Joseph Chamberlain became mayor of Birmingham in 1873, and took urgent action to deal with the City’s shambolic gas and water supply. Two rival gas companies dug up the City’s streets seemingly at random, while the water supply was intermittent, polluted and spread fatal diseases. Under his leadership, the City bought out the private companies and radically improved the service. The profits from the new municipal gas enterprise helped fund schools, libraries, parks, swimming pools, and what would now be called ‘social housing’. This policy was sometimes called ‘municipal socialism’, but Chamberlain was a successful industrialist and certainly did not see his actions as part of a war on capitalism: rather, they were practical steps to ensure that the City received an efficient set of public services, and that the profits from these enterprises would benefit all its citizens.
In the last thirty years, Chamberlain’s policies have gone into reverse. Public services have been sold off to large international corporations, the whole process being managed by a process of ‘contracting’ that involves millions of pounds of public funding for lawyers, accountancy firms, and management consultants. Utility companies have to be bribed with further tax receipts to provide essential public services: local authorities are being encouraged by government to pay BT to install high-speed broadband in rural areas; while central government will soon commit £100 billion capital expenditure to update the water and electricity networks. Why do the public have to pay? Because long-term investment in infrastructure does not generate the short-term profits needed to maintain corporations’ share prices.
Private contractors for public services are regulated on behalf of the public by a set of QANGOs. These can be active. In the last year, EDF have been fined £4.5 million for mis-selling electricity and gas to vulnerable customers, Npower was fined £2 million for breaching regulations on handling customers’ complaints, while British Gas was fined £1 million for lying about the amount of electricity it generated from renewable sources. Still pending is action over the cartel used by the major gas suppliers to jack up the prices paid by consumers.
The supposed benefit of privatisation is of course that competition generates efficiency and hence low prices. But the British people now pay well above the median pre-tax prices in Europe for gas and electricity, and our rail fares are the highest in Europe. What competition does generate successfully is a multitude of tariffs and fares. Go to a price-comparison website and enter details of your electricity ‘supplier’. Then check the box of your tariff. You will see dozens of choices, some time-limited, some pre-paid, all confusing. This is bewildering because each supplier is selling an identical commodity. Electricity does not vary between EDF, Npower or Eon - no ‘supplier’ has some magic ingredient in their electricity. It all comes through the same supply lines and does exactly the same thing whoever charges you for it. The latest government initiative is to force ‘suppliers’ to place their customers on the cheapest tariff. But this intervention only proves that the whole paraphernalia of market competition, contracts and regulation fails to work for the benefit of the public.
What would Joseph Chamberlain do? He would realise that high power bills cause hardship to many families and impede business success. His initial step would therefore be to set up a corporation to buy electricity from the various generating companies on behalf of the public. This would charge a few simply-understood tariffs, but would use its monopoly purchasing-power to push down prices. In the case of the railways, he would probably take over the companies running main-line services and scrap the whole crazy franchising system that means that one set of companies run the trains, another set own the rolling-stock and another one owns the track.
These are not a particularly radical steps: they are what happens in most of Europe. One of the strange features of the operation of privatised public services in the UK is that most of the private suppliers of public services are foreign-owned, in some cases owned by foreign governments. The power ‘supplier’ EDF is mainly owned by the French government. The German government is the controlling shareholder of DB, which owns Arriva Trains, Chiltern Railways, Cross-Country, Grand Central Railway, Tyne and Wear Metro, and the main UK railfreight company DB Schenker. The prices EDF, DB and similar foreign-owned companies are allowed to charge in their own countries are significantly lower than in the UK, which means that the profits they make in our country cross-subsidise our European neighbours. Next time you catch a train owned by DB or buy fuel from EDF, take pleasure in the fact that part of the inflated prices you pay is helping keep taxes down in Germany and France.
Thanks to The Observer Business Leader for 18th November 2012, page 44.
See also http://stuartcumella.blogspot.co.uk/2011/01/meet-new-boss-same-as-old-boss.html
In the last thirty years, Chamberlain’s policies have gone into reverse. Public services have been sold off to large international corporations, the whole process being managed by a process of ‘contracting’ that involves millions of pounds of public funding for lawyers, accountancy firms, and management consultants. Utility companies have to be bribed with further tax receipts to provide essential public services: local authorities are being encouraged by government to pay BT to install high-speed broadband in rural areas; while central government will soon commit £100 billion capital expenditure to update the water and electricity networks. Why do the public have to pay? Because long-term investment in infrastructure does not generate the short-term profits needed to maintain corporations’ share prices.
Private contractors for public services are regulated on behalf of the public by a set of QANGOs. These can be active. In the last year, EDF have been fined £4.5 million for mis-selling electricity and gas to vulnerable customers, Npower was fined £2 million for breaching regulations on handling customers’ complaints, while British Gas was fined £1 million for lying about the amount of electricity it generated from renewable sources. Still pending is action over the cartel used by the major gas suppliers to jack up the prices paid by consumers.
The supposed benefit of privatisation is of course that competition generates efficiency and hence low prices. But the British people now pay well above the median pre-tax prices in Europe for gas and electricity, and our rail fares are the highest in Europe. What competition does generate successfully is a multitude of tariffs and fares. Go to a price-comparison website and enter details of your electricity ‘supplier’. Then check the box of your tariff. You will see dozens of choices, some time-limited, some pre-paid, all confusing. This is bewildering because each supplier is selling an identical commodity. Electricity does not vary between EDF, Npower or Eon - no ‘supplier’ has some magic ingredient in their electricity. It all comes through the same supply lines and does exactly the same thing whoever charges you for it. The latest government initiative is to force ‘suppliers’ to place their customers on the cheapest tariff. But this intervention only proves that the whole paraphernalia of market competition, contracts and regulation fails to work for the benefit of the public.
What would Joseph Chamberlain do? He would realise that high power bills cause hardship to many families and impede business success. His initial step would therefore be to set up a corporation to buy electricity from the various generating companies on behalf of the public. This would charge a few simply-understood tariffs, but would use its monopoly purchasing-power to push down prices. In the case of the railways, he would probably take over the companies running main-line services and scrap the whole crazy franchising system that means that one set of companies run the trains, another set own the rolling-stock and another one owns the track.
These are not a particularly radical steps: they are what happens in most of Europe. One of the strange features of the operation of privatised public services in the UK is that most of the private suppliers of public services are foreign-owned, in some cases owned by foreign governments. The power ‘supplier’ EDF is mainly owned by the French government. The German government is the controlling shareholder of DB, which owns Arriva Trains, Chiltern Railways, Cross-Country, Grand Central Railway, Tyne and Wear Metro, and the main UK railfreight company DB Schenker. The prices EDF, DB and similar foreign-owned companies are allowed to charge in their own countries are significantly lower than in the UK, which means that the profits they make in our country cross-subsidise our European neighbours. Next time you catch a train owned by DB or buy fuel from EDF, take pleasure in the fact that part of the inflated prices you pay is helping keep taxes down in Germany and France.
Thanks to The Observer Business Leader for 18th November 2012, page 44.
See also http://stuartcumella.blogspot.co.uk/2011/01/meet-new-boss-same-as-old-boss.html
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