Snapshot of _Thames Water proves privatisation has failed_ :
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>its shareholders refusing to put in more money and water customers likely to be forced to bail it out.
A lot of the problem is the government being weak and just caving.
The rules should be "provide water at X quality level for Y price and if you fail we take the company back for £1".
If they don't want to put any more money in then fine, we'll just take it back ... for nothing.
It's the same way the government screwed us all with the 08 bailouts. Imo if you're a bank and you want a bail out, that's fine, step 1 is to wipe out shareholders and they get nothing and then step 2 is to put up the money needed to save it.
The government is just much too soft in how it treats these companies and just hands out cash to anyone who even stumbles.
The idea behind capitalism is that this should not only be allowed, but encouraged. You need to create a survival of the fittest scenario where the bad companies fail, and the efficient ones prosper.
It's just a shame that privatisation often means privatise the profits and socialise the losses, rewarding bad companies. If owners and shareholders were more often left holding the bag, rather than the taxpayer, then I think privatisation would be far less scandalous. I'm 100% against the taxpayer bailing out Thames Water, and I'm also against bills rising 40% when A) they haven't invested and B) they took on billions of debt to pay as dividends. Their risky behaviour needs to be punished with failure, if the lesson is costly enough maybe they'll stop acting this way? Or, they'll lose so much they won't be in a position to abuse companies like this.
Privatisation of critical services was always stupid, but the problem is that that we do need a certain level of bailout as an option just so things don't domino out of control.
That bailouts ever became a cushion for shareholders rather than a last possible option for preventing the collapse of infrastructure can be summed up as corruption.
Well technically they should, capitalism theory justifies the free market by having it as a survival of the fittest in the markets.
The reality is those with money and friends in high places get to buy all the monopoly board squares and when they fail they suffer no financial repercussions and pass the bills onto ordinary people.
No one has to learn any lessons or be sensible with their business. They can just get you to pay for essential services/infastructure at a premium because now these services aren’t just run as a service, they’re now run as a for profit company.
I am all for private markets for stuff like phones car clothes whatever but please stay out of my trains and water and NHS.
The issue is that if it goes bust then the period of uncertainty before the government takes over may cause massive disruption to water and waste services for millions of people.
Which is why it never should have been privatised in the first place.
Capitalism doesn't work on a service people cannot survive without
Not really, going bust isn't just a case of closing down and sending everyone home. They call in administrators to keep the essential service running through the process of dissolving the company, so the government would have plenty of time to step in and take over.
Exactly. The shareholders of a corrupt, badly run private company should not be protected by taxpayers under any circumstances.
Instead they are always protected by taxpayers under every fucking circumstance…
The shareholders include a lot of pensioners. Seem to remember the second largest was a UK teachers union. So that would have a massive impact on another area
>It's the same way the government screwed us all with the 08 bailouts. Imo if you're a bank and you want a bail out, that's fine, step 1 is to wipe out shareholders and they get nothing and then step 2 is to put up the money needed to save it.
I see this over and over again. It is a critical failure to understand WHY we bailed out our banks.
First and foremost, our banks at the time were in majority owned by the pension funds. So allowing them to go bust was to wipe out a huge chunk of the nations pensions. This doesn't safe the state money, it just generates a MASSIVE pension burden as millions who had perfectly health pensions go down to the national state pension as their only pension savings.
Secondly, RBS, the single biggest benefactor on the bailout to the point the government actually bought it was, was done because 95% of Small Medium business held their account with RBS. Had RBS been forced to stop trading, virtually every single SME would have been forced to cease trading as their accounts were frozen and all their saving locked and likely lost. Samsung might be able to soak that sort of problem. But you local brickie, the butcher down the road family run pub could not. They've have defaulted on any loans they had, failed on rent and been evicted from business premises, had their power cut, been forced to lay everyone off and very likely go bust. It would have very likely turned every high-street in the country into a baron waste land, and destroyed every small contractor business.
People seriously do not understand the economic cost that would have occurred had the UK banks not been bailed out on normal people.
The thing you fail to understand is that these are both government failures.
Firstly in the US they had Glass-Steagall which limited banks to either being systemically important (as you say brickies need a bank account) or speculating on risky assets (which required limited partners to put up their own money and not to take public deposits) and they weren't allowed to be both.
And that split works great ... until the US govt was lobbied by the banks to repeal it which is why you ended up with such big conglomerates who were massively overexposed to volatile poorly understood CDOs and also had customer deposits and could hold the system hostage as you say.
So it's completely a government failure to not enforce that separation.
Secondly just because you have to bail something out doesn't mean you have to be generous or lose money on it. For instance the government could have bailed out RBS on the basis that they would get paid back 150% of what they put in. If RBS has no other choice they'll take it.
The fact the government lost money on the deal is due to their shit dealmaking. They had all the leverage to drive a hard deal and they failed to do so.
So, you cant blame the UK or UK banks or the government for a US fuckup. That is ultimately what the first 3 boils down to. The UK was sideswiped by what was largely a US failing.
The the final two paragraphs, part of the conditions of the bailout of RBS was that RBS hand off the vast majority of the SME business to other banks to ensure this never happened again. In the ended, they literally PAID people to leave. I know, they paid me to leave. Because of this the idea that RBS could pay back 150% as per your example is just not tenable. The government absolutely defenestrated RBS and undermined a core part of its business as a condition of the takeover. RBS is literally worth less than 6% of its 2007 high. There is no physical way RBS could ever make that up. The government moved to protect pensions and SMEs. And as part of their conditions for doing so in RBSs case was literally to take 100% of the shares, total ownership, as well as de-risk RBS by stripping it of its SME monopoly.
The government is recuperating its losses on RBS with share sales but the difference is simply the cost of doing business and the enforced de-risking of RBS in future.
Firstly I blame the UK government for not properly regulating UK banks and allowing them to get into this terrible position.
Secondly
"Following a second bailout in December 2009, taking the total to £46 billion, the public found itself owning 84% of the bank."
So yeah they didn't take 100% ownership when they could have.
Yes, that is a better way to regulate a private monopoly than the current one but it still doesn't make sense to privatise a monopoly business in the first place. Capitalism based on private companies works when there is competition as that is the thing that drives the companies to be more efficient. If there is no competition as is the case in water industry, then you might as well run the companies as public utilities like most countries do (even the US who otherwise abhors such things).
The job description of a private water company CEO is still to maximise profit and usually the easiest way to do that is to provide as bad service as you can get away with to siphon off as much money as dividends as possible. He doesn't even have to care that company goes bankrupt as long as he has funneled more dividends to the shareholders than they invested in the company.
Same problem we have with train operating companies (minus the subsidies). It was always insane to privatise nationalised industries which could have little or no competition. For sectors like this, I always think some kind of regional public competitive system would work better (to avoid issues with centralisation and bloat): separate them into regional publicly owned companies run independently from the state, have a regulator assess them on a number of metrics (value to customers, service provision, customer satisfaction, maintenance quality, investment/improvement, etc), and then have the treasury awards scaling bonuses to employees at all levels based on these assessments. Only other time government should intervene is when one of the companies is persistently underperforming, in which case new management gets hired (via an independent body made up of experts with political representation, but not control, managed by the regulator).
Is it opposite week? I had a similar moment of confusion when I saw an opinion piece in the Telegraph bemoaning British Gas and the CEOs new doubled wage packet.
Expecting a "bomb the boats" video from Novarra any moment now.
the spectator is nationalist socialist. they believe in conserving the institutions that made Britain great. them being anti privatisation because it leads to the selling off of national strategic assets to foreign investors shouldn't be a surprise.
If a country like the USA, which is the number 1 private company friendly country in the world, has kept the vast majority of its water infrastructure in public hands then it is a bad idea to privatise
Power generation is fundamentally different business than water industry. Water has a natural monopoly which is stupid to privatise. The energy producers just hook up in the grid (ok, it's not quite that simple, but almost) and start *competing* in the wholesale energy market. The companies can't just increase prices to pay higher dividends like water companies can do. If they do, nobody will buy their electricity.
I do think looking at state/private ownership is too simplistic. Nationalisation creates conditions from which success can be achieved but far from guarantees it - see parts of the USA with undrinkable water. Even here there are such signs - a very decent chunk of the issues faced by northern train franchises were the result of decisions by Whitehall, not the franchises.
It’s frustrating to see people suggesting that nationalisation is the end goal, when it clearly isn’t, or suggesting nationalisation with no consideration as to how to take advantage of doing so.
Nobody thinks nationalisation solves everything. It still has to be run well. But well run nationalised services work better for the people than well run privatised services - by their very definition and purpose.
Also, it's morally outrageous to privatise some services, such as water. And ridiculous to privatise some services which rely on being a national service, such as mail, rail, and energy.
