Regulatory reform, not state ownership, is the key to improved delivery of public servicesby Guy de Jonquières / November 7, 2019 / Leave a comment
Privatisation, Margaret Thatcher’s flagship domestic policy, is under attack, amid mounting public complaints about energy prices and rail fares, late and cancelled trains and alleged exploitation by rapacious and environmentally irresponsible water companies.
Spotting a potential vote-winner, the Labour Party has hit on an answer: re-nationalisation of swathes of British industry, starting with utilities and the Royal Mail. Despite the cost to the taxpayer, estimated by the Confederation of British Industry as at least £196bn—a figure Labour disputes—opinion polls suggest the party’s pitch enjoys considerable popular support.
However, Labour risks sacrificing the pursuit of sound policy to political opportunism and ideological zeal. There is little evidence that the nature of ownership is, or need be, the critical determinant of corporate performance and a good deal to suggest that, in Britain at least, nationalised industries delivered poor service and value for money in the past.
Few people aged over 60 recall fondly the days when state-owned British Rail operated dirty, unpunctual and crowded trains and the Post Office could take months to install telephones and charged high tariffs for all but local calls. Strikes were regular events, while sustained investment was hampered by the Treasury’s mistreatment of nationalised industries as macro-economic policy tools and piggy banks to be raided to fill holes in the public finances.
Nor do modern day examples support the notion of “public ownership good, private ownership bad.” In France, the cradle of statism in Europe, privately-owned water companies have been around since the mid-19th century and today supply three quarters of the country’s water. There is public grumbling about charges, but no popular clamour for the companies’ nationalisation.
Conversely, 18 of Britain’s 23 rail operators are wholly or partly owned by state-owned foreign companies, whose operations in their own countries are often held up as models by critics of Britain’s train services. Whether or not they do actually perform better—exact comparisons are difficult and depend heavily on how performance is measured—the critics’ arguments appear inconsistent, if not self-contradictory.
In truth, the quality of public services is determined far less by ownership models than by regulation. This was a field in which Britain led the world in the 1980s, pioneering systems for overseeing newly-privatised utilities that were widely studied and emulated…