These days, it's easy to forget just how revolutionary the idea of privatisation was at the end of the 1970s and the beginning of the 1980s. According to the Institute for Government, the word privatisation' was invented by David Howell, a minister in Margaret Thatcher's cabinet, because the government thought denationalisation' sounded too negative.
Thatcher was flushed with election victory in 1979 when she set about deregulating markets and making public corporations more competitive. But British Telecom (BT) was massive. Nobody was quite sure how privatising a business of that size would work. As BT puts it, the sale "was revolutionary in its scale and experimental in its marketing. Ultimately, it was not just British Telecom that was being sold, but the whole concept of privatisation."
In 1981, the British Telecommunications Act split off BT from the Post Office, and the telecoms sector was opened up to competition. Then in July 1982, the government announced it intended to sell over half its stake in the company.
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
After a second election victory the following year, the government pressed on with its plans. The sale, it was hoped, would promote share ownership among the general public. But, as BT explains, "it had the added benefit of positively contributing to the Public Sector Borrowing Requirement (PSBR)". So long as the government had a less than 50% stake in BT, "any future capital borrowed is exempt from the PSBR, a figure the Conservatives were keen to reduce".
In November 1984, over three million shares were offered 50.2% of the business with 34.3% earmarked for the general public. By the time the deadline expired, the shares had been oversubscribed by 3.2 times. Trading began on 3 December, raising £3.9bn for the Exchequer.
Not everybody was happy. The Labour party was opposed to privatisation, and former Conservative prime minister Harold Macmillan compared it to selling off the family silver. The media complained the shares had been priced too low at 130p. The government explained this had been done intentionally in the interests of promoting share ownership. Either way, the genie was out of the bottle. Privatisation came to be seen as one of the defining policies of the Thatcher era.
SEE ALSO:
BT is making progress and the dividend is back – but is it time to buy yet?
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
31 August 1957: the Federation of Malaya declares independence from the UKFeatures On this day in 1957, after ten years of preparation, the Federation of Malaya became an independent nation.
-
13 April 1960: the first satellite navigation system is launchedFeatures On this day in 1960, Nasa sent the Transit 1B satellite into orbit to provide positioning for the US Navy’s fleet of Polaris ballistic missile submarines.
-
9 April 1838: National Gallery opens in Trafalgar Square
Features On this day in 1838, William Wilkins’ new National Gallery building in Trafalgar Square opened to the public.
-
3 March 1962: British Antarctic Territory is created
Features On this day in 1962, Britain formed the British Antarctic Territory administered from the Falkland Islands.
-
10 March 2000: the dotcom bubble peaks
Features Tech mania fanned by the dawning of the internet age inflated the dotcom bubble to maximum extent, on this day in 2000.
-
9 March 1776: Adam Smith publishes 'The Wealth of Nations'
Features On this day in 1776, Adam Smith, the “father of modern economics”, published his hugely influential book The Wealth of Nations.
-
8 March 1817: the New York Stock Exchange is formed
Features On this day in 1817, a group of brokers moved out of a New York coffee house to form what would become the biggest stock exchange in the world.
-
7 March 1969: Queen Elizabeth II officially opens the Victoria Line
Features On this day in 1969, Queen Elizabeth II took only her second trip on the tube to officially open the underground’s newest line – the Victoria Line.
