Thames Water’s woes don’t show the folly of privatisation, but a lack of competition
Thames Water has got itself into this position not because it’s in private hands, but because it isn’t subject to the improving forces of the market
Ask your your average punter whether privatisation of utilities has been a success and you’re unlikely to get a treatise on the relative merits of today’s service compared to the 1970s.
What you’ll get is frustration at the way things are today – train networks that seem to treat timetables more as a guideline than a rule, energy companies whose customer service is enough to have you bang your head against your smart meter, and now a water company that struggles with sewage, leaks, debt and, apparently, keeping hold of a chief executive.
But at the risk of sounding like Corbynistas bemoaning that the problem with socialism is that it’s never been tried in its unadulterated form, the problem with the privatisation of our utilities is that it has managed to replicate some of the worst parts of a nationalised industry: specifically, the lack of competition. In the water industry, competition has a long history.
London’s early water supply was not a public utility – it was for all intents and purposes privately owned, with competing firms battling over every connection.
As detailed in Nick Higham’s wonderful book The Mercenary River, that wasn’t brilliantly efficient for the firms, but it did ensure that the capital became well-served for water much faster than other European cities.
Much of that fell apart when the private firms effectively agreed to end their competition and carve up the capital into geographic areas. Service declined, prices went up, even if it meant roadways weren’t being dug up on a semi-permanent basis to fit new customers with a different water supply.
That system ended with nationalisation, but has come back in its own way in the form of Thames Water and the other utility companies who, with no competition and long-term contracts, can load themselves up with debt, cream off profits, and generally muddle along with the complacency that erodes all firms that don’t have rivals snapping at their heels.
So, no, the problem isn’t returning utilities to the market. It’s not letting the market work that’s the problem.