This summer we’ve been plagued by stories of privatised companies failing customers and the public interest, as well as regulators failing to do anything meaningful about it – from sewage pollution in England’s seas and rivers by water companies to energy companies making enormous profits while households face extraordinary increases in bills.
Since the 1990s the UK has sought to regulate industries like water and energy in the private sector. State regulators like Ofgem and Ofwat were established to hold these companies to account – at least in theory. But three decades later this model of running utilities companies has proven to be a disaster.
While regulators increasingly talk tough, water and energy companies hand out vast dividends by lumbering the public with egregiously high bills, while simultaneously failing to invest in our future. The interests of shareholders, rather than the public, have been prioritised above all else.
Privatisation promised a world of consumer choice and modern, high-quality services but the real-world results have been a joke. The water industry has seen investment levels in critical infrastructure fall by up to a fifth, coupled with eye-watering shareholder payouts. The results for households? A40 per cent rise in water bills in real-terms since privatisation.
The results in energy are deeply troubling too. One study, from the University of Greenwich, found that energy bills are as much as 20 per cent higher than if privatisation hadn’t taken place. Research from Common Wealth has found that the “Big Six” energy suppliers, which are now just the “Big Five”, handed out £42.7 billion in dividend payments and share buybacks between 2010 and 2020. And the failure to properly invest in green energy has left the UK lagging behind its own insufficient climate targets.
Given the poor record on regulation of energy and water, returning the privatised utilities to public ownership offers the best chance of making these industries fit for the challenges of the 2020s.
The record of publicly-owned utilities companies demonstrates that public ownership can deliver efficient and affordable services, accountable to the wider public.
In France, the biggest energy company is overwhelmingly owned by the public – who currently hold an 85 per cent stake (set to rise to 100 per cent). Where the UK has had a 54 per cent increase in its energy price cap, the equivalent rise has been capped at 4 per cent in France.
This is not just a question of keeping bills down – it’s also a question of how we achieve a sustainable future. As the campaign group We Own It shows, many of the countries making significant progress on renewables have energy systems that are publicly-owned energy companies.
Public ownership can enable greater levels of democratic planning, essential for ensuring a co-ordinated response to the climate crisis, and a move away from decisions motivated by maximising profits to delivering on social and environmental goals.
The argument for public ownership of water and energy, where we have seen nothing but failure to regulate in the interests of society, is increasingly clear cut. This argument also applies to other utilities.
The utilities companies regulated by Ofcom have not delivered the high-quality services we all need. The painfully slow roll-out of full fibre broadband, which is fuelling regional disparities and holding back our digital infrastructure, shows why companies like BT Openreach would likely better serve public needs if they belonged to all of us.
Since privatisation Royal Mail has sought to cut jobs despite being profitable and faced rising customer complaints. Bringing it back into public ownership would offer a chance to rebuild the company as a public utility – and according to one study could save£171 million a year, to be invested in the service or used to bring down prices.
The model of “privatise and regulate”, born in the 1980s and 1990s, has benefited virtually nobody except for shareholders and management. Rather than simply asking regulators to fix the performance of our privatised utilities, we should take them back into public ownership so that they can be geared toward the public good.
Image: Pollution on the Jubilee River, managed, or mismanaged, by Thames Water. (Shutterstock)