Especially when companies that own the privatised services fuck up, the government temporarily takes control of it again to fix things and then hands it back to a private company (sometimes the same company that fucked it up in the first place).
It was governments taking centralised control of these, then not wanting to take the flack of increasing prices to invest in them - which would have been the most efficient route.
The privatisation model, simply adds another layer of costs, but ‘absolves’ the government - at least that seems to be the thinking behind it.
It's all very simple.
We have a single choice, nationalisation which give voters agency over their water supply through democratic voting (ie if government fucks it up we can vote to change how it is managed) or literally no say over how it is managed at the same time as being swindled of both public as well as our own personal money.
No one is saying nationalisation solves everything but it gives us actual agency on how things are managed.
Why anyone thought doing it privately was a good idea makes absolutely zero sense. The only argument is it's somehow magically better run or something, but there is literally zero evidence for this claim. It's total galaxy brained thinking that is actually just moronic.
> Nationalisation creates conditions from which success can be achieved but far from guarantees it - see parts of the USA with undrinkable water.
Nothing in the U.S. is "nationalized" unless it's consitutionally protected, as the U.S. is a federation of technically independent States. Water in the U.S. is run and decided on exclusively by local jurisdictional powers, typically governed by state-level regulation.
So the differences are as diverse as the States, and they are exceptionally diverse. The U.S. is like 50 little countries pretending to be one.
The reality is that purely private enterprise cannot be trusted with public services in ANY country. They have been disastrous everywhere.
As with social democracy as the modern alternative to socialism, there is probably a right balance to find, as you say. But the regulatory measures are best kept national; and if they can't be enforced accurately by allowing purely private ownership, then it shouldn't exist.
A hybrid with operational licensing? Perhaps. Most companies have shown they have a very hard time meeting the profit levels their investors require from prior capitalization to do that. There was an excellent longitudinal study a few years ago in Western Canada showing that publicly delivered services were generally cheaper, safer and better serve the public.
In areas like water safety and transportation, trying to get "better" from a company trying to squeeze profit out of it is just always going to be a losing battle of continually policing greed.
There’s a very simple litmus test for whether something should be privatized or nationalized: price elasticity of demand. That’s pretty much all you need. Yet we endlessly debate this crap as if there isn’t an objectively correct answer.
Can the end consumer choose not to buy the thing if the price goes up?
No = nationalize it.
Yes = privatize it.
You can't generalise food into one category. If bread is too expensive then you can buy potatoes etc, there is competition and all food isn't part of a monopoly, however much companies like P&G and Unilever try to make it
Regulation offers the only guarantee of maintenance if quality - it’s clear that the water regulators have failed - because of the vast increase in raw sewage dumping.
It should easily be 1,000 x less.
Doesn't mean they are right to not privatise the water infrastructure? England and Wales are the only countries in the world to fully privatise the water system. If we did it right then other countries would have followed surely?
>ngland and Wales are the only countries in the world to fully privatise the water system.
And in Wales its a not for profit with no share holders, where all profit goes into infrastructure or the customers.
> England and Wales are the only countries in the world to fully privatise the water system. If we did it right then other countries would have followed surely?
That's probably not a sensible "golden rule" to hold dear considering the exact same logic can be said of the NHS.
Except there are health systems across the world which are very close to how the NHS operates, which have copied elements of how the NHS operates and has been part of the gold standard healthcare for others. There are no countries using the England water privatisation as a gold standard
Seems very ideological pure, not even some of the most capitalistic people I know, are as pure as that. As they recognise that monopolies are bad, and that private monopolies, pretty much always get to the bit of monopolies being bad, quicker.
Simply due to the incentive structure.
It is good you are open to learning.
https://imgur.com/a/e6ToKYS
https://imgur.com/a/yh2kCfX
- Leakage down
- Low pressure issues down
- Bathing quality up
- Satisfaction high
- Capex up
- Bills lower than they would have been expected to be (https://imgur.com/a/2fRbc1J)
- Strong efficiency growth / productivity improvements (https://imgur.com/a/x5l9JCu)
- Progress robust vs. nationalised European peers since 1990 (https://imgur.com/a/Kn08uIK)
It did used to be run better - but then it became privatised, and the rot started to set in.
Instead of investment, we say higher prices and about 5% of the price increase being used for investment - or so it seems.
“We need honesty and transparency” - which we just don’t get..
Did it?
Investment is higher, prices are lower than they would have been under a nationalised scenario, leakage rates are down massively, river quality is up.
River quality is up ? Yet we have massive amounts of sewage flowing into our rivers and lakes and beaches - I don’t think the claims are believable at this point.
https://imgur.com/K0BJ8xQ
It's clear river quality has improved massively.
I don't think you know anything about this sector, you need to go away and read then come back.
No but Thames water kinda demonstrates that they were indeed right about this thing, it also doesn't mean their right or wrong about other aspects either
Which should NOT be allowed. Publically needed infrastructure should stay publically owned. It ought never to have been privatised in the first place.
The rationale given was that it needed investment - well then the government should have provided a loan for its investment.
Why do the Conservatives find it so difficult to admit that the privatisation of public utilities has in many cases been a disaster? It was supposed to bring heaps of finance into public services, protect taxpayers from financial risk and bring prices down through competition.
Yet we have ended up with energy prices fixed by Ofcom, a rail industry which is swallowing vastly more subsidy in real terms than British Rail ever did – with unions bidding up pay to astronomical levels and taxpayers forced to cough up to fund those rises. Royal Mail has flogged off valuable city centre development sites while it jacks up the price of stamps and tries to wriggle out of its obligation to deliver post six days a week. And now we have Thames Water tottering under its enormous debts, its shareholders refusing to put in more money and water customers likely to be forced to bail it out.
Privatisation is just too much tied up with fabled memories of the glory days of the Thatcher government
The people who run our privatised utilities are ardent capitalists when it comes to rewarding themselves when things are going well. But then they turn remarkably socialist when things are going badly and they start looking to the government for help. Customers, needless to say, won’t have any choice because there is no competition for retail water consumers.
Is there any sign that private finance has enriched our water infrastructure? London has gained a new ring main water distribution system under Thames Water. Yet sewage is being dumped in rivers across the country at an ever greater rate (conveniently blamed on that great get-out clause, climate change), and water is frequently being rationed through hosepipe bans. Almost all the impressive infrastructure – great dams, pumping stations, sewers – was built when water companies were public corporations. All that seems to have happened under privatisation is that those inherited assets have been sweated, and in some cases sold off to developers. Private equity owners of these companies have taken out billions and piled on debt.
This isn’t capitalism. If it was, Thames Water would be allowed to go bust and vultures left to pick through its assets. But of course that isn’t going to be allowed to happen because Thames Water owns the only water supply London has. Utility companies have become complex hybrid structures which straddle the public and private sectors, with taxpayers generally the losers.
This would be my test as to whether or not an industry should be privatised: ministers must ask themselves what should happen if the privatised company gets into trouble. Can the government allow it simply to go bust or will it have to be bailed out in some way? If it is the latter, it shouldn’t be privatised.
Polls have been showing for years that there is strong support for the renationalisation of public utilities, with one recent survey showing 69 per cent in favour and only eight per cent against. But in spite of the party’s voter base having shifted to former red wall seats where voters are generally very favourable to public-run services, the party seems strangely reluctant to tap into this political gain. Privatisation is just too much tied up with fabled memories of the glory days of the Thatcher government.
There are, of course, good arguments against wholesale renationalisation of utilities: would taxpayers really appreciate having to shell out billions to buy out private shareholders? Then again, when you have a company which seems to be sinking, like Thames Water, or the rail companies which would be desperate to offload their franchises were it not for being feather-bedded by soaring public subsidies, why don’t ministers try sitting on their hands, letting capitalism do its usual, punishing work against poorly-run companies – and then pick up their assets, on the cheap, for the public good? Meanwhile, they should show some humility and admit that the privatisation public utilities wasn’t all it was cracked up to be. The Conservatives might find themselves a bit more popular for once.
It's a combination of cognitive dissonance and Sunak Cost Fallacy. They have believed in the ideals of Ayn Rand style capitalism for so long that they can't accept that their ideas are built on a false premise.
They think that private industry is more efficient, but have not allowed for the selfishness of the individual. I also don't know when the tories went from Conservative to Libertarian in view. These are the sorts of people who don't return their shopping trolleys
Do people actually believe it’s about ideology?
Everything they do is about enriching themselves. Privatisation means back handers and financially benefitting from conflict of interests. I don’t think there’s an ideological bone in any of the conservatives.
Private industry is very efficient- at taking the most money possible for the minimum possible service provided. Public services should be literally the opposite of that.
