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By Root 2940 0

of privatization compelled such companies to make themselves competitive and profitable. Lord King turned round British Airways by a bold policy of slimming it down, improving its service to the customer and giving its employees a stake in success. It was sold as a thriving concern in 1987. British Steel, which had absorbed vast subsidies in the 1970s and early ’80s, re-entered the private sector as a profitable company in 1988. But it was perhaps BL (now known as the Rover Group) whose return to private ownership caused me most satisfaction — in spite of the almost endless arguments about how much its private sector purchaser, the once state-owned British Aerospace, had received.

Rover had by now a superb Chairman in Graham Day who had been making great efforts to do what I had always hoped would be done — dispose of surplus assets and increase the drive for higher productivity. But that did not mean that I was happy with the sort of figures the company’s Corporate Plans contained. It retained an apparently insatiable appetite for cash — it had absorbed £2.9 billion of public money in total since we came to office in 1979 — and the Government’s liabilities under the Varley-Marshall assurances remained at some £1.6 billion. The earlier anti-American hysteria about takeovers by foreign companies of our British car production meant that the prospects for sale of the main car business did not look promising,* though both Ford and Volkswagen continued to express some interest.

This was the position when, just before Christmas 1987, there were signs that British Aerospace might be interested in acquiring Rover. I was not immediately clear that British Aerospace’s was a serious offer. But it soon turned out that it was. There was an industrial logic in the acquisition, for the car business — if relieved of its burden of debt and provided with a substantial injection of new investment — would complement the rest of BAe’s business. Aerospace depends on gaining a few huge contracts at inevitably irregular intervals; cars satisfy a steadier market. And, of course, the sale to BAe would have one marked political advantage: the company would stay British.

David Young was subsequently heavily criticized for the way in which the deal was struck. In fact, he played a difficult hand with great aplomb. The special financial provisions of the deal only reflected the poor state of BL after years of state ownership and wasted investment. That the terms had to be revised reflected the new interest of the European Commission in probing the details of state aid to industry, rather than being a reflection on the basic soundness of the deal itself.

Only satisfied customers can ultimately guarantee the future of a business or the jobs depending on it and Rover could not be an exception to that rule. But the effects of the disastrous socialist experiment to which the company had been subject had now been overcome; and Rover was back in the private sector where it belonged.

PRIVATIZATION OF PUBLIC UTILITIES

British Telecom was the first utility to be privatized. Its sale did more than anything else to lay the basis for a share-owning popular capitalism in Britain. Some two million people bought shares, about half of whom had never been shareholders before. But the relationship between privatization and liberalization — that is opening up telecommunications to wider competition — was a complex one. The first steps of liberalization had begun under Keith Joseph who split British Telecom from the Post Office, removed its monopoly over telephone sales and licensed Mercury to provide a competing network. Further liberalization took place at the time of privatization.

But if we had wanted to go further and break up BT into separate businesses, which would have been better on competition grounds, we would have had to wait many years before privatization could take place. This was because its accounting and management sytems were, by modern standards, almost nonexistent. There was no way in which the sort of figures which investors would want to see