It's quite simple: when you make your living selling off the family silver, and have a lot more to sell, you make sure the price of silver does not go down. For behind the decision is the Government's desperate need to ensure that the shares in the newly privatised electricity generators and distributors do not plunge in value, as they inevitably would have done had the companies been forced to continue buying British coal.
The need to keep the share price up provides further evidence for what might be termed the 'bribery' school of students of privatisation, as opposed to those who believe it is pure fanatical zeal - the Thatcherite equivalent of black magic - for the concept that private corporate governance is, ipso facto, better than anything smacking of state involvement.
The 'bribery' school already had a lot of evidence going for it, such as the pounds 300m or so disbursed to the Government's loyal City advisers over the years. But more tellingly, virtually all the shares involved were sold at a fraction of their real value. According to an official estimate, the shares in the privatised water companies were sold for a cool pounds 1bn less than they should have gone for. Even more breathtaking, the market value of the Government's former shares in British Telecom is now pounds 10bn more than the money the Treasury received eight years ago.
But the 'black magic' school has some even more telling arguments. Supporters can point to the Citizen's Charter, with its ridiculous assumption that only public services need monitoring, or to the Government's equally ingenuous notion that the mere act of privatisation was an adequate substitute for properly thought-out policies and would instantly cure long- standing ills that required equally long periods of heavy investment. In the case of water, despite the giveaway, the Government did well. It let the privatised companies take the blame for the vast increases in rates needed for improvements in the country's sewerage systems and water quality.
But the magic wand is most obviously irrelevant in the case of coal - where the size of the 'privatiseable' industry is minimal - and above all, railways, where the basic idea of competing services on the same lines was abandoned in the 1820s. Privatisation is simply an attempt to avoid spending the massive sums required to bring British Rail's track and equipment up to scratch. But then you don't expect logic from fanatics - Stalinist or Thatcherite.Reuse content