Brown has had successes on privatisation
The Conservatives should not chide Labour for selling the family silver at the wrong time: the party that invented privatisations sold a stream of state assets at low prices when it was in government. And Gordon Brown has twice called the market correctly in raising billions of pounds of capital from the private sector.
A £16bn sale of government assets has been announced by Labour (or re-announced, as the figure first came in April’s budget) and been denounced by political opponents for being at the wrong time in the market. But the Tories sold some assets cheaply when they started privatising in the 1980s.
British Aerospace, the first sale in 1981, was valued at just £150m; Amersham was floated for £64m, and while half of British Telecom was sold for £3.9bn, the next quarter was sold for £5bn, making the original sale look very underpriced. Indeed, several privatisation share issues doubled in price on the first day of their partly-paid dealings.
There was a bull market of course, and the rise in values made some seemingly impossible privatisations viable. Without the popular issues like BT, Railtrack and water could never have been sold.
Yet when the bull market ended in 2000, many of the privatisations – including BT, British Steel, Rolls-Royce and British Energy – were showing a loss on their original sale price years earlier.
But the best assets have gone, which is why Labour is now trying to sell business such as the Tote and the nuclear industry – assets that have proved too difficult to sell previously. The public portfolio is now a mishmash of canals, bridges, student loans, the Royal Mint, Channel 4 and Ordinance Survey.
But while Brown sold off the country’s gold reserves at a quarter of bullion’s current value, he has had two successes. He allowed property companies to convert into Reits – real estate investment trusts – in January 2007, paying a one-off fee of 2 per cent of asset values to avoid future capital gains tax. The Treasury received over £1bn from all the big property firms just as prices started to plunge; the fee was thus applied to maximum values when gains were about to disappear.
And just before telecom stocks collapsed in 2000, Brown sold five 3G mobile licences for staggering £25bn. A year later he might not have been able to sell them at any price.
Where the money went is another matter, but it offsets the loss on the gold sale. Unfortunately, this is not the best time to sell the remaining ragbag of assets, but governments sell when they are desperate – and the public finances are desperate.
