Thatcher's privatization faces pitfalls

BRITISH Prime Minister Margaret Thatcher, a strong proponent of selling off state-owned enterprises, is discovering that transferring giant corporations to the private sector does not necessarily improve their performance. Her government is also learning that it is difficult to ensure that the new creations are properly accountable to the millions of people they are supposed to serve. The problems have arisen as the Thatcher government, having sold off such high-profile enterprises as British Airways and British Gas, is preparing a new round of privatization that is likely to include a large chunk of the nation's water supplies and perhaps even railways and coal mines.

Much of the controversy is beginning to focus on British Telecom, which was offered to the British public in 1984. At the time BT, which two years earlier had been hived off from the post office, was widely criticized for its poor service to customers.

Getting new telephone lines installed in Britain's larger cities - and sometimes villages, too - was notoriously difficult. Repair work was heavily delayed and expensive. Large numbers of public call boxes were in a permanently vandalized state. Telegram and telex services were antiquated, and all too often the people dealing with the public were inefficient and rude.

Lack of technology

Above all, BT lacked the benefits of modern electronic technology: for example, outdated telephone switching systems produced long delays in dialing numbers, and there was a high proportion of misdialings, especially at peak hours.

Privatization was supposed to fix all that. But two weeks ago the Office of Telecommunications (Oftel), a watchdog body that has monitored BT's performance for three years, issued a report that heavily crticized it in a number of areas.

It proposed fixed financial penalties for delays in repairs and in provision of services, and urged the government to allow Mercury, a small privately-owned telecommunications network, to link its services into BT and expand its own operations.

The Oftel recommendations follow several months of snowballing public criticism of BT. It has been hammered for dragging its feet in the installation of System X, a high-grade electronics telephone switching system, and for charging private subscribers at a higher rate than businesses.

BT has suffered the worst attacks because it has been privatized longer than other services that have been moved out of the public domain. But British Gas, another monopoly that was sold off last year, is beginning to suffer heavy public criticism for failing to improve its services and, at the same time, racking up high profits.

Fears of an airline monopoly

There are fears too that British Airways, already by far the nation's biggest air carrier, will begin to lose a sense of accountability to the public. The fears have been heightened by BA's bid to take over British Caledonian, the second-largest airline. Worried about the virtual airline monopoly in prospect, and conscious of a rising tide of public resentment about the dubious performance of other monopolistic privatized corporations, the Thatcher government has ordered a three-month probe of the proposed airline merger, which is now heavily in doubt.

The buildup of resentment among members of the British public is causing the Thatcher government to move carefully in its plan to privatize the 10 regional water authorities in England and Wales.

Under the plan put forward by Nicholas Ridley, Mrs. Thatcher's environment secretary, the authorities, once they are privatized, would lose the powers over water management that they now exercise. Mr. Ridley plans to vest powers of management and regulation in a publicly-controlled body, the National Rivers Authority. He believes this is the only way to ensure that the public interest is preserved.

Give them their `head'

But Roy Watts, chairman of the Thames Water Authority, the largest in the country, spoke for his peers in the industry when he heavily attacked the Ridley plan. He called it unworkable and threatened to oppose it vigorously.

Mr. Watts and other leaders of the water industry believe that privatization, which most of them welcome in principle, will work only if the modified corporations are given their commercial head and are not subject to interference.

The growing argument about water encapsulates one of the key dilemmas Thatcher's third administration faces in following through on its privatization strategy. Private industry has a built-in commitment to making profits, and does not find it easy to answer to a public used to holding accountable those who supply community services. Ridley's plan is an attempt to reconcile business interests with the public interest.

There is, however, another problem that has begun to emerge in the cases of BT and British Gas. Each has retained tens of thousands of workers from the old publicly-owned management structures.

Most of these people remain members of trade unions that opposed privatization. Most of them would like a Labour government - if and when it is elected - to return the giant corporations to the public sector.

Such workers (who include some middle managers) do not like the business ``ethos'' of privatized industry. In the case of British Telecom, much of the slowness and inefficiency of its privatized services is being blamed by top management on foot-dragging workers unsympathetic to Thatcher government policies.