Knee-jerk nationalisers have no idea how the water industry actually works
It’s a pattern as predictable as the water cycle itself. Britain has a drought. The newspapers discover that billions of gallons are being wasted through leaks. There is unanimous agreement that the water companies must be punished. The Guardian calls once more for nationalisation.
It’s not just the left that get agitated. In the last few days, both Rishi Sunak and Liz Truss have weighed in to castigate the water companies for permitting too many leaks.
Ed Davey, the leader of the Liberal Democrats, has gone even further. He told The Independent that consumption targets ‘feel utterly pointless whilst Thames Water waste a quarter of all their water from leaking pipes’. He added: ‘It is time someone stood up to these companies. That should start with a sewage tax to clean up rivers they pollute and a ban on CEO bonuses until pipes are fixed.’ But this entire narrative rests on a galactic misunderstanding about how the water industry in the UK operates.
The whole thing is well worth reading, partly as an antidote to the politics and partly because it raises a useful question. How many people would take ten minutes to read a piece like this and how many prefer the knee-jerk reaction?
Of course we already know Sir Keir is a knee jerk. Sorry - I had to squeeze that one in.
I’m not trying to claim that privatisation is a panacea. There are plenty of things wrong with the current system: witness the way that the companies have piled on debt, as mentioned above. (If you want a fuller list of their failings, the best place to start is this speech by Michael Gove, during his time as Environment Secretary.)
But it’s a bit grating to hear knee-jerk calls for nationalisation from people who apparently have absolutely no understanding of how the water industry is structured, or the incentives it operates under, or the changes and improvements that have happened since privatisation.
4 comments:
Thanks, that's an interesting read on something I'd given little thought to before. If the water companies are merely contractors who bid for contracts which meet government targets, we would seem to have set up a system that combines the worst of both worlds. If the government sets targets, it might as well be nationalised already. And encouraging competition to meet pre-existing targets is essentially asking them to do it as cheaply and shoddily as possible.
But so many systems work like this. Further Education, where I worked, certainly does.
Sam - it isn't entirely clear to me why this system seems to work reasonably well, but I suppose much of it is down to the regulator who can do the job well, not so well or badly. The arms length approach must also have much to do with it, as if it is important to preserve a commercial culture in the water companies. Nationalisation would presumably destroy that.
That is a good piece. Not being a lengthy essay he omitted one of the glories of privatisation.
In the old days the water and sewers industry was almost entirely owned by arms of the state e.g. councils. The state was also responsible for keeping the rivers clean. Since the state tended not to punish itself that meant that the sewers businesses polluted the rivers frequently.
One of the benefits of privatisation was that the water and sewers businesses could now be punished by a separate outfit. And , lo, things got better.
Incentives work, you know.
dearieme - incentives do work. I remember when the water industry was privatised, we saw a small but quite definite improvement in sewage effluent discharge standards.
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