You don't have to be sentimental about the days of nationalised industries to be dismayed at the failures of privatisationby Jonathan Derbyshire / August 21, 2014 / Leave a comment
Private Island by James Meek (Verso, £12.99)
Earlier this year, Dieter Helm, the Oxford economist, published a paper on the state of Britain’s energy market. The privatisation of the Central Electricity Generating Board (CEGB) in 1990, Helm wrote, was meant to usher in a “liberalised quasi-competitive market.” What we’ve ended up with, however, is something much closer to the “command and control” structure of the old nationalised energy industry. Today it is the Department of Energy and Climate Change (DECC) that is responsible for awarding energy contracts, rather as the CEGB used to engage private contractors to carry out investments on its behalf.
The energy industry is still in private hands. But, partly as a result of reforms introduced in the late 1990s, it is dominated by a handful of firms, the so-called “Big Six,” four of which are partially or wholly foreign-owned. The way the CEGB set prices before the 1990s might have been arcane and difficult to understand, but things are hardly any less opaque now. Indeed, in July, the Competition and Markets Authority began an investigation into allegations of “tacit coordination” on energy pricing by the Big Six after Ofgem, the industry regulator, raised the alarm.
Helm’s rather gloomy message was that we shouldn’t expect much from this latest inquiry into dysfunctional competition. The likely result will be yet more muddled intervention from DECC and another round in the unhelpfully polarised debate between partisans of increased state control and those who dream of a “more competitive landscape.”
According to the journalist James Meek, it was ever thus. “One of the oddest things about the privatisations of water, the railways, electricity and the rest,” he writes in his new book, “is that they were framed as binary possibilities: stay or go, stick or twist.” Beginning with the flotation of British Telecom on the stock exchange in 1984, either you were for “selling off the family silver,” as former Prime Minister Harold Macmillan put it in a speech attacking Margaret Thatcher’s privatisation policies, or for the continuation of state control.
This is a point Meek makes several times in Private Island, a history of 30 years of privatisation in Britain based…