Privatisation – Good or Bad?

Privatisation (also known as denationalisation) is a policy undertaken by a government, whereby an industry owned by the government (thus the nation) is placed into the hands of the private sector. This is often done through an Initial Public Offering on a stock market, but could be also done through a sale to a single entity. There are a number of reasons why a government may decide to privatise a holding:

  • Sell off loss making enterprises – if the government is making a loss on a firm it owns it may wish to sell it. By doing this it reduces the amount it has to pay for the loss, and a private firm may be able to turn its fortunes around, and turn it into a profit making firm, potentially increasing government tax revenue and reducing unemployment (and thus unemployment benefit spending).