Put simply, privatisation involves the transfer of assets or economic activity from the public to the private sector. This is the general definition. There are, however, three specific types of privatisation.
- Denationalisation: The sale of public sector assets. Includes industries, companies and local authority council houses. This is the type of privatisation that most people recognise; the selling off of British Telecom and the gas, electricity and water industries.
- Deregulation: The removal of legal barriers to entry in a previously protected market to allow private enterprise to compete. Hence, public sector provision (i.e. financing) and production are replaced by private sector provision and production (e.g. the bus services).
- Franchising: The public sector continues financial provision but for private sector production. Competitive tenders are requested for a contract to be awarded for a stated period of time (e.g. hospital needs and the railways).
Nearly all exam questions on this topic ask you, in one way or another, to examine the advantages and disadvantages of privatisation. This would seem to be a good place to start. For more detail, see the next two Learn-Its.