In the late 1970s, the word privatisation' didn't really exist. If anyone ever spoke of listing the UK's many nationalised firms (they generally didn't), they used the word denationalisation'. That changed fast.
Privatisation' seen as a more positive description was first brought to public attention in a Financial Times article in July 1979, says John Littlewood in his book The Stock Market: 50 Years of Capitalism at Work. It didn't take long to grab the public imagination.
By November, 5% of BP had been sold into the market. By 1981, pretty much everything was seen as up for grabs: stakes in Ferranti, British Aerospace, Cable & Wireless, and the National Freight Corporation had all been sold.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, it was in 1982 when the state for the first time attempted a full privatisation. Not just a sale of its holding in a company (it owned only 51% of BP in the first place), but of a whole company. It was Amersham International, created as a subsidiary of the UK Atomic Agency to develop and sell radioactive materials.
With no shares in the market yet, the government had to come up with its own price. And guess what? It got it wrong. The issue was 24 times oversubscribed and began trading at a 30% premium to the listing price. Everyone was livid (except those who got and flipped the shares, of course).
Yet the state followed that up by underpricing Associated British Ports it went to a 23% premium. Then there was BT. Shares were to be paid for in instalments, but the way the deal was structured allowed hundreds of thousands to double their money: the part-paid shares went to a 100% premium on day one. It didn't end there.
The part-paid shares in Rolls-Royce and British Airways both got to a near-70% premium. Even British Gas could have been stagged for a 25% gain on its first day.
Each listing came with a flood of fury from parts of the public. It seemed to them that the under-pricing was less about incompetence, and more about bribing the middle classes to vote for Margaret Thatcher. I suspect it was a mixture of both.
Nonetheless, it still makes the botched Royal Mail (RM) listing look a little same old, same old'. The lessons of the 1980s give the buyers enough to keep them buying, but not so much that the taxpayer is ripped off clearly weren't learned.
New mistakes were made too: the administration mess that prevented small investors from selling on Tuesday and the idiocy of excluding anyone who asked for what the state decreed was too much (£10,000 plus) haven't covered the state in glory.
The listing of RM could have been a triumph for capitalism (as some still think it was). But unless you define capitalism as giving thousands of people the opportunity to stag an underpriced initial public offering at the expense of the average taxpayer, I think things might need a rethink before the government has another go.
-
What will the unravelling of US-China trade mean for the economy?What will a US-China decoupling mean for the global economy?
-
Scottish Mortgage: why we’re turning to private companies and China for exceptional returnsWhen it comes to delivering growth, Scottish Mortgage will stop at no end in its hunt for exceptional long-term returns - this includes China, unicorn companies and sectors such as space exploration
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
The public may have reached its limit for tax risesEditor's letter The UK tax burden is now at a 70-year high. And, while there may be some reason to hold off on cuts right now, taxes are too high because the state tries to do too much. Perhaps it should do less, says Merryn Somerset Webb.
-
Things may look bad – but they’re not that badEditor's letter The UK faces plenty of problems, says John Stepek. But things may not be as bad as they look. Our debt to GDP ratio is lower than many other major economies, and high employment means a healthy tax take. That gives the new chancellor room to cut taxes so people can keep more of their own money.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
