Should the Royal-Mail be Privatised? (Advantages & Disadvantages)
Should the Royal-Mail be Privatised?
This has been on the cards for a while and with the partial sell off of Royal-Mail looks not to proceed at this current time: http://news.bbc.co.uk/1/hi/uk_politics/8129101.stm
We look at the advantages and disadvantages of privatising a public sector business.
Advantages of Privatisation
- Improved Efficiency – It’s argued that public sector businesses are not really designed for making profit but to provide a service to the public. If the business is privatised then through its new owners the business will be profit driven. It will mean the business will have to cut costs and become efficient to make a profit.
- The deregulation of the market will mean introduce Royal Mail to new competition. In order to survive this the business will have to become efficient.
- It’s argued that increased competition and efficiency should leave to lower prices in the lon-run.
- Less political interference in the long-run will mean the business can be left alone to be run and make a profit.
- Shareholders – this will firstly allow inward investment into the business so that it can improve its infrastructure. It will give the business a bit of pressure to make a profit to provide returns to shareholders.
- The Government also raise revenue from the sale of a public sector business such as the Royal –Mail which could be used to lower debt or even be used to invest in Health & Education.
Disadvantages of Privatisation
- Royal Mail may take a while to become efficient and if competition is introduced then new businesses could lower their prices below that of Royal Mail for the time being.
- If new competition isn’t introduced by deregulation then the business will be a Monopoly and may raise prices to make a profit in the short-term.
- If the business I sold to a private company and the private company can’t make a profit from the Royal Mail then they will fail to provide that service. This is what’s called Market Failure. It may result in the business having to be nationalised again at the expense of the tax Paper.
- The Royal Mail doesn’t seem to make a profit at the moment anyways, but if it did then the Government would lose out on revenue from the business if it decided to sell it.
- To become efficient there may be job losses and even disputes with workers over pay and working conditions.
What do you think? – Should it be privatised?
