers of legislation, either because the organizers to open the market, or because of the effects of international changes on a larger scale, such as the globalization process.
The performance of the companies privatized incomplete. And saw most of their powers with the erosion of the monopoly market has become more challenging. Some of the privatization were not worked, and the most obvious example is the failure of the privatization of railways and the collapse of Railtrack in the end when he went to the administration.
There are still controversial issues about the size of the profits that some of the privatized utilities and decisions, and the water industry is a good example of this. Facilities in most markets there are now more of a real choice for consumers. And price levels were realistic in the long term. .
The performance of the companies privatized incomplete. And saw most of their powers with the erosion of the monopoly market has become more challenging. Some of the privatization were not worked, and the most obvious example is the failure of the privatization of railways and the collapse of Railtrack in the end when he went to the administration.
There are still controversial issues about the size of the profits that some of the privatized utilities and decisions, and the water industry is a good example of this. Facilities in most markets there are now more of a real choice for consumers. And price levels were realistic in the long term. .
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