The Performance of Privatisation Vol. I: The Question of Safety

Volume I: The Question of Safety

Safety issues are often cited as a matter of public policy concern. Recently, the privatisation of the rail and nuclear industries has brought particular attention to this subject. Opponents of privatisation have often argued that commercial pressures on newly-privatised companies can lead to cuts in expenditure on safety programmes – and this repreated criticism of privatisation has clearly made a deep impact on public perception. A recent ICM poll of 1,200 people, commissioned by the Guardian in April 1996, found that:–

  • 43% of respondents expected railway services would be less safe after privatisation;
  • 34% thought they would be safer;
  • 24% did not know.

It can be argued that such fears are naive – no private company wants to risk its reputation as a reliable employer or a safety-conscious provider of goods or services.  The important question is whether they are justified.


The conclusions of the Executive Summary are clear:

“Occupational safety standards have improved…in nearly all of the privatised firms and industries. In some cases…the extent of improvement has been significantly greater than elsewhere in the economy.”

“The incidence of [injuries to the general public] is very low on average across the privatised firms and industries. Data on certain specific issues, where the nature of the industry is such that there are potentially significant public safety concerns…indicate that the performance of the privatised firms has improved strongly since privatisation.”


Employee Safety

In its analysis of employee safety, NERA concludes that the post-privatisation record has been  impressive. In five out of the seven industries reviewed, the privatised enterprises concerned:

‘…have performed [in terms of safety] as well as or better than the performance of the economy as a whole since they were privatised.’

In four of these industries – gas, electricity, water and steel – there has been a marked fall in the number of non-fatal major injuries (the steel industry displays this trend to a less consistent extent), as well as industrial injuries which necessitated more than 3 days off work since the companies were privatised.

In another of the industries examined –  BT –  the picture is more varied: while the rate of major injuries has plummeted, particularly in the early 1990s, the number of injuries sustained by employees which required more than 3 days off work was marginally higher over the same period. However, over the last year this rate of incidence has fallen dramatically: the 1995/96 rate is almost 20% lower than the number of industrial injuries recorded in 1989/90.

In the final company examined – Associated British Ports (ABP) – the NERA analysis would initially suggest that there has been a significant increase in the incidence of all types of industrial injuries. However, under the worst excesses of the Dock Labour Scheme a significant number of registered dockers did little or no productive work, so there was little likelihood of them sustaining industrial injuries.  Following the abolition of the Dock Labour Scheme in 1989, the ports’ management began to tackle the problems associated with over-manning. As a result, there has been a remarkable transformation in  productivity. NERA notes that:

‘…in effect, there may have been little or no changes in the incidence of injuries per hours “worked” despite the apparent increase in the rate per employee.’

Comparing the pre- and post- privatisation performance, NERA points out from its analysis of the available data on employee safety in the electricity supply and water industries that:

‘the data show that the incidence of both types of injury was trending downward prior to privatisation in each industry; and that the decline continued after privatisation.’

What is more, the rate of decline has shown a marked acceleration in the immediate post-privatisation period.

Consumer Safety and the Safety of the General Public

The NERA study shows that the performance of the privatised companies in relation to the safety of consumers and the general public has improved very significantly since privatisation. In the case of the gas industry there has been a prolonged downward trend in the number of serious explosions involving natural gas; this encouraging trend has become even more evident in the post privatisation period.

‘…the performance of the industry concerned [i.e. the gas, electricity and water industries] has improved very significantly since privatisation.’

Safety is of pre-eminent importance in the airline industry: a private sector airline which gains a reputation for poor safety would soon face bankruptcy. In its analysis of British Airways’ performance following its public flotation in January 1987 NERA finds no evidence to support the argument that its safety performance has been jeopardised by privatisation. Just the reverse: there have been hardly any deaths or injuries in the UK as a result of airline accidents since 1987 and none involving BA aircraft.

What is more, BA’s own safety standards are considerably higher than those set out in UK or EU law. Thus, all BA’s fleet of aircraft are fitted with a Traffic Collision Alert System (TCAS) even though this will not be legally required under EU legislation for another five years.

NERA - Monday, 10th June, 1996