In the City
Britoil unissued
Tony Rudd
Aloud no bigger than a man's foot has been hanging over the investment scene these last few months, namely the disposal by a public stock market issue of a large slice of Britain's North Sea oil assets. However, it looks now as tlfough this may turn out to be the biggest event not to have occurred this year, because the rumour is that Mr Nigel Lawson and his lieutenants are unlikely to get the price they want. The outlook for oil and for the shares of the leading oil companies is such that, to put it mildly, there is no great appetite on the part of the institutions to have any more in that sector just right now. The usual light pressure in the small of the back would not on this occasion be enough to turn reluctant institutional buyers into avid subscribers for the simple reason that the numbers are just too large. The issue is apparently sup- posed to bring in over £3/4 billion. If the market does not improve soon, however, it may be one of the issues which do not reach the market during the life of this parlia- ment; it will have to be postponed until Mrs Thatcher's second administration has taken office.
In the meanwhile, the pause gives time for a little reflection. When it finally became apparent that North Sea oil was a bonanza, some financial observers sug- gested that the best thing to do with it would be to give it back to the citizens, who in a sense already own it. The idea was that everybody would go down to the Post Of- fice and receive their certificates which would entitle them to their slice of the new wealth and which would be in negotiable form which they could sell or keep as they wished. Reverting to Professor Milton Friedman's speech the other week, bits of which, like old shrapnel, are still surfacing, he suggests that the best way to cope with the problem of the public sector would be to give it to the people who really owned it. He didn't mention the North Sea asset par- ticularly, but was applying his suggestion to everything in the public sector, all the na- tionalised industries and anything which could be packaged handily. But of course we all know that no government would ever do that, not even a Conservative one.
We have to go to the analogy of the quoted public company. Very few of them ever give back assets to shareholders even if they are surplus. They always 'redeploy' them (and quite often diminish them in the process). Assets are there for management to play with. And in the public sector they are there for bureaucrats to kick around. Not to be given away.
But then it's another thing entirely to sell to people what they already own. Again, some companies have done, or try to do, exactly this. When they get short of cash they sort out some likely-looking slice of business which, because of fashion in the stock market, commands a high premium and package that and sell it in the market. But then they do this by offering it in the first place to their shareholders. What they are doing, of course, is selling back to their shareholders what they already own. Finan- cial journalists who are on the ball im- mediately point this out and the operation becomes that much more difficult.
However, in the case of Britoil, nobody seems to have pointed out that this is exact- ly what the Government are doing. It isn't as though North Sea oil went into public ownership by virtue of a nationalisation measure whereby the original owners got compensation in the form of fast- depreciating Treasury stock, as with, for in- stance, the coal mining or steel industry. North Sea oil was put there not by a munifi- cent government, but by the Almighty. The Government and their observers have been exploiting it as our agents. For they don't own it either. We do. But now, or rather
when the market is ready for the exercise, the public is to be given the opportunity of buying for ready cash its own birthright. What will they think of next? Stonehenge would make a very nice small issue in the leisure field; it could be done as a single unit or packaged with Avebury. The Tower of London would be excellent as a 'Theme Park' quotation. Going back to Britoil, though, we have in prospect the possibility of doing the exercise not once but several times. For it is not difficult to imagine the circumstances under which a certain kind of Labour administration would renationalise the assets without compensation. Then the succeeding Conservative administration, which would eventually come in, could sell it back again once more for real money.. The fact is of course that, leaving aside these difficulties of divestment, the days of the nationalised sector as such are over. Originally the Left conceived it as crucial to their control of the economy that the keY basic industries should be in public owner- ship. Otherwise, it was argued, the state would never be on equal terms with private enterprise. This thinking in post-war Britain was as irrelevant to the country's real, economic problem as has been much. 01 policy-making since the war. For what were thought to be key industries were nothing more than the dying dinosaurs left over from the early part of the industrial revoly- tion. The future lies not with the basic in- dustries, so called, but with electronic technology. The government that can control or at least direct development in that area isIn; deed having a fundamental influence and for an example of that we have only to look at Japan. There, the many applications of the computer revolution are being pushed , forward as a matter of general policy. 11"" tragedy in this country is that we have been wasting our time fighting over who should own the steel industry. It was inevitable that , whoever did own it when the real crunch came would have a very nasty problem deed on their hands. Unfortunately for the public sector (but luckily for the private see, tor) this parcel game ended up with the IP, wanted asset being owned by the g°verrl There is much to be said for a pro: gramme being worked out for the d,e„ nationalisation of the rest of the assets still, in the public sector by the route suggest° by Professor Milton Friedman and others. If, for instance, the coal mines were literaUY given back to the public, Mr Scargill would be seen to be up against every indivicluT consumer and owner simultaneouslY• programme which handed back the railways, British Telecom, Britoil, the BBL: the Bank of England and the whole basket ful all at the same time, but keeping thee restrictions under which these enterPris,e,, operated, would solve a great deal of tr bickering which goes on about the Pub „I, sector itself. Selling it off in the way crt templated for Britoil is fundamentally 91,', wrong approach; it should all just be harw ed back.
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