a. Trust Ports

Earlier in 2010 the Dover Harbour Board published proposals for its privatisation. The Coalition has asked it to put additional information into the public domain to facilitate consultation on the proposals.

The Port of Dover is one of a large number of 'trust ports' in the UK. Mechanisms for their privatisation already exist in law. If the Coalition approves the sale of Dover it is likely to be the first of many trust port privatisations.

b. Northern Rock

The Coalition has announced that the government guarantee for the wholesale liabilities of Northern Rock plc will expire at the end of October 2010, ahead of the timetable originally planned. This has been billed as one (small) step towards the ultimate independence of the bank.

c. High Speed 1

High Speed 1 is the line that carries high speed train services from London to the Channel Tunnel, and High Speed 1 Ltd is the government owned company that operates the line. The Coalition is currently considering interest from potential purchasers with the intention of privatising the line at the earliest opportunity.

d. Audit Commission

The Audit Commission, as we reported in the last Coalition Watch, is being abolished. At least part of it is also being privatised. Its audit practice, which is the fifth largest in the country, will be transferred out of public ownership. The Coalition states that 'a range of options will be developed for converting the audit practice into a business independent of Government which could be sold to the private sector'.

Our comment:

It might seem curious to list the Audit Commission under the heading of privatisations. It is not naturally viewed as the kind of body that would be capable of privatisation in the traditional sense. Yet, as the Coalition has pointed out, a large part of its activity consists of auditing local government and the NHS; an activity that will, following abolition, need to be carried out by private sector audit practices. The skilled and experienced body of auditors who work for the Commission could readily be established as a business in their own right, capable of sale to firms of auditors who will no doubt be prepared to pay for the unique expertise, experience and contact list that they will thereby acquire.

According to the Chairman of the Commission, who has spent much of the last fortnight busily defending the reputation of his organisation, there has already been considerable interest in an acquisition. The Coalition has therefore, by privatising the activity of local government and NHS audit, also created the market in which it can privatise the public sector auditors themselves. All of which begs the question how many more instances there will be of improbable privatisations as the Coalition attempts to shrink the state and shift economic activity into the private sector.

Meanwhile, with the proposed privatisation of High Speed 1, the Coalition is merely continuing the policy of the previous government. In fact, the High Speed 1 line was never intended to be in public ownership. The line was planned to be constructed and run as an entirely private sector opportunity, and it was only when its owners sank beneath their weight of debt that the government stepped in and, rightly viewing the line as key national infrastructure, took on both the company and its debt.

The principal objective of privatisation will therefore not be to raise money for the Treasury, but to shift existing debt off the government's books. The history of High Speed 1, like that of Northern Rock, is a lesson in the ultimate limitations of the free market. In a truly free market, failing businesses are allowed to fail. But in reality, where a business is sufficiently important to the national economy, the government will always need to step in and stand behind it. There are no doubt many lessons here for the proposed High Speed 2 line, and for other key national infrastructure projects to be brought forward in the life of this Parliament.