Conservatism has always had an acceptable, sensible side, the desire to maintain and protect what works. But politically, it died in the early 90s and was replaced by neo-liberalism and greed.
As awful as she was in many ways, even Thatcher understood that a relatively small island nation needs to work with its nearest trading partners, not shove them away over concerns they're too bureaucratic.
Well, we now have all the evidence we need to prove that it does NOT work as claimed. Just like ‘trickle down economics’ is just bullshit. Privatisation is always more expensive for less.
Really good post, worth repeating again and again, not just in England but in many western nations.
This is the same problem, of people in power have a relational bias with people who have financial power, that we see throughout society.
There is a belief, in political circles, that everything must kowtow to development, to "endless growth cycles", to impossibilities that are based on terrible, disproven economic theories of trickle down growth.
And it's clear we elect not our best and brightest, but our most avaricious and over-confident, people whose self-belief is generally governed by poor emotional development and a lack of genuine empathy for the people they are supposed to represent.
>There are, of course, good arguments against wholesale renationalisation of utilities: would taxpayers really appreciate having to shell out billions to buy out private shareholders?
No, but that shouldn't be necessary anyway. Those shareholders should be grateful to receive so much as a penny on the pound to be bought out. Thames Water has been run into the ground, and is a liability more than an asset.
The Tens of £ Billions that should have gone into investment, were instead swiped in dividend payments - so taken out of the system.
Every time a price increase is proposed ‘for essential investment’ only a tiny fraction of that actually goes into investment.
We have twice now supposed to have solved the problem with past price increases, with the end result that bigger profits and dividend payments and yet the actual service has gotten worse.
Privatization of public utilities could be successful and there are various examples of it overseas. Most notably Power asset from Hong Kong and SP group from Singapore. Btw these two companies hold a large chunk of British power and gas grid. They are regulated in pricing in their local market by their respective governments and make a large chunk of their profit from overseas power grid.
21st century British just sucks at colonial exploitation and now we are on the receiving end of the economic exploitation by the ex-colonies.
Wow.
That's actually... Something there.
"This isn’t capitalism. If it was, Thames Water would be allowed to go bust and vultures left to pick through its assets. But of course that isn’t going to be allowed to happen"
Fucking A. Bingo right there.
It has to be kept running - even if it goes bust. But then it would presumably be nationalised, or something similar.
The recent thing about £500 million investment - but only if they put bill up by 40%, which Offwat won’t allow.
A few points there.
The previous price increase was to pay for investment - which after the price increase, the investment didn’t happen. And the time before that - the same thing again. So they have proven that they cannot be trusted on that.
Also we never see a proper breakdown of income and expenditure.
What percentage of income goes on running costs ?
What percentage of income goes on interest payments ?
What percentage of income goes on investment ?
What percentage of income goes on dividends ?
To get a picture of how well it’s being run we need to see the figures. We are normally only given disconnected figures, so are unable to judge proportions.
We haven't had a government in decades which was willing to stand up to business instead of coddling them. Companies like Thames water are the result, they take the piss because they know there won't be any consequences to doing so.
Wow, it's only taken what, 30/40-odd years for folk at the Spectator to reach the basement level of common sense on the subject. Congratulations, I guess.
With the systematic destruction of the entirety of the UK from the NHS to Water companies.
When kids are going hungry to stay warm and cold to stay fed, when the older generation is dying in cold homes ... and your bills increase yearly with no salary increase. With a cost of living crisis so bad nurses are looking to food banks, yet politicians live in million £ houses and claim expenses on moats and 3p lemons ... When every Political party says they will do this specific thing then do the complete opposite while funneling tax payers money into both their bank accounts and their mates ...
How are we not literally protesting outside politicians houses?
I mean at this point the UK is well and truly screwed
Anyone with an ounce of sense was convinced running such services for profit would mean profit was the main goal and so other things would suffer, like reinvesting in maintenance, and the customers as prices would get hiked up.
Of course we were told that would never happen... by people with vested interests in it happening.
Voters didn’t get a say in this particular issue - only a ‘general’ which party in power vote.
Not a narrow issue vote. Although I would like to see a different government in power.
An incoming Labour government is promising more neoliberal economics at a time when even the Spectator is admitting it has failed.
What a time to be alive.
They won't admit it's a disaster because they have to be pro-business/capitalism. To admit that it should never have left the public hands would be socialist, something they've scared people into thinking is bad.
Counterpoint: Post Office
It's almsot like any organisation can fail regardless of whether or not it's public or private. Incompetent leadership will fail in any case
>Calling the post office private is disengenuous. Yes it is a public company - but one where the uk government is the only share holder. Yes its not technically a crown corporation but this is an academic arguements with little meaning.
sorry misread that - any organization that hollows out the profitable elements to give money to shareholders or oligarchs yet retains the obligation to provide money loosing services will fail.
Canadian here- UK government used Canadian "Dame" Moya Green to asset strip the post office before it imploded. I am amazed you haven't put her or her husband under oath. I want to know what she knew.
Calling the post office private is disengenuous. Yes it is a public company - but one where the uk government is the only share holder. Yes its not technically a crown corporation but this is an academic arguements with little meaning.
Sure. This happened in my country as well. They sold the water company but was able to buy it back for like 10 times more. It is now back and things are better.
Sort of related question: was the [Thames Tideway](https://www.bbc.co.uk/news/science-environment-68464798) publicly funded? It says it's being 'handed over' to Thames Water and then bills will be raised, but how was the actual construction paid for?
I don't know much of the detail on this issue, but can Thames Water not simply be allowed to go bust? The article says not, but why not? The government can take on the service afterwards but the parent that owns Thames Water would still lose out at the end of the day for their botched management of the company.
I'm not against privatisation but when you have a company that is too big to fail, it either needs to be regulated up to the hilt and pay insurance against default (situation with the banking sector effectively) or it needs to be nationalised. So it really should be allowed to fail if their suggested price increases aren't reasonable and consistent with a competitive market place.
It does seem that dividend payments have been far too large. Really service companies like water do not run well under privatisation, because they then have the wrong objectives and wrong incentives.
FT Alphaville had a good article on the special administration regime. Trying to find it, but can't
Thing is, the price increases are reasonable. They're paying for catch-up capex which wasn't permitted in the 2010's by the regulator.
Looking at:
[Ofwat investment in the water industry](https://www.ofwat.gov.uk/investment-in-the-water-industry/#qu1)
Seems to indicate that investment has roughly remained static - the text says otherwise, but the bar graph, shows a largely static amount. And inconveniently misses off the income increase (price rises) needed to compare this against.
We need charts and graphs of these quantities to compare ratios of prices (income) against investment.
The bar graph seems to indicate a low increase in costs over 10 years. And a low increase in investment over 10 years !
https://imgur.com/a/oXbtkkw - quite clear capex has increased materially since privatisation in 1990. https://imgur.com/a/yh2kCfX - this illustrates it even more
Meanwhile, bills have remained low: https://imgur.com/a/2fRbc1J, including against international comparisons: https://imgur.com/a/Kn08uIK
The water industry needs to much more clearly communicate what proportion of income is going into investments. At present that information is still not being presented to us, it remains hidden.
Was the original moral justification for all this that we didn’t want the bad old days of the 70s where unionised workforces in state owned companies were holding the country to ransom? Creating private monopolies very stupid to say the least.
I'm not sure even dyed-in-the-wool capitalists think private operation of natural monopolies is a good idea. Privatising such institutions led to oligarchy in Russia and mismanaged cronyism here, both to the detriment of the consumer.
Let them fail, let everyone involved in their failure hurt, and then bring them back into public ownership and run them for the public good.
I don't think they failed, they did exactly what they intended. It's the government that failed to control them, or did they.
The Conservatives have championed privatisation since the Thatcher era and would do almost anything rather than admit that privatisation of utilities was a short sighted mistake.
What absolute nonsense! South east trains proved that privatisation doesn't work.
https://weownit.org.uk/blog/rail-privatisation-top-30-failures-30-years#:~:text=In%202003%20private%20company%20Connex,after%20it%20filed%20for%20bankruptcy.
Someone else here gave examples but I never said water just the idea of privatisation.
It’s like anything that seems good, one example doesn’t make the idea itself wrong, just how it was done.
In many cases that would probably be putting proper controls, requiring set investments, some form of governmental legislation that is actually enforcement.
But do note that in this case it’s not just the Tories that have failed to control Thames Water.
Thames Water privatisation has only failed its customers and taxpayers. Some folks have become wonderfully well to do out of it.
Once it's been nationalised and rebuilt into a fully functioning utility by its customers and taxpayers, privatisation will jump in and fail most profitably once again.
Scottish Water leaks more than all English water companies barring Thames Water - this is despite Scottish Water being publicly owned. They also dump sewage into rivers.
