The successes of utility privatisation in the UK

Prices:

Competition will almost always act to keep prices down…

Telecoms:

• Call charges are down by 59 per cent in real terms since BT was privatised in 1984.
• The UK has led the way in the reduction of call charges by European telecom providers. A three-minute weekday morning call from London to Manchester costs less than half the price of a similar call in Germany.
• The cost of a five minute call to the United States has been cut by around 80 per cent in real terms.
• The cost of having a domestic phone line installed by BT has fallen by 22 per cent in real terms.
• Even with greatly increased phone use, the average residential phone bill has fallen by almost 20 per cent over the past five years.
• Over the past five years, businesses have saved a total of £920 million a year (R7.4 billion), and domestic customers have saved £872 million a year (R7 billion) through price reductions and simplifications such as the abolition of the morning peak rate and the introduction of a single low-cost weekend rate.
• A major consumer survey conducted in 1995 ranked BT amongst the UK’s top ten companies offering value for money – alongside such famous names as Boots, Tesco, Sainsbury, the BBC, Virgin, the Body Shop and Cadbury’s.

Gas:

• The cost of domestic gas has been cut by at least 32 per cent in real terms since British Gas was privatised in 1986.
• Over ten years, the typical domestic gas bill has fallen by around £100 (R800) in real terms.

Electricity:

• Domestic electricity charges have been cut by 19 per cent in real terms since the industry was privatised in 1990. In April 1997, the typical household paid £58 less (R464), in real terms and excluding VAT, for electricity than in 1990.
• Domestic prices are lower in real terms than at any time in the past 20 years, and are lower than in France, Germany and Spain.
• The cost of industrial electricity has fallen by up to 30 per cent in real terms.
• Industrial electricity prices are lower than at any time since records began in 1970.
• UK industrial electricity prices are lower than in the Germany, France, Spain and Italy.

Water:

• Water charges have risen since the industry was privatised in 1989. Increased charges have been necessary to make up for under-investment by successive governments and to help meet new environmental standards.
• Under price limits set in 1994, water charges across the board have not been increased since then by more than 1 per cent a year.

Quality of service:

In many cases, UK regulators have required privatised utilities to meet targets for standards of service…

Telecoms:

• There are now 50 per cent more telephone boxes than in 1984 – 132,000 compared with under 80,000. More than 96 per cent of call boxes work at any one time, compared with 77 per cent ten years ago.
• There is now no waiting list for telephone installation. Before privatisation, 250,000 people had to wait two months for a phone line.
• New services have been provided for vulnerable groups: a low-user rate for those, such as the elderly, who need the phone in case they have to summon assistance; Braille telephone bills and other services for the blind; and a caller’s number display service to protect against nuisance callers.
• BT now has 21.6 million residential customers and 6.8 million business lines, compared with 15.5 million and 3.6 million respectively in 1984.
• Some 94 per cent of households now have a telephone, compared with 78 per cent in 1978.
• Before privatisation, 1 in 30 calls failed to get through. Now it is 1 in 1,000
• The number of residential and business bill accuracy complaints is 1.2 in every 1,000, and many of these complaints are not upheld.
• 99 per cent of customers are connected to a modern, digital exchange.
• 37,000 customer interviews each month keep customer satisfaction under constant review. Satisfaction levels exceed 90 per cent for nearly all services.

Gas:

• The number of gas disconnections has fallen by one third in the 11 years since privatisation. There are now about 30,000 disconnections for non-payment each year, out of around 18 million customers.
• When a fault has occurred British Gas now restores supply within 24 hours in 99.5 per cent of cases.

Electricity:

• For 1996-7, disconnections were down by 99 per cent since before privatisation. Out of 24 million customers, there were only 471 disconnections, mostly for persistent non-payment.
• Across the 12 regional supply companies, the target of replying to all customer letters within ten days is being met between 98 and 100 per cent of the time.
• Complaints by customers to the electricity regulator have fallen by 50 per cent since 1990-1.
• Breaks in supply are restored within 24 hours in 99.8 per cent of cases.

Water:

• The number of properties subject to unplanned interruptions in supply fell by 36 per cent in the five years after privatisation.
• Water quality has been improved significantly, with 99.3 per cent of 3.75 million samples meeting UK and European quality standards.
• 89 per cent of designated bathing waters now meet European quality standards, compared with 66 per cent before privatisation.
• Although 1995 was one of the hottest and driest summers in the UK for over 200 years, the number (60) of drought orders – powers to limit supply (not always exercised) – granted was well below the number (136 in 1976 and 104 in 1984) for other recent dry summers.

Source: Extract from Privatisation: A UK success story by Thomas O’Malley

(published 1998)