Argument for Privatisation

Privatisation is the transfer of publicly owned assets to the private sector, The act of privatisation can often mean deregulation, whereby opening the market up to competition this can have its advantages and disadvantages on the rail industry where it can either be beneficial to consumers and the business itself or harmful. It can give private companies incentives to invest, profit maximise and be efficient all these factors can therefore aid toward economic welfare.

A benefit of privatising the rail industry would be that as it becomes privately owned, a business’ main interest would be to profit maximise. In order to do so it would require a company to be efficient and provide greater quality of service to attract consumers. As the market is opened up to fierce competition from other firms, it would only make sense for a company to invest and improve the overall standard efficiency of the rail industry; more generated routes, less delays and comfortable trains to standout from competitors. Alongside this it has its benefits to consumer – firms would want to be as price competitive as possible and subsequently leading to a fall in price in order to increase own demand. Consumers are given greater choice and disposable income overall improving standard of living whilst also getting a better quality of service.  

Another benefit of privatisation rather than a state owned company of rail is that the Government, although will also seek profit, they will however be easily influenced by political pressures and negative publicity. For example, they may not want to get rid of excessive workers which are causing the rail industry to be inefficient due to being perceived negatively in the public’s eye because of job losses. Therefore privatisation can be good for rail industries as private companies will be motivated by economic and business sense rather than political pressures. This can mean more freedom of going about to make changes in the rail industry and can lead to more efficient rail transport.