Thursday 5 May 2016 11:39 am

Why the government should sell off Channel 4 into the nasty and horrible world of private sector competition

Channel 4 tells us, for some reason, that they don't want to be sold off into that nasty and horrible world of private sector competition.

They've commissioned a report which tells us all that it wouldn't be a good idea and perhaps, for those currently running it, it wouldn't be.

The rather more important question though, given that they're doing this with our money, is whether we'd be better off if it were sold? From their own arguments it would appear that we would be, yes.

Read moreReport argues Channel 4 privatisation would be "overwhelmingly negative"

Some parts of what they tell us are not believable: that selling a TV station will affect the balance of payments, for example. No, not really, the balance of payments balances, always and exactly, a fact rather contained within the phrase. Other things they tell us are more misunderstood.

The heart of their case is that any buyer would have to get “more bang for the buck”. That is, more revenue per pound from Channel 4's content budget.

Given that this is actually the point of an organisation which produces anything at all this would seem to be a good argument in favour of that privatisation.

Profit is the value added within an organisation and all value added in the entire economy is Gross Domestic Product. The cost to an organisation of the inputs is their value being employed to do something else. The revenue is of course the revenue: the profit, the value added, is the gap between these two. Thus higher profits mean more value added: that contribution of that organisation to GDP.

Read more: Here are the companies media analysts think could bid for Channel 4

Given that we like more GDP, generally and correctly assuming that it makes us all richer in aggregate, we therefore want organisations to make more profit as that is their contribution to it. Thus we need to recast what is actually being said by Channel 4.

We know that it is possible for us to be more efficient, we know that a change in the way we do things will make Britain richer. But only the incentives of being a privatised organisation will push into doing that so don't privatise us.

Our answer to the question put that way is obvious: we'd rather be richer thank you, onto the auction block you go.

Read more: Why Channel 4's chief exec finds privatisation talk puzzling

This is also the general reason for privatisation in a nutshell. Where increased profit is not the driving organisational force or incentive then the organisation is not straining those sinews to make us all collectively richer.

Given that we do like being collectively richer, therefore we should be privatising everything not entirely nailed down. Just to expose all to those bracing incentives which have, over the past couple of centuries, driven us from that peasant destitution to the current situation, where we have the luxury of pondering whether Countdown could survive in the cut throat world of the private sector or not. Or must be protected by the public service remit of a not for profit broadcaster.

Sell it, preferably yesterday.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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