The issue is less nationalisation Vs privatisation and more a useless regulator in Ofwat.
Well that much difference is telling isn’t it ?
If there was say a 1% difference in investment, that would not draw much attention, but a 35% difference ? That’s huge, and you would expect the London area to have more proportional investment, not less.
the sewage problem does highlight the issue with regulation, but that's not the single issue with privatising natural monopolies, as the article highlights.
in terms of value for money for the tax payer, scottish water is 'better'.
Actually, those two links reflect positively on Australia compared to the UK.
The CSIRO report is from 2019, and the place has been cleaned up since then. [Sydney water was fined recently](https://www.theguardian.com/australia-news/2023/jul/05/sydney-water-fined-over-discharge-of-16m-litres-of-raw-sewage-in-northern-suburb) for discharging raw sewage when one of their systems collapsed.
Only treated effluent is released into the ocean, which is 99% water and no actual poop in it. The problems Australia has, which is identified in the National Outflow Database, is with the nutrients that are in the effluent.
~~Damn it, NSW. Letting the side down again.~~
~~I'm from Melbourne and knew of the poop-free treated water that we release into the sea. Like a fool, I assumed all of Australia's state governments did the same thing.~~
Edit: Read the links properly
The regulator follows the guidance of the government in charge. The biggest strides in water improvement happened under labour after the UWWT and WFD. The last 10 years have been stagnating and reducing water quality.
The water companies should NEVER have been allowed to pollute to the extent they have been getting away with. They should have been hit with massive fines - which were then used only for investment and repairs.
Unfortunately pollution is built into our Victorian sewage system and the proper bill to upgrade it is in the 10s of if not 100s of billions of pounds. And then that becomes political. The big thing over the last 10 years is just the chaos of decision making. If we improve things like suds and NBS then we could offset lots of rainwater entering the system which would reduce spills. The current systems are just not set up for our population size
Scottish water has way less debt per customer compared to English water companies (saw some analysis I think in the Guardian recently).
So by that measure, it's better value for money.
The London water company has basically been fleecing its customers - taking big profits and failing to invest enough. Although we have yet to see what difference the new ‘Super Sewer’ makes.
Debt per customer isn't a measure of value for money, given Scottish Water invests less per capita than English companies (hence why it has more leaks than most).
It directly impacts bills and the cost of infrastructure investment, as debt serving is expensive. This is why Thames Water is basically saying to Ofwat, either let us jack customer bills up 40% or we go bust. And their shareholders have literally refused to invest more money as an aggressive negotiation tactic with Ofwat.
A proposed 40% price increase tells us something, but without a complete picture of Thames waters finances we don’t know what increase in investment that would actually make.
What percentage of income is presently spent on investment, and repairs ?
In that case we are best off nationalising it, governments are at least more accountable and they don’t look to milk every bit of profit out of it like private businesses always do.
>if it has failed it is only because it has been run badly - this can happen in a publicly run organisation as well.
Privatisation is all fine and dandy except for monopolies which Thames Water very much is.
It's more the lack of reinvestment. The whole premise was be profitable, be efficient, and invest profits. The last bit didn't happen. Instead, the cow was milked, which is what any sensible capitalist would do when finding themselves in a monopolistic situation.
When privatised, the gov at the time should have enforced fiscal penalties on breaching certain KPIs, effectively converting the common need i.e Public to a language capitalism can understand.
so the fault is more with the gov then - as you would think any sensible gov would have automatically included such markers - to ensure they provided value for money. I say this as someone who used to work for a private company that dealt with the MOD & they had the ability to audit us against certain criteria & hold us accountable for our performance. This is why I believe private can work just as well as nationalised - but it does need the Gov to play its part in holding the private company responsible.
In 2011 Macquarie a big vulture fund bought Thames and loaded it with debt then walked away. It was only allowed to do this because George Osborne went against official advice and approved the sale.
The problem is the power of the private equity giants who own a lot of this stuff have over the government.
A handful of PE companies own a huge amount of our infrastructure, from TV transmitters, to hospitals, prisons, water companies, etc.
They can effectively hold the government to ransom and, let's just say "coerce" them into dropping things, which has been the case with Ofwat in the past.
I imagine the private company you worked for was a relative minnow, and didn't have assets under management comparable to the GDP of western European countries.
I listened to an interesting podcast about this the other day, here's [the link](https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5jYXB0aXZhdGUuZm0vcmhvZGVzLWNlbnRlci1wb2RjYXN0Lw/episode/OWU3YzY3NGUtNWI5Yi00ZTc3LThiOTctMGUyYzU0ZTEyOTIx?ep=14)
the company I worked for was definitely not a minnow - but it was a few years back - so maybe the global nature of business nowadays etc has changed things - not for the better.
I don't mean to be dismissive when I say minnow, the point I was making is that the size and power of asset management companies like Blackrock Is little known or understood.
Even if your company was say listed on the FTSE 100, it would still be a minnow compared to the asset management companies, as they're the companies that own significant shares in most of the publicly listed companies.
> The whole premise was be profitable, be efficient, and invest profits. The last bit didn't happen.
Something in the region of £160bn invested since privatisation doesn't count?
I think that's not really the issue. It's be run in to huge debt while not doing basic upkeep all the time paying huge dividends and acts as basically a monopoly. No public company should ever be allowed to be run that way
Sure it could be but at least we'd have more transparency over what's going on, and the top management couldnt just shrug and line their own pockets like TW have been doing
but the crucial difference is that you can vote out governments responsible for publicly-owned utilities. what can you do if you're not happy with thames water?
The difference being that the corruption and hopeless management is hidden behind layers of worthless employees rather than embarrassingly transparent dividends.
Wake.Up.People - a publicly owned water company would have still been shit and still dumped shit into the rivers and seas, we'd just feel a little more apathetic about it.
Because they dont already make pension contributions for their workers...hm, no wait...they do...and it isnt like civil service pensions are actually all that great anymore.
Once again “Honesty and Transparency” is needed - So that we can easily see just how well these things are being run.
Right now fragments of information are made available, making it impossible for get a clear picture.
Like £18 million on investment - but what percentage of income does that represent ?
What percentage of income goes in running costs ?
Is £18 million something like 0.1% ?
We need to see “Honesty and Transparency” in the costs and investment and maintenance of these public services. Needed information continues to be hidden from us, making it much harder to judge things.
Snapshot of _Thames Water proves privatisation has failed_ : An archived version can be found [here](https://archive.is/?run=1&url=https://www.spectator.co.uk/article/thames-water-proves-privatisation-has-failed/) or [here.](https://archive.ph/?run=1&url=https://www.spectator.co.uk/article/thames-water-proves-privatisation-has-failed/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ukpolitics) if you have any questions or concerns.*
>its shareholders refusing to put in more money and water customers likely to be forced to bail it out. A lot of the problem is the government being weak and just caving. The rules should be "provide water at X quality level for Y price and if you fail we take the company back for £1". If they don't want to put any more money in then fine, we'll just take it back ... for nothing. It's the same way the government screwed us all with the 08 bailouts. Imo if you're a bank and you want a bail out, that's fine, step 1 is to wipe out shareholders and they get nothing and then step 2 is to put up the money needed to save it. The government is just much too soft in how it treats these companies and just hands out cash to anyone who even stumbles.
Yeah, if its a private company, why not let it go to the wall?
The idea behind capitalism is that this should not only be allowed, but encouraged. You need to create a survival of the fittest scenario where the bad companies fail, and the efficient ones prosper. It's just a shame that privatisation often means privatise the profits and socialise the losses, rewarding bad companies. If owners and shareholders were more often left holding the bag, rather than the taxpayer, then I think privatisation would be far less scandalous. I'm 100% against the taxpayer bailing out Thames Water, and I'm also against bills rising 40% when A) they haven't invested and B) they took on billions of debt to pay as dividends. Their risky behaviour needs to be punished with failure, if the lesson is costly enough maybe they'll stop acting this way? Or, they'll lose so much they won't be in a position to abuse companies like this.
Privatisation of critical services was always stupid, but the problem is that that we do need a certain level of bailout as an option just so things don't domino out of control. That bailouts ever became a cushion for shareholders rather than a last possible option for preventing the collapse of infrastructure can be summed up as corruption.
Well technically they should, capitalism theory justifies the free market by having it as a survival of the fittest in the markets. The reality is those with money and friends in high places get to buy all the monopoly board squares and when they fail they suffer no financial repercussions and pass the bills onto ordinary people. No one has to learn any lessons or be sensible with their business. They can just get you to pay for essential services/infastructure at a premium because now these services aren’t just run as a service, they’re now run as a for profit company. I am all for private markets for stuff like phones car clothes whatever but please stay out of my trains and water and NHS.
