Explain the possible impact of privatisation on the UK economy use examples focusing on at least two industries (e.g. Banking, Insurance, Legal, Health etc.)
Privatisation involves offering state-owned institutions for sales to the private participation to increase business efficiency and profitability. Although, critics argue that privatisation can enable exploitation via monopolistic power that ignores more extensive social costs. The advent of the 1980s to the 1990s welcomes the privatisation of a few previously state-owned industries including BT, BP, Electricity companies, British Airways, Gas providers and the rail network in the UK. More importantly, the private sector procured many of the National industries and institutions during the privatisation policies of Mrs Margaret Thatcher as Prime Minister borne out of her believe that private sectors investments show characteristic high efficiency geared towards profitability than government-owned institutions Pettinger (2013). Moreover, the privatisation of public sector institutions has offered financial benefits to the government over the last 30 years with an accruable revenue of about £67 billion between 1980 and 1997 alone. The acceptance of the importance of privatisation for governmental revenue generation is evident by the decision of the Labour Party to amend its constitution to a commitment popularly known as the “the common ownership of the means of production” in 1995. https://www.aol.co.uk/money/2013/04/10/britain-and-privatisation-has-it-worked Accessed 10 December 2017.
However, the anticipated impact of the privatisation process on the UK economy is not forthcoming because of the inherent gaps of inequality and social disparity and poverty because of the lack of re-investment of privatisation proceeds into the social sector. These problems are prominent in two critical domains of economic activities namely the transportation and banking sectors. Unusually, despite the massive profit and financial wealth offered by rail sector privatisation; their service provision continues to decline regarding meeting consumer expectations year in year out.
Despite privatisation targeting assured financial sustainability and enhanced operational efficiency via private investments; it remains capital intensive. In the UK, the British Rail institution experience enormous problems even after privatisation as against its core implementation to help stem considerable inherent losses that face the operational activities because of high dependence on external subsidies, especially the necessity for safety. The governmental efforts in the provision of extensive national infrastructure for rail services hamper the full privatisation of the rail sector. Therefore, part-privatisation, as well as partnership, remains the feasible approach to engage in the privatisation of the rail transport sector between the owners of the infrastructure (the UK government) and private operators such as Arrival, First, East Midlands, Docklands and Chiltern in the United Kingdom. Hence, the government commissioned the partnership arrangement with the Rail track, who is responsible for the maintenance, infrastructure investments and pricing regimes for the operating companies as well as organising timetable and schedules. While the Train Operating Companies operates the wagons, bus, metro and other carriers.
Arguably, the rail transport privatisation seeks to achieve increased efficiency via cost reduction and ameliorating wastes, enhanced concern for consumer specifications, and requirement needs as well as minimising governmental subsidies. However, rail privatisation encouraged mass monopoly and hinders keen market competition that subsequently drives up the cost of rail services. Moreover, there are also severe compromises of safety and train favourable schedules. Given these problems, it follows that there are no clear lines of service efficiencies between government actions in comparison to the privatised rails companies because of the unending prohibitively high cost of rail services without commensurate service efficiencies and consumer satisfaction. There are the inherent compelling economic implications for rail system privatisation regarding the irreconcilable conflicts of balancing public accessibility via price control systems and regulation, vis-à-vis the investments cost, which is at variance with the underlying principles of privatisation (Shaoul, 2007); (BBC, 2013).
Also, there has been the argument that the failure of the market and regulatory policies also influence the soaring cost of infrastructure and train operations (Preston and Robins, 2013). Moreover, observations also reveal the annual increase of 4% in the number of passenger journey on privatisation between 1997 to 2012. However, this does not automatically translate to increased profitability since the government still provide support for the cost of infrastructure via government subsidy to the tune of £7.45 billion, for example, in 2006/2007 (Bowan, 2015). Though, the unique rail privatisation experiment in England came under scrutiny by some European countries; none of these countries embraced the methodological approach due to the above critical issues (Shaw and Docherty, 2014). Consequently, the Network Rail took back direct control of the responsibilities for the maintenance of the infrastructure in place of the usage of subcontractors by the partnering companies. (Duranton and Turner 2012).
