Community (Public) Ownership and Privatisation
Fundamental reports relevant to today's problems and to a better future
Banking: Trustee Savings Bank (TSB)
The UK's Trustee Savings Banks had been collecting and looking after the working population's small savings for about 200 years. They were formed 'for the safe custody, and increase of small earnings belonging to the labouring and industrious classes'. It had many branches in working-class areas, was helping people to pull themselves up by their own bootstraps.
The Trustee Savings Bank (TSB) was run entirely for the benefit of its depositors. When profits were earned they were allocated to the bank which earned them and in part to a mutual assistance fund. Its profits went to depositors, to build schools and libraries, and to its reserves.
Active in banking, credit cards, unit trusts and insurance, with more than 1,600 branches in the UK, the TSB had a profit of GBP 77 million in 1982.
In 1985, well known for friendly and effective service, the TSB had more branches than Barclays and was considered to be better managed than the big clearing banks. It had accumulated reserves of GBP 800 million, a lot of money in 1985.
It was dedicated to serving the community and effectively competing with the big clearing banks by successfully attracting deposits.
Ownership of the bank and its reserves became important when a Conservative government decided to 'privatise' the bank and convert it into a shareholder-owned profit-maximising bank just like the commercial banks.
When the Trustee Savings Bank was privatised, buyers received not only ownership of the bank but also the money they bought it with, about GBP 1 billion.
The government went ahead with selling the TSB. Buyers received not only ownership of the bank but also the money they bought it with.
The total number of shares issued was 1.5 billion (at 100 pence a share), giving the bank a market capitalisation of GBP 1.5 billion. And the GBP 1 billion plus privatisation proceeds went to the shareholders of the new company instead of the taxpayer.
A later TV documentary pointed out that the costs of the sale of the TSB included total fees to the City (London's financial businesses) of about GBP 50 million. The final bill for the sale was apparently GBP 226 million.
Here was accumulated wealth which had been created by many small savers. It was working for the benefit of ordinary people, of the community. It was taken over and dispersed, given away.
Massive funds were serving the working population and the community, were a source of strength and support. The use of these funds was in effect being controlled by depositors, by the working population. Privatisation placed the funds under the control of people aiming to maximise their profits.
Making Cars: British Leyland (BL)
British Leyland was formed in 1968 by merging British car manufacturers with the intention of creating an enterprise big enough to compete effectively with foreign car manufacturers.
British Leyland (BL) was producing roughly 850,000 cars a year in the UK with 190,000 employees worldwide, making a pre-tax profit of about £40 million each year, from 1968 to 1973.
But 1973 to 1975 production dropped to 600,000 cars a year, profit turned into a loss of £90 million.
In 1975, the government took control of BL.
Management became tougher, more authoritarian.
Confrontation developed between workforce and management.
Sales continued to fall and there were massive redundancies.
By 1982, BL's production was 400,000 cars a year, its workforce had been reduced to 110,000 employees and the loss was £100 million.
What had gone wrong?
Between 1968 and 1982, about £2.2 billions of taxpayers' money were poured into BL in the form of new share capital.
However, time taken from drawing-board to consumer had increased from three to five years
And, in 1981, BL launched a model built under licence from a foreign company.
Market share can be defined as the sales achieved by one enterprise in an industry, expressed as a percentage of total sales in that industry. It is an indication of relative success between competitors and roughly independent of the state of the economy.
Now consider this. In 1968, BL's UK market share was about 40 per cent. From 1972, BL's UK market share dropped until ten years later it had fallen to 19 per cent, and this process continued.
The market share dropped and continued to drop, for ten long years. This situation surely requires an explanation.
How come the informed press and media failed to get across to the general public what was taking place and the points being made here? To the general public which was paying enormous sums to keep the company going and who surely had the right to know how their investments were being applied, how the company was performing, about how well or how badly the company was being directed and managed.
What is needed is direct accountability to the community for performance in achieving the community's aims and objectives.
Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.
More than 5 million copies of his reports have been downloaded from the Solhaam website so far (April 2011).
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