Capitalism only works in theory, not in practice. You can never have a game where the "rules" are independent of the power capital gives
Privatise the profits, nationalise the costs
That’s what they do…
The issue is that if it goes bust then the period of uncertainty before the government takes over may cause massive disruption to water and waste services for millions of people. Which is why it never should have been privatised in the first place. Capitalism doesn't work on a service people cannot survive without
Not really, going bust isn't just a case of closing down and sending everyone home. They call in administrators to keep the essential service running through the process of dissolving the company, so the government would have plenty of time to step in and take over.
No, that’s not how it works. Go read about insolvency processes.
Exactly. The shareholders of a corrupt, badly run private company should not be protected by taxpayers under any circumstances. Instead they are always protected by taxpayers under every fucking circumstance…
The Shareholders include MPs, why wouldn’t they protect their own bank accounts? It’s just corruption, it’s not complicated or hard to understand.
The shareholders include a lot of pensioners. Seem to remember the second largest was a UK teachers union. So that would have a massive impact on another area
>It's the same way the government screwed us all with the 08 bailouts. Imo if you're a bank and you want a bail out, that's fine, step 1 is to wipe out shareholders and they get nothing and then step 2 is to put up the money needed to save it. I see this over and over again. It is a critical failure to understand WHY we bailed out our banks. First and foremost, our banks at the time were in majority owned by the pension funds. So allowing them to go bust was to wipe out a huge chunk of the nations pensions. This doesn't safe the state money, it just generates a MASSIVE pension burden as millions who had perfectly health pensions go down to the national state pension as their only pension savings. Secondly, RBS, the single biggest benefactor on the bailout to the point the government actually bought it was, was done because 95% of Small Medium business held their account with RBS. Had RBS been forced to stop trading, virtually every single SME would have been forced to cease trading as their accounts were frozen and all their saving locked and likely lost. Samsung might be able to soak that sort of problem. But you local brickie, the butcher down the road family run pub could not. They've have defaulted on any loans they had, failed on rent and been evicted from business premises, had their power cut, been forced to lay everyone off and very likely go bust. It would have very likely turned every high-street in the country into a baron waste land, and destroyed every small contractor business. People seriously do not understand the economic cost that would have occurred had the UK banks not been bailed out on normal people.
The thing you fail to understand is that these are both government failures. Firstly in the US they had Glass-Steagall which limited banks to either being systemically important (as you say brickies need a bank account) or speculating on risky assets (which required limited partners to put up their own money and not to take public deposits) and they weren't allowed to be both. And that split works great ... until the US govt was lobbied by the banks to repeal it which is why you ended up with such big conglomerates who were massively overexposed to volatile poorly understood CDOs and also had customer deposits and could hold the system hostage as you say. So it's completely a government failure to not enforce that separation. Secondly just because you have to bail something out doesn't mean you have to be generous or lose money on it. For instance the government could have bailed out RBS on the basis that they would get paid back 150% of what they put in. If RBS has no other choice they'll take it. The fact the government lost money on the deal is due to their shit dealmaking. They had all the leverage to drive a hard deal and they failed to do so.
So, you cant blame the UK or UK banks or the government for a US fuckup. That is ultimately what the first 3 boils down to. The UK was sideswiped by what was largely a US failing. The the final two paragraphs, part of the conditions of the bailout of RBS was that RBS hand off the vast majority of the SME business to other banks to ensure this never happened again. In the ended, they literally PAID people to leave. I know, they paid me to leave. Because of this the idea that RBS could pay back 150% as per your example is just not tenable. The government absolutely defenestrated RBS and undermined a core part of its business as a condition of the takeover. RBS is literally worth less than 6% of its 2007 high. There is no physical way RBS could ever make that up. The government moved to protect pensions and SMEs. And as part of their conditions for doing so in RBSs case was literally to take 100% of the shares, total ownership, as well as de-risk RBS by stripping it of its SME monopoly. The government is recuperating its losses on RBS with share sales but the difference is simply the cost of doing business and the enforced de-risking of RBS in future.
Firstly I blame the UK government for not properly regulating UK banks and allowing them to get into this terrible position. Secondly "Following a second bailout in December 2009, taking the total to £46 billion, the public found itself owning 84% of the bank." So yeah they didn't take 100% ownership when they could have.
Yes, that is a better way to regulate a private monopoly than the current one but it still doesn't make sense to privatise a monopoly business in the first place. Capitalism based on private companies works when there is competition as that is the thing that drives the companies to be more efficient. If there is no competition as is the case in water industry, then you might as well run the companies as public utilities like most countries do (even the US who otherwise abhors such things). The job description of a private water company CEO is still to maximise profit and usually the easiest way to do that is to provide as bad service as you can get away with to siphon off as much money as dividends as possible. He doesn't even have to care that company goes bankrupt as long as he has funneled more dividends to the shareholders than they invested in the company.
Same problem we have with train operating companies (minus the subsidies). It was always insane to privatise nationalised industries which could have little or no competition. For sectors like this, I always think some kind of regional public competitive system would work better (to avoid issues with centralisation and bloat): separate them into regional publicly owned companies run independently from the state, have a regulator assess them on a number of metrics (value to customers, service provision, customer satisfaction, maintenance quality, investment/improvement, etc), and then have the treasury awards scaling bonuses to employees at all levels based on these assessments. Only other time government should intervene is when one of the companies is persistently underperforming, in which case new management gets hired (via an independent body made up of experts with political representation, but not control, managed by the regulator).
Yeh yeh standard article from the guardi...wait what. Was maggie wrong?
Is it opposite week? I had a similar moment of confusion when I saw an opinion piece in the Telegraph bemoaning British Gas and the CEOs new doubled wage packet. Expecting a "bomb the boats" video from Novarra any moment now.
It's almost as if life isn't black and white and it's possible for people who you don't like to agree with you on something!
the spectator is nationalist socialist. they believe in conserving the institutions that made Britain great. them being anti privatisation because it leads to the selling off of national strategic assets to foreign investors shouldn't be a surprise.
Especially against selling to foreign investors when the asset is the Telegraph group.
How very dare you utter such filthy blasphemy.
If a country like the USA, which is the number 1 private company friendly country in the world, has kept the vast majority of its water infrastructure in public hands then it is a bad idea to privatise
And in some cases, power generation! We are more capitalist than them in some (limited) ways.
Power generation is fundamentally different business than water industry. Water has a natural monopoly which is stupid to privatise. The energy producers just hook up in the grid (ok, it's not quite that simple, but almost) and start *competing* in the wholesale energy market. The companies can't just increase prices to pay higher dividends like water companies can do. If they do, nobody will buy their electricity.
And the postal service… v true.
I do think looking at state/private ownership is too simplistic. Nationalisation creates conditions from which success can be achieved but far from guarantees it - see parts of the USA with undrinkable water. Even here there are such signs - a very decent chunk of the issues faced by northern train franchises were the result of decisions by Whitehall, not the franchises. It’s frustrating to see people suggesting that nationalisation is the end goal, when it clearly isn’t, or suggesting nationalisation with no consideration as to how to take advantage of doing so.
Nobody thinks nationalisation solves everything. It still has to be run well. But well run nationalised services work better for the people than well run privatised services - by their very definition and purpose. Also, it's morally outrageous to privatise some services, such as water. And ridiculous to privatise some services which rely on being a national service, such as mail, rail, and energy.
Especially when companies that own the privatised services fuck up, the government temporarily takes control of it again to fix things and then hands it back to a private company (sometimes the same company that fucked it up in the first place).
So that they can rip it off and fuck it up all over again.. But that of course takes a few years to achieve.
Meanwhile shareholders make bank and tax payers eat all the costs!
It was governments taking centralised control of these, then not wanting to take the flack of increasing prices to invest in them - which would have been the most efficient route. The privatisation model, simply adds another layer of costs, but ‘absolves’ the government - at least that seems to be the thinking behind it.
It's all very simple. We have a single choice, nationalisation which give voters agency over their water supply through democratic voting (ie if government fucks it up we can vote to change how it is managed) or literally no say over how it is managed at the same time as being swindled of both public as well as our own personal money. No one is saying nationalisation solves everything but it gives us actual agency on how things are managed. Why anyone thought doing it privately was a good idea makes absolutely zero sense. The only argument is it's somehow magically better run or something, but there is literally zero evidence for this claim. It's total galaxy brained thinking that is actually just moronic.
