Sell-offs raised pounds 90bn - but what is there to show for it?

Labour says windfalls paid for failure.

Almost pounds 90bn has been raised by the Conservatives from the privatisation programme, started under Mrs Thatcher and continued under John Major, a Labour MP has discovered.

Yet this vast windfall disappeared into a Treasury black hole, claims Labour, to be used on propping up a soaring social- security budget rather than on projects of lasting, tangible value that would have provided major sources of employment.

What began with a promise in the Conservative manifesto in 1979, "to sell back to private ownership the recently nationalised aerospace and shipbuilding concerns, giving their employees the opportunity to purchase shares" and to sell "shares in the National Freight Corporation to the general public," raised pounds 88.36bn.

According to a Parliamentary answer from Michael Jack, the Treasury minister, to Alan Milburn, the Labour frontbencher, cumulative proceeds from 1979 to 1996 were pounds 83.86bn when expressed in current prices. Add the figure of pounds 4.5bn given by Mr Jack for estimated privatisation revenues in this financial year and the full tally is reached.

This ideal of Mrs Thatcher's, "reversing the corrosive and corrupting effects of socialism", has been bettered only by North Sea oil revenues, which boosted the Government's coffers by pounds 120bn. The former Conservative prime minister Harold Macmillan, however, referred to it in 1984 as "selling the family silver".

The Treasury never specifies where its income is spent. But the privatisation revenues track exactly the rise in the Government's so-called "rescue" spending - social security, health, social services - and the fall in "renewal" - education, training, transport, housing. As a proportion of GDP, "rescue" spending rose 3.7 per cent while "renewal" fell 4 per cent.

"Billions of pounds have been poured down the drain to pay the cost of the Tories' social and economic failure," Mr Milburn said. "Selling the family silver", he went on, had gone "to foot the bill of past failure rather than investing in future success. They have squandered nearly pounds 90bn from privatisations. With proper investment, Britain should have been prepared to meet the challenges of the next century - instead, the money has been spent supporting divisive, short-sighted policies."

There was more to privatisation than a series of sales. With it developed a whole new sub-culture, of City banks which set up specialist privatisation arms, of public relations executives who dreamt up new ways of marketing what until then had often been a run-down branch of government, of eager punters queuing round the block to get their share forms.

The first Thatcher administration saw the sales of British Aerospace, NFC, Cable and Wireless, Associated British Ports, Britoil, British Rail Hotels and Amersham International.

After her second, resounding victory in 1983, the process moved up a gear. Out went Enterprise Oil, Jaguar, British Telecom, British Gas, British Airways and Rolls-Royce.

By now, she recounts in her autobiography, The Downing Street Years, "privatisation had leapt from fairly low down to somewhere near the top of our political and economic agenda". That zeal was confirmed by her third, and last, term, which saw the programme reach new heights of ambition in the sales of water and electricity.

In all, in what Mrs Thatcher boasted was "the greatest shift of ownership and power away from the state to individuals and their families in any country outside the communist bloc", more than 600,000 people ceased to be public servants.