Privatisation + weak regulation = underinvestment, as private owners don’t have the incentive to spend the money to invest for the long-term.
Nationalisation = underinvestment, as putting politicians in charge means they’ll be too sensitive to the impact on voters of charging them (either via taxes or water bills) for investment in the infrastructure.
Privatisation + strong regulation = needed investment, as strong regulators can be more demanding of water companies but can do so at arm’s length from politicians.
It’s a double edged sword. A private company with a strong regulator might have more appetite for investment. However, a private company might also do their utmost to work around any rules, investing as little as possible to make the most profits.
Which is why the ‘strong’ bit of ‘strong regulation’ is key. Not just write some hands-off rules and call it job done, but ongoing supervision by the regulator.
its probably inevitable now that much stronger oversight will be brought in. In the last few days Labour have been saying thats what the plan is wether its now or in the next government. It makes sense to make the failed ones like Thames Water pay to clean up the mess, instead of letting them off the hook by nationalising. I just think its hard in principle to justify making money off an essential for life service. Its almost the same as air or the sky being private owned because the private company can clean it up.
I just think its hard in principle to justify making money off an essential for life service.
There are many good arguments for nationalising an industry - particularly a natural monopoly - but I always find ‘we need it to live’ to be a weak argument. We need food to live, we need shelter, we need clothes - would you nationalise the supermarkets, the housing stock, the fashion industry? The government’s role in these things should be to make sure that the things we need to live are made available to people, but I’m relaxed about whether the provider makes a profit for their shareholder or claims a subsidy from the taxpayer - either way, we pay for it.
I’d compare it to other utilities like electricity or railways where not only has the market entirely failed to improve the service but actually costs far more after disastrous market adventures. Any regulator would be attacked for being political at some level by some people.
Trains are different. There isn’t market competition between the Train Operating Companies (TOCs) so they created a system of pre-market competition when they privatised them - the competition takes place when TOCs bid against each other in the auction for the local franchises every five (I think?) years.
The bit of the rail network over which it’s much harder to introduce competition is the actual railways themselves - which is partly why the railways were renationalised by Labour in 2002.
Water companies don’t/can’t compete against each other though - that’s the reason even the Thatcher government thought it was necessary to give us a system of price cap regulation in order for them to operate privately. But as I’ve said above, the problem with water isn’t monopolistic pricing, it’s underinvestment, which wouldn’t obviously be solved under public ownership either.
sort of, its surely not that simple. Its the same electrons whoever you buy them off, only the different types of generation and transmission depending where you live. Whats annoying about electrons is if we make them via wind or nuclear or solar its all priced in gas, so the cost of say a solar farm benefits the operator hugely and the customer is paying alot more for what is basically the sun which is still free to access.
I think the argument of the article is:
Privatisation + weak regulation = underinvestment, as private owners don’t have the incentive to spend the money to invest for the long-term.
Nationalisation = underinvestment, as putting politicians in charge means they’ll be too sensitive to the impact on voters of charging them (either via taxes or water bills) for investment in the infrastructure.
Privatisation + strong regulation = needed investment, as strong regulators can be more demanding of water companies but can do so at arm’s length from politicians.
It’s a double edged sword. A private company with a strong regulator might have more appetite for investment. However, a private company might also do their utmost to work around any rules, investing as little as possible to make the most profits.
Which is why the ‘strong’ bit of ‘strong regulation’ is key. Not just write some hands-off rules and call it job done, but ongoing supervision by the regulator.
its probably inevitable now that much stronger oversight will be brought in. In the last few days Labour have been saying thats what the plan is wether its now or in the next government. It makes sense to make the failed ones like Thames Water pay to clean up the mess, instead of letting them off the hook by nationalising. I just think its hard in principle to justify making money off an essential for life service. Its almost the same as air or the sky being private owned because the private company can clean it up.
There are many good arguments for nationalising an industry - particularly a natural monopoly - but I always find ‘we need it to live’ to be a weak argument. We need food to live, we need shelter, we need clothes - would you nationalise the supermarkets, the housing stock, the fashion industry? The government’s role in these things should be to make sure that the things we need to live are made available to people, but I’m relaxed about whether the provider makes a profit for their shareholder or claims a subsidy from the taxpayer - either way, we pay for it.
I’d compare it to other utilities like electricity or railways where not only has the market entirely failed to improve the service but actually costs far more after disastrous market adventures. Any regulator would be attacked for being political at some level by some people.
The difference with electricity is that I can change provider without having to move house
There is no competition between water or train companies
Trains are different. There isn’t market competition between the Train Operating Companies (TOCs) so they created a system of pre-market competition when they privatised them - the competition takes place when TOCs bid against each other in the auction for the local franchises every five (I think?) years.
The bit of the rail network over which it’s much harder to introduce competition is the actual railways themselves - which is partly why the railways were renationalised by Labour in 2002.
Water companies don’t/can’t compete against each other though - that’s the reason even the Thatcher government thought it was necessary to give us a system of price cap regulation in order for them to operate privately. But as I’ve said above, the problem with water isn’t monopolistic pricing, it’s underinvestment, which wouldn’t obviously be solved under public ownership either.
sort of, its surely not that simple. Its the same electrons whoever you buy them off, only the different types of generation and transmission depending where you live. Whats annoying about electrons is if we make them via wind or nuclear or solar its all priced in gas, so the cost of say a solar farm benefits the operator hugely and the customer is paying alot more for what is basically the sun which is still free to access.
Yep, which is why Spain’s inflation rate has fallen so quickly because they unlinked the gas price from electricity
There is competition between electricity firms on price, unlike water though.
But, the same principle doesn’t apply with trains. You can’t have multiple train opcos on the same route, it should be nationalised.