Margaret Thatcher’s Conservative government in the 1980s, in its drive to shrink the state and transfer publicly owned businesses to private hands, launched a global economic revolution. Governments in more than 100 countries have since privatised thousands of formerly state companies. The Thatcherite commitment to private enterprise and competition helped shift the EU policy framework, and influenced the post-communist transformation of the ex-Soviet bloc.
Now the Thatcher revolution is being challenged in the country of its birth. Both main parties in Britain’s election are touting a return to the big-spending ways of the 1970s. Labour aims to go further — by reversing many 1980s privatisations. Jeremy Corbyn’s party had already committed to take 10 per cent stakes in large UK companies and renationalise many utilities. Its pledge to nationalise BT’s network arm, Openreach, in a £20bn plan to provide full-fibre broadband to every UK home and business by 2030, is a surprise. It is also symbolic: BT’s 1984 flotation was a Thatcher-era flagship.
Labour’s broadband plan is a victory for outdated ideology over economic good sense. True, the UK has fallen badly behind many peers in broadband; fewer than 10 per cent of British homes and businesses can connect to a full-fibre network, against 75 per cent in Spain or 97 per cent in Japan. Prime Minister Boris Johnson has yet to flesh out his own breezy promise to invest £5bn in ensuring all British households enjoy “gigabit speeds” by 2025.
Yet borrowing a mooted £15bn to buy Openreach and turn it into British Broadband is not the way to accelerate the fibre rollout. The complexities of nationalising Openreach and uncertainties it would create — including for other private-sector competitors — might only slow progress. State-owned businesses have not lost their propensity to turn into bloated, inefficient bureaucracies. Nor have the customer service demands involved in running high-speed data networks ever been a strength of government monopolies.
Buying Openreach at a likely discount to market prices, moreover, would hit millions of people who hold BT shares directly or through their pension funds. Breaking up BT would create risks for its sizeable pension fund deficit. It would frighten away some domestic and foreign investment. Indeed, Labour’s sudden reversal on BT — which shadow chancellor John McDonnell had previously said was “not on the list” for nationalisation — will increase business jitters over its hostility to private enterprise. Funding future costs of maintaining the broadband network by slapping a tax on technology giants such as Google and Facebook could have a dampening effect on tech investment, one of the bright spots of the UK economy.
While it might work as an electoral bribe, there is also no sound argument for making broadband free. Vital utilities such as water and electricity have never been free; neither has public service broadcasting. A government might choose to subsidise, say, the elderly or residents of rural or remote areas. But it is otherwise better to use scarce funds to increase health and social care spending.
The benefits of privatisation have in some cases been obscured by annoyance over rising prices, overcrowding, or excessive profits and bosses’ pay. Market structures in some industries — such as rail — need reassessing. Future governments must develop more effective means of regulating utilities. But there were good reasons to privatise the lumbering state behemoths of the 1970s. There are few good reasons to turn the clock back now.