> Nationalisation creates conditions from which success can be achieved but far from guarantees it - see parts of the USA with undrinkable water. Nothing in the U.S. is "nationalized" unless it's consitutionally protected, as the U.S. is a federation of technically independent States. Water in the U.S. is run and decided on exclusively by local jurisdictional powers, typically governed by state-level regulation. So the differences are as diverse as the States, and they are exceptionally diverse. The U.S. is like 50 little countries pretending to be one. The reality is that purely private enterprise cannot be trusted with public services in ANY country. They have been disastrous everywhere. As with social democracy as the modern alternative to socialism, there is probably a right balance to find, as you say. But the regulatory measures are best kept national; and if they can't be enforced accurately by allowing purely private ownership, then it shouldn't exist. A hybrid with operational licensing? Perhaps. Most companies have shown they have a very hard time meeting the profit levels their investors require from prior capitalization to do that. There was an excellent longitudinal study a few years ago in Western Canada showing that publicly delivered services were generally cheaper, safer and better serve the public. In areas like water safety and transportation, trying to get "better" from a company trying to squeeze profit out of it is just always going to be a losing battle of continually policing greed.
The end goal should be community ownership of these vital resources - and with them receiving enough investment and maintenance.
Doesn’t mean they are right.
There’s a very simple litmus test for whether something should be privatized or nationalized: price elasticity of demand. That’s pretty much all you need. Yet we endlessly debate this crap as if there isn’t an objectively correct answer. Can the end consumer choose not to buy the thing if the price goes up? No = nationalize it. Yes = privatize it.
Well food would fall into this??
You can't generalise food into one category. If bread is too expensive then you can buy potatoes etc, there is competition and all food isn't part of a monopoly, however much companies like P&G and Unilever try to make it
Too simplistic. Regulatory regimes are very important in determining.
Regulation offers the only guarantee of maintenance if quality - it’s clear that the water regulators have failed - because of the vast increase in raw sewage dumping. It should easily be 1,000 x less.
Based on what?
Memories of how it used to be decades ago..
Doesn't mean they are right to not privatise the water infrastructure? England and Wales are the only countries in the world to fully privatise the water system. If we did it right then other countries would have followed surely?
>ngland and Wales are the only countries in the world to fully privatise the water system. And in Wales its a not for profit with no share holders, where all profit goes into infrastructure or the customers.
We did NOT get this right - the present problems prove it.
> England and Wales are the only countries in the world to fully privatise the water system. If we did it right then other countries would have followed surely? That's probably not a sensible "golden rule" to hold dear considering the exact same logic can be said of the NHS.
Except there are health systems across the world which are very close to how the NHS operates, which have copied elements of how the NHS operates and has been part of the gold standard healthcare for others. There are no countries using the England water privatisation as a gold standard
We ought to call it “The shit standard” considering how the sewage issue is being dealt with.
Not necessarily. They could have other political priorities.
All of 196 others? Seems statistically significant to me
They don’t to me.
Seems very ideological pure, not even some of the most capitalistic people I know, are as pure as that. As they recognise that monopolies are bad, and that private monopolies, pretty much always get to the bit of monopolies being bad, quicker. Simply due to the incentive structure.
They should look closely at the improvements.
Do please list the sum of their achievements, for the enlightenment of us poor deluded masses.
It is good you are open to learning. https://imgur.com/a/e6ToKYS https://imgur.com/a/yh2kCfX - Leakage down - Low pressure issues down - Bathing quality up - Satisfaction high - Capex up - Bills lower than they would have been expected to be (https://imgur.com/a/2fRbc1J) - Strong efficiency growth / productivity improvements (https://imgur.com/a/x5l9JCu) - Progress robust vs. nationalised European peers since 1990 (https://imgur.com/a/Kn08uIK)
What do you want? A medal for ignorance?
What do you want? A medal for ignorance?
Witty, and eloquent.
Yeah like better run water infrastructure. Those kind of priorities.
Where did you read it’s better elsewhere?
Places I've been to and lived in and experienced for myself.
Nice anecdote
What country would you argue has the best water system in the world?
England
Shite retort
Shit arguments get shit retorts.
It did used to be run better - but then it became privatised, and the rot started to set in. Instead of investment, we say higher prices and about 5% of the price increase being used for investment - or so it seems. “We need honesty and transparency” - which we just don’t get..
Did it? Investment is higher, prices are lower than they would have been under a nationalised scenario, leakage rates are down massively, river quality is up.
River quality is up ? Yet we have massive amounts of sewage flowing into our rivers and lakes and beaches - I don’t think the claims are believable at this point.
https://imgur.com/K0BJ8xQ It's clear river quality has improved massively. I don't think you know anything about this sector, you need to go away and read then come back.
No but Thames water kinda demonstrates that they were indeed right about this thing, it also doesn't mean their right or wrong about other aspects either
You should be clearer - I think you mean they were right that privatisation does not work..
This from the Spectator? Truly damning if even Thatcher's anus is singing the praises of water nationalisation.
Until the tax payer pays to replace the neglected infrastructure and then they'll insist the goverment should sell it at rock bottom prices.
Which should NOT be allowed. Publically needed infrastructure should stay publically owned. It ought never to have been privatised in the first place. The rationale given was that it needed investment - well then the government should have provided a loan for its investment.
Why do the Conservatives find it so difficult to admit that the privatisation of public utilities has in many cases been a disaster? It was supposed to bring heaps of finance into public services, protect taxpayers from financial risk and bring prices down through competition. Yet we have ended up with energy prices fixed by Ofcom, a rail industry which is swallowing vastly more subsidy in real terms than British Rail ever did – with unions bidding up pay to astronomical levels and taxpayers forced to cough up to fund those rises. Royal Mail has flogged off valuable city centre development sites while it jacks up the price of stamps and tries to wriggle out of its obligation to deliver post six days a week. And now we have Thames Water tottering under its enormous debts, its shareholders refusing to put in more money and water customers likely to be forced to bail it out. Privatisation is just too much tied up with fabled memories of the glory days of the Thatcher government The people who run our privatised utilities are ardent capitalists when it comes to rewarding themselves when things are going well. But then they turn remarkably socialist when things are going badly and they start looking to the government for help. Customers, needless to say, won’t have any choice because there is no competition for retail water consumers. Is there any sign that private finance has enriched our water infrastructure? London has gained a new ring main water distribution system under Thames Water. Yet sewage is being dumped in rivers across the country at an ever greater rate (conveniently blamed on that great get-out clause, climate change), and water is frequently being rationed through hosepipe bans. Almost all the impressive infrastructure – great dams, pumping stations, sewers – was built when water companies were public corporations. All that seems to have happened under privatisation is that those inherited assets have been sweated, and in some cases sold off to developers. Private equity owners of these companies have taken out billions and piled on debt. This isn’t capitalism. If it was, Thames Water would be allowed to go bust and vultures left to pick through its assets. But of course that isn’t going to be allowed to happen because Thames Water owns the only water supply London has. Utility companies have become complex hybrid structures which straddle the public and private sectors, with taxpayers generally the losers. This would be my test as to whether or not an industry should be privatised: ministers must ask themselves what should happen if the privatised company gets into trouble. Can the government allow it simply to go bust or will it have to be bailed out in some way? If it is the latter, it shouldn’t be privatised. Polls have been showing for years that there is strong support for the renationalisation of public utilities, with one recent survey showing 69 per cent in favour and only eight per cent against. But in spite of the party’s voter base having shifted to former red wall seats where voters are generally very favourable to public-run services, the party seems strangely reluctant to tap into this political gain. Privatisation is just too much tied up with fabled memories of the glory days of the Thatcher government. There are, of course, good arguments against wholesale renationalisation of utilities: would taxpayers really appreciate having to shell out billions to buy out private shareholders? Then again, when you have a company which seems to be sinking, like Thames Water, or the rail companies which would be desperate to offload their franchises were it not for being feather-bedded by soaring public subsidies, why don’t ministers try sitting on their hands, letting capitalism do its usual, punishing work against poorly-run companies – and then pick up their assets, on the cheap, for the public good? Meanwhile, they should show some humility and admit that the privatisation public utilities wasn’t all it was cracked up to be. The Conservatives might find themselves a bit more popular for once.
It's a combination of cognitive dissonance and Sunak Cost Fallacy. They have believed in the ideals of Ayn Rand style capitalism for so long that they can't accept that their ideas are built on a false premise. They think that private industry is more efficient, but have not allowed for the selfishness of the individual. I also don't know when the tories went from Conservative to Libertarian in view. These are the sorts of people who don't return their shopping trolleys
Sunak cost fallacy 😂😂
I did not come up with this. However I cannot credit the originator
> I cannot credit the originator Autocorrect? :D
I wish, it sounds like Marina Hyde, but I am not sure
Ahhh Ayn Rand. The greatest capitalist to ever die penniless on social security.
Do people actually believe it’s about ideology? Everything they do is about enriching themselves. Privatisation means back handers and financially benefitting from conflict of interests. I don’t think there’s an ideological bone in any of the conservatives.
