It was reported yesterday that the privatised water companies are continuing to waste astonishing amounts of water because of their failure to reduce leakages – and have been set leakage reduction targets by Ofwat, the industry regulator, that are so weak as to be virtually meaningless. This raises a key question about the ownership and operation of all the privatised utilities. It’s self-evident that shareholder interests are always going to predominate over the interests of consumers, employees and taxpayers. And that regulators are always going to struggle to minimise profiteering, prevent consumer rip-offs and encourage investment.
In this context, it’s worth noting the concept of ‘regulatory capture’. Well-understood by economists, this describes a situation where the regulatory agency established to act in the public interest, promotes instead the commercial interests of the industry it purports to regulate because of the latter’s economic and political muscle and the nominal interest taken by government in exercising genuine supervision or control over that sector.
No amount of rhetoric about ‘new targets’, ‘holding companies to account’ or ‘price caps’, whether from the Government or Labour, is ever going to change this situation. With £billions extracted annually from the privatised water, energy and rail utilities surely it’s time for a national debate about the merits of re-nationalisation – and the different forms this might take – of what are natural monopolies that used to belong to us all.