The privatisation of banks offers both short and long-term economic benefits regarding improvement in the performance characterised by revenue inflow and efficiency gains. Studies have shown the positive effect of bank privatisation on the financial sustainability, operational efficiency as well as the profitability of boosting the economy more than public sector banking institutions (Kausar et al. 2014). Furthermore, privatised banks have minimal risk of vulnerability to financial solvency and liquidity unlike the public owned counterpart due to the implementation of pragmatic loan policies, which is healthy for economic growth (Acharya and Subramanian, 2016). Moreover, privatised banks also significantly enhance revenue generation and leverage profit margins more efficiently than public banks through low equity to debt ratio that also supports revenue inflow (Wang, 2017). Besides, robust and efficient risk management procedures are implemented to contain the impact of unforeseen anomalies and market variability as well as ensuring performance stability to stimulate economic growth through dividends to shareholders (Dickson, 2017).
Using the arguments of three individuals supporting each side of the NHS privatisation argument compare the two sides of the debate. Use AU Harvard referencing technique to correctly show the sources of any comments you have attributed to the individuals you choose
There has been the visualisation of the NHS, England as a mixture of confusion offering only short-term solutions in an uncoordinated manner (Pemberton, 2017). The current undue waiting times, as well as lack of beds for admission across several NHS Trusts in England since December 2017 till date, is some veritable attestations of this assertion. The author further argued that the current anachronistic models of these NHS Trust need care synthesis to meet up with the variable needs of service users. Especially, (Pemberton, 2017) recognises the unsustainability of the current state of the privatised NHS and recommends the need for more appropriate and new ways to fund the NHS. These include charging willing people for their healthcare interventions, through subsidised prescriptions if affordable, payment for making GP appointments like in the Scandinavians countries as well as the possibility of a health insurance regime like in the USA.
Also, endless arguments surround the privatisation of the NSH as rightly noted by professor Stephen Hawking who believed the NHS privatisation follows a degree of secrecy that cast some doubts about its altruistic intentions (Hawking, 2017). It is arguable that the NHS remains the most comfortable way of healthcare delivery; however, the timeliness and especially fairness regarding the promotion of inclusions through the bridging of healthcare inequality remains mostly challenging. The inability of the privatised NHS to serve as a public system that delivers free quality healthcare interventions for all regardless of the wealth and status leads to the lack of continuity as well as a change of healthcare services.
Hence, it becomes pertinent that healthcare services like the GPs are better off as a public intervention rather than delivery as short contracts through private companies, who are mainly driven by profitability at the sacrifice of quality healthcare services. The desire for good continuity is particularly central to the delivery of reliable health care services to the elderly patients to inspire trust and confidence using a person-centred approach. On the other hand, while the NHS currently seems to be far from providing the desired level of continuity, arguably, the advocacy of increased privatisation is recommended to ensure continuity. However, Hawking, 2017 further advocates that anecdotal evidence suggests that the funding and running public healthcare by the government remain the most efficient strategy to deliver healthcare services (Ridic, Gleason and Ridic, 2012).
British Medical Association Argument
The British Medical Association (BMA) survey of 463 doctors shows that two-thirds of doctors believe that the benefits of privatisation are below expectations (O’dowd, 2016). Study expresses worry of members because of the substantial financial commitment towards independent sector organisations offering these services over the past seven years with an approximate 6.3% (nearly £7billoin) expended during 2014-15. BMA doctors show concerns regarding the effectiveness of the NHS service delivery by the private providers with the arguments that the level of services especially their destabilisation and fragmentation makes the inherent value creation at variance with the unexpected colossal government expenditure while predominantly seeking profitability as against the provision of quality healthcare interventions for patients. Hence, the BMA advocates the need to synthesise a better regulatory strategy that compels the independent NHS service providers to comply with statutory standards via checks and balances. Also, the BMA suggests the development of a standard approach for the regulation of the activities of the private sector providers by the Care Quality Commission (CQC). Moreover, BMA recommends that private sector providers offer support to CPD of NHS staff via education and training. In summary, the BMA opines that substantial financial burden on the NHS motivates the need to monitor the activities of private providers through effective appraisals of their quality and safety of services vis-à-vis the value for money as well as the overall influence on other NHS services. Consequently, the BMA lend their support for the public funding and provision of NHS services as against privatisation. However, the governing body of the private sector health providers has some contrasting views to the above assertions arguing that the NHS is far from being privatised and that their members strictly adhere to the requirements of the CQC.
British Government and Minister Argument
The publication of the government Health and Social Care Act 2012 regulation compulsorily mandates new local commissioning bodies such as the clinical commissioning groups (CCGs) to explore strategic market policies for the commissioning of healthcare services. Although, the government through the ministers continues to allay the fear that these methods are not a backdoor to the privatisation of the NHS (Hunter, 2016); however, the requirements of the adoption of competitive market regimes to afford health care commissioning via the CCGs is akin to pseudo privatisation. Further, this regulation stipulates statutory powers for the regulatory body to monitor and enforce compliance in their capacities as regulators as well as on behalf of private service providers. The outsourcing of NHS services to some private providers such as the virgin care means subject patients to access restrictions as some of their services are beyond the reach of the average citizens.
Furthermore, the opaqueness of the activities of the many different bodies that encompasses the NHS limits the ability to identify the exact extent of the privatisation of the public health sector especially in relations to contractual engagements for the provision of services. Government efforts have clandestinely increasingly drifted the NHS towards stealth privatisation through the rise in a more substantial chunk of the NHS budgets going to private providers such as Virgin Care that recently won a £1billion contract in areas of community services, general practice and mental health care. The continued rise in funding for private sector providers indicates the ulterior intention to engage in the slow privatisation of the NHS by the government. Also, the continued use of private sector providers and their ability to undercut the NHS providers in the face of constraints facing CCGs promote the outsourcing of NHS service contracts at the sacrifice of quality healthcare delivery. The continued outsourcing of services makes private healthcare providers the central of healthcare delivery while tilting then NHS towards privatisation.
However, the position of the government is at variance with the outcome of the BMA survey regarding the NHS and its use of private healthcare providers. While the BMA believes that the NHS must be the primary healthcare provider, the government lends its support for the granting of full autonomy to the health commissioners regarding the choice of selecting the appropriate procurement process that matches their healthcare service preferences.
Explain your initial view of the NHS privatisation argument and then consider how your position has or has not altered in the light of the research you have undertaken.
The need for the continuous funding and running of the NHS as a public service is paramount. However, the research shows that governmental efforts in the NHS service delivery tilt toward meeting compelling political needs rather than the public interest. We also noted the complexity of the relationship between public and private investments to offer an excellent combination of efficiency, improvement and investments. However, the financial burden facing NHS must motivate the desire of the government to increase the funding of the NHS rather than outsourcing to private providers to meet the health needs of a broad variety of patients irrespective of wealth and status. Primarily, this becomes important to meet the needs of the ageing population in the face of resource constraints (Francis, 2013). Moreover, while the subsisting regimes of healthcare delivery persist, it is essential for the government to conduct oversight functions to ensure that private providers meet the requirements of the law. By monitoring the adherence to statutory rules and regulations, there is the likelihood that issue of Carillion might not have spiralled out of hand with the inherent demerits.
Government efforts to upgrade the economy and growth via the privatisation of public institutions are commendable. However, the political considerations of government must be minimal while administering regulations that monitor and regulate the strategies and processes for the delivery of NHS services. Furthermore, political office holders must attach more value to embrace the public interests over the desire to attain transient financial benefits through privatisation. Moreover, the theoretical basis of privatisation indicates that incentive has potential roles to enhance the success of privatisation as a causative factor for economic growth. Furthermore, the methods of implementing privatisation play an essential role in creating the right incentives and leading the way for the appropriate economic realignments. Hence, it becomes crucial to note that achieving privatisation success functionally depends on the commitment of the government to the legal and regulatory frameworks. Given the collaboration between private and government, the benefit of both structures is achievable for the public interest (John, 2004). A privatised NHS service without government subsidies will deter the participation of the private sector practitioners, which can leave the patient stranded. It is necessary that services such as GP that requires continuity remains essential to the patient and must remain as a public service through funding and other supporting interventions rather than being a private company. The complete privatisation of the NHS poses a risk to the public because it defeats the purpose of its initial conceptualisation for easy accessibility as well as free at the point of needs as against the lengthy and expensive processes of tendering and compliance of contracting law. Consequently, NHS services must be more available to the patient without restrictions that promote exclusions and inequality of accessing the services.