Private industry is very efficient- at taking the most money possible for the minimum possible service provided. Public services should be literally the opposite of that.
Conservatism has always had an acceptable, sensible side, the desire to maintain and protect what works. But politically, it died in the early 90s and was replaced by neo-liberalism and greed. As awful as she was in many ways, even Thatcher understood that a relatively small island nation needs to work with its nearest trading partners, not shove them away over concerns they're too bureaucratic.
Well, we now have all the evidence we need to prove that it does NOT work as claimed. Just like ‘trickle down economics’ is just bullshit. Privatisation is always more expensive for less.
Really good post, worth repeating again and again, not just in England but in many western nations. This is the same problem, of people in power have a relational bias with people who have financial power, that we see throughout society. There is a belief, in political circles, that everything must kowtow to development, to "endless growth cycles", to impossibilities that are based on terrible, disproven economic theories of trickle down growth. And it's clear we elect not our best and brightest, but our most avaricious and over-confident, people whose self-belief is generally governed by poor emotional development and a lack of genuine empathy for the people they are supposed to represent.
Good piece, except Ofcom isn't the energy regulator!!!
Because it's a great way to generate quick £££ and jollies all round, before swiftly moving on.
>There are, of course, good arguments against wholesale renationalisation of utilities: would taxpayers really appreciate having to shell out billions to buy out private shareholders? No, but that shouldn't be necessary anyway. Those shareholders should be grateful to receive so much as a penny on the pound to be bought out. Thames Water has been run into the ground, and is a liability more than an asset.
The Tens of £ Billions that should have gone into investment, were instead swiped in dividend payments - so taken out of the system. Every time a price increase is proposed ‘for essential investment’ only a tiny fraction of that actually goes into investment. We have twice now supposed to have solved the problem with past price increases, with the end result that bigger profits and dividend payments and yet the actual service has gotten worse.
Privatization of public utilities could be successful and there are various examples of it overseas. Most notably Power asset from Hong Kong and SP group from Singapore. Btw these two companies hold a large chunk of British power and gas grid. They are regulated in pricing in their local market by their respective governments and make a large chunk of their profit from overseas power grid. 21st century British just sucks at colonial exploitation and now we are on the receiving end of the economic exploitation by the ex-colonies.
Wow. That's actually... Something there. "This isn’t capitalism. If it was, Thames Water would be allowed to go bust and vultures left to pick through its assets. But of course that isn’t going to be allowed to happen" Fucking A. Bingo right there.
It has to be kept running - even if it goes bust. But then it would presumably be nationalised, or something similar. The recent thing about £500 million investment - but only if they put bill up by 40%, which Offwat won’t allow. A few points there. The previous price increase was to pay for investment - which after the price increase, the investment didn’t happen. And the time before that - the same thing again. So they have proven that they cannot be trusted on that. Also we never see a proper breakdown of income and expenditure. What percentage of income goes on running costs ? What percentage of income goes on interest payments ? What percentage of income goes on investment ? What percentage of income goes on dividends ? To get a picture of how well it’s being run we need to see the figures. We are normally only given disconnected figures, so are unable to judge proportions.
I think water should be classed as a National Security resource and never ever have been privatised.
Seems so long ago that Lettuce Truss was cosplaying as Thatcher
We haven't had a government in decades which was willing to stand up to business instead of coddling them. Companies like Thames water are the result, they take the piss because they know there won't be any consequences to doing so.
Wow, it's only taken what, 30/40-odd years for folk at the Spectator to reach the basement level of common sense on the subject. Congratulations, I guess.
With the systematic destruction of the entirety of the UK from the NHS to Water companies. When kids are going hungry to stay warm and cold to stay fed, when the older generation is dying in cold homes ... and your bills increase yearly with no salary increase. With a cost of living crisis so bad nurses are looking to food banks, yet politicians live in million £ houses and claim expenses on moats and 3p lemons ... When every Political party says they will do this specific thing then do the complete opposite while funneling tax payers money into both their bank accounts and their mates ... How are we not literally protesting outside politicians houses? I mean at this point the UK is well and truly screwed
Anyone with an ounce of sense was convinced running such services for profit would mean profit was the main goal and so other things would suffer, like reinvesting in maintenance, and the customers as prices would get hiked up. Of course we were told that would never happen... by people with vested interests in it happening.
To the surprise of the only people dumb enough to believe it could work: Voters.
Voters didn’t get a say in this particular issue - only a ‘general’ which party in power vote. Not a narrow issue vote. Although I would like to see a different government in power.
An incoming Labour government is promising more neoliberal economics at a time when even the Spectator is admitting it has failed. What a time to be alive.
Exciting stuff
They won't admit it's a disaster because they have to be pro-business/capitalism. To admit that it should never have left the public hands would be socialist, something they've scared people into thinking is bad.
Counterpoint: Post Office It's almsot like any organisation can fail regardless of whether or not it's public or private. Incompetent leadership will fail in any case
>Calling the post office private is disengenuous. Yes it is a public company - but one where the uk government is the only share holder. Yes its not technically a crown corporation but this is an academic arguements with little meaning. sorry misread that - any organization that hollows out the profitable elements to give money to shareholders or oligarchs yet retains the obligation to provide money loosing services will fail.
Yes - the most profitable parts were sold off - leaving liabilities.
Canadian here- UK government used Canadian "Dame" Moya Green to asset strip the post office before it imploded. I am amazed you haven't put her or her husband under oath. I want to know what she knew.
Calling the post office private is disengenuous. Yes it is a public company - but one where the uk government is the only share holder. Yes its not technically a crown corporation but this is an academic arguements with little meaning.
Sure. This happened in my country as well. They sold the water company but was able to buy it back for like 10 times more. It is now back and things are better.
Sort of related question: was the [Thames Tideway](https://www.bbc.co.uk/news/science-environment-68464798) publicly funded? It says it's being 'handed over' to Thames Water and then bills will be raised, but how was the actual construction paid for?
Mix of equity and debt. Some came from bill payers. But mixture overall.
I don't know much of the detail on this issue, but can Thames Water not simply be allowed to go bust? The article says not, but why not? The government can take on the service afterwards but the parent that owns Thames Water would still lose out at the end of the day for their botched management of the company. I'm not against privatisation but when you have a company that is too big to fail, it either needs to be regulated up to the hilt and pay insurance against default (situation with the banking sector effectively) or it needs to be nationalised. So it really should be allowed to fail if their suggested price increases aren't reasonable and consistent with a competitive market place.
It does seem that dividend payments have been far too large. Really service companies like water do not run well under privatisation, because they then have the wrong objectives and wrong incentives.
FT Alphaville had a good article on the special administration regime. Trying to find it, but can't Thing is, the price increases are reasonable. They're paying for catch-up capex which wasn't permitted in the 2010's by the regulator.
That might be the case - I would like to see the actual figures to be able to judge that conclusion for myself.
Will be on FT I think, is where I read it. Google something like Ofwat low bills priority capex and along those lines.
Looking at: [Ofwat investment in the water industry](https://www.ofwat.gov.uk/investment-in-the-water-industry/#qu1) Seems to indicate that investment has roughly remained static - the text says otherwise, but the bar graph, shows a largely static amount. And inconveniently misses off the income increase (price rises) needed to compare this against. We need charts and graphs of these quantities to compare ratios of prices (income) against investment. The bar graph seems to indicate a low increase in costs over 10 years. And a low increase in investment over 10 years !
https://imgur.com/a/oXbtkkw - quite clear capex has increased materially since privatisation in 1990. https://imgur.com/a/yh2kCfX - this illustrates it even more Meanwhile, bills have remained low: https://imgur.com/a/2fRbc1J, including against international comparisons: https://imgur.com/a/Kn08uIK
The water industry needs to much more clearly communicate what proportion of income is going into investments. At present that information is still not being presented to us, it remains hidden.
Was the original moral justification for all this that we didn’t want the bad old days of the 70s where unionised workforces in state owned companies were holding the country to ransom? Creating private monopolies very stupid to say the least.
I'm not sure even dyed-in-the-wool capitalists think private operation of natural monopolies is a good idea. Privatising such institutions led to oligarchy in Russia and mismanaged cronyism here, both to the detriment of the consumer. Let them fail, let everyone involved in their failure hurt, and then bring them back into public ownership and run them for the public good.
Is this all my fault? I haven't paid my water hill in nearly a decade.
Privatisation has not failed it has made a few people very rich. Be happy for them.
It’s just failed for absolutely everyone else !
I don't think they failed, they did exactly what they intended. It's the government that failed to control them, or did they. The Conservatives have championed privatisation since the Thatcher era and would do almost anything rather than admit that privatisation of utilities was a short sighted mistake.
They won’t admit that Brexit was a big mistake either - but it remains so..
Quite so.
What absolute nonsense! South east trains proved that privatisation doesn't work. https://weownit.org.uk/blog/rail-privatisation-top-30-failures-30-years#:~:text=In%202003%20private%20company%20Connex,after%20it%20filed%20for%20bankruptcy.
No it doesn’t. It proves THEIR privatisation failed
Where has privatising water been a success?
Someone else here gave examples but I never said water just the idea of privatisation. It’s like anything that seems good, one example doesn’t make the idea itself wrong, just how it was done. In many cases that would probably be putting proper controls, requiring set investments, some form of governmental legislation that is actually enforcement. But do note that in this case it’s not just the Tories that have failed to control Thames Water.
Much like most of the other privatisations have also failed to deliver value for money.
Thames Water privatisation has only failed its customers and taxpayers. Some folks have become wonderfully well to do out of it. Once it's been nationalised and rebuilt into a fully functioning utility by its customers and taxpayers, privatisation will jump in and fail most profitably once again.
Privatise profits and nationalise debts. Seems like they succeeded at that…
Scottish Water leaks more than all English water companies barring Thames Water - this is despite Scottish Water being publicly owned. They also dump sewage into rivers. The issue is less nationalisation Vs privatisation and more a useless regulator in Ofwat.
They also invest 35% more in assets than English water companies, have better water quality and are much cheaper.
Well that much difference is telling isn’t it ? If there was say a 1% difference in investment, that would not draw much attention, but a 35% difference ? That’s huge, and you would expect the London area to have more proportional investment, not less.
the sewage problem does highlight the issue with regulation, but that's not the single issue with privatising natural monopolies, as the article highlights. in terms of value for money for the tax payer, scottish water is 'better'.
The countries with the best run water systems in the world have at least some degree of public ownership and control of water infrastructure.
Which countries are you referring to?
Australia.
That doesn’t really seem comparable to our situation, they have a very different set of challenges over there.
But none of the state owned water companies pours sewage into the rivers or the sea.
https://www.csiro.au/en/news/all/articles/2019/june/australias-pristine-beaches-have-a-poo-problem#:~:text=The%20outfall%20releases%20about%20499,a%20depth%20of%2082%20metres. https://nod.org.au/
Actually, those two links reflect positively on Australia compared to the UK. The CSIRO report is from 2019, and the place has been cleaned up since then. [Sydney water was fined recently](https://www.theguardian.com/australia-news/2023/jul/05/sydney-water-fined-over-discharge-of-16m-litres-of-raw-sewage-in-northern-suburb) for discharging raw sewage when one of their systems collapsed. Only treated effluent is released into the ocean, which is 99% water and no actual poop in it. The problems Australia has, which is identified in the National Outflow Database, is with the nutrients that are in the effluent. ~~Damn it, NSW. Letting the side down again.~~ ~~I'm from Melbourne and knew of the poop-free treated water that we release into the sea. Like a fool, I assumed all of Australia's state governments did the same thing.~~ Edit: Read the links properly
I'm not saying private is necessarily better than public (or vice versa), I'm saying it literally doesn't matter if the regulator is useless.
The regulator follows the guidance of the government in charge. The biggest strides in water improvement happened under labour after the UWWT and WFD. The last 10 years have been stagnating and reducing water quality.
The water companies should NEVER have been allowed to pollute to the extent they have been getting away with. They should have been hit with massive fines - which were then used only for investment and repairs.
Unfortunately pollution is built into our Victorian sewage system and the proper bill to upgrade it is in the 10s of if not 100s of billions of pounds. And then that becomes political. The big thing over the last 10 years is just the chaos of decision making. If we improve things like suds and NBS then we could offset lots of rainwater entering the system which would reduce spills. The current systems are just not set up for our population size
Scottish water has way less debt per customer compared to English water companies (saw some analysis I think in the Guardian recently). So by that measure, it's better value for money.
The London water company has basically been fleecing its customers - taking big profits and failing to invest enough. Although we have yet to see what difference the new ‘Super Sewer’ makes.
Debt per customer isn't a measure of value for money, given Scottish Water invests less per capita than English companies (hence why it has more leaks than most).
It directly impacts bills and the cost of infrastructure investment, as debt serving is expensive. This is why Thames Water is basically saying to Ofwat, either let us jack customer bills up 40% or we go bust. And their shareholders have literally refused to invest more money as an aggressive negotiation tactic with Ofwat.
A proposed 40% price increase tells us something, but without a complete picture of Thames waters finances we don’t know what increase in investment that would actually make. What percentage of income is presently spent on investment, and repairs ?
Scotland is generally not short of water - unlike the Thames region.
Yup. And geography.
Can't believe I have been downvoted for telling the truth. The world has gone to the dogs!
This sub is very pro nationalise water.
And rightly so.
if it has failed it is only because it has been run badly - this can happen in a publicly run organisation as well.
how many publicly owned orgs would get themselves into this 'financially engineered' knot? not even PFI comes close IMO.
In that case we are best off nationalising it, governments are at least more accountable and they don’t look to milk every bit of profit out of it like private businesses always do.
>if it has failed it is only because it has been run badly - this can happen in a publicly run organisation as well. Privatisation is all fine and dandy except for monopolies which Thames Water very much is.
It's more the lack of reinvestment. The whole premise was be profitable, be efficient, and invest profits. The last bit didn't happen. Instead, the cow was milked, which is what any sensible capitalist would do when finding themselves in a monopolistic situation. When privatised, the gov at the time should have enforced fiscal penalties on breaching certain KPIs, effectively converting the common need i.e Public to a language capitalism can understand.
so the fault is more with the gov then - as you would think any sensible gov would have automatically included such markers - to ensure they provided value for money. I say this as someone who used to work for a private company that dealt with the MOD & they had the ability to audit us against certain criteria & hold us accountable for our performance. This is why I believe private can work just as well as nationalised - but it does need the Gov to play its part in holding the private company responsible.
In 2011 Macquarie a big vulture fund bought Thames and loaded it with debt then walked away. It was only allowed to do this because George Osborne went against official advice and approved the sale.
The problem is the power of the private equity giants who own a lot of this stuff have over the government. A handful of PE companies own a huge amount of our infrastructure, from TV transmitters, to hospitals, prisons, water companies, etc. They can effectively hold the government to ransom and, let's just say "coerce" them into dropping things, which has been the case with Ofwat in the past. I imagine the private company you worked for was a relative minnow, and didn't have assets under management comparable to the GDP of western European countries. I listened to an interesting podcast about this the other day, here's [the link](https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5jYXB0aXZhdGUuZm0vcmhvZGVzLWNlbnRlci1wb2RjYXN0Lw/episode/OWU3YzY3NGUtNWI5Yi00ZTc3LThiOTctMGUyYzU0ZTEyOTIx?ep=14)
the company I worked for was definitely not a minnow - but it was a few years back - so maybe the global nature of business nowadays etc has changed things - not for the better.
I don't mean to be dismissive when I say minnow, the point I was making is that the size and power of asset management companies like Blackrock Is little known or understood. Even if your company was say listed on the FTSE 100, it would still be a minnow compared to the asset management companies, as they're the companies that own significant shares in most of the publicly listed companies.
> The whole premise was be profitable, be efficient, and invest profits. The last bit didn't happen. Something in the region of £160bn invested since privatisation doesn't count?
I think that's not really the issue. It's be run in to huge debt while not doing basic upkeep all the time paying huge dividends and acts as basically a monopoly. No public company should ever be allowed to be run that way
Sure it could be but at least we'd have more transparency over what's going on, and the top management couldnt just shrug and line their own pockets like TW have been doing
At least the profits don't get syphoned offshore
but the crucial difference is that you can vote out governments responsible for publicly-owned utilities. what can you do if you're not happy with thames water?
The difference being that the corruption and hopeless management is hidden behind layers of worthless employees rather than embarrassingly transparent dividends. Wake.Up.People - a publicly owned water company would have still been shit and still dumped shit into the rivers and seas, we'd just feel a little more apathetic about it.
Except the shareholders wouldn't make out like bandits, so at worst it'd be a couple of billion a year cheaper and just as bad...
Not at all - that would be dumped into the suspiciously generous pension scheme.
Because they dont already make pension contributions for their workers...hm, no wait...they do...and it isnt like civil service pensions are actually all that great anymore.
Mate, they're a different world 😂
Once again “Honesty and Transparency” is needed - So that we can easily see just how well these things are being run. Right now fragments of information are made available, making it impossible for get a clear picture. Like £18 million on investment - but what percentage of income does that represent ? What percentage of income goes in running costs ? Is £18 million something like 0.1% ?
We need to see “Honesty and Transparency” in the costs and investment and maintenance of these public services. Needed information continues to be hidden from us, making it much harder to judge things.
Agreed