We cannot afford to return to state-run services
Privatised infrastructure is more efficient and more responsive to customer needs than nationalisation
How do you start your morning? Have a shower, put the kettle on, go through your post and take a train to work, perhaps. It’s no exaggeration to say that many aspects of modern life rely upon efficient and effective delivery of our infrastructure, by the companies that run them, from dawn to dusk.
It’s fair to say that this doesn’t work every time – anyone who regularly takes a train in and out of our major cities will have stories about delays, cancellations and crammