Many political parties are obsessed by the issue of privatisation (either pro or anti), but surely this argument misses the whole point? The arguments involve the extent to which the public retains a stake in decision-making, but, as we shall see, ownership is often an irrelevance.
Let us look at two entities, one of which is totally private and the other totally public.
Heathrow Airport
The British Airports Authority was privatised in 1987 and has since been broken up. Heathrow Airport Holdings is owned by Ferrovial (25%) and a string of foreign government (Qatar, Singapore, Québec and China (65%). The remaining 10% is owned by a US pension fund.
So, how much control does this private entity have over its own affairs?
- It cannot build a new runway without express Government permission;
- HAH may be fined for poor performance, for instance excessive queuing at security;
- Any improvement or expansion of its terminals are subject to public enquiry, which can deny the proposals; and
- The fees which it charges to airlines (landing fees) are regulated by the Civil Aviation Authority.
Guaguas de Arrecife
The municipal bus company in Arrecife, Lanzarote, is an operation run directly by the public sector, namely the town hall of Arrecife. The service is presumably meant to be run for the citizens of the city.
However, with demand having fallen by a quarter in five years, any information on prices or routes being at a premium and an average age of the fleet of nearly ten years (vintage, in bus terms), it is clear that this public sector entity is not influenced by the people whom it is meant to serve, whose only option is to vote with their feet – which is what they have done.
There are apparently no performance incentives and no way of removing a company which consistently provides a poor quality of service to the public.
Monitoring, Control and Transparency
So, I would suggest that the real issue is not whether a company is publicly- or privately-owned but how much monopolies and quasi-monopolies are regulated and, in particular, monitored. For this to occur, Spain (to name but one example), needs to provide detailed operational information, available online, so that the public can see just how well the monopolies providing service are actually performing.
The performance regime also needs to include sanctions, including the ultimate sanction of ejecting the operator. At the very least, an service provider such as Guaguas de Arrecife, needs to be set up as a standalone company, with its own profit and loss account and balance sheet so that anybody can see in real time just how well these providers are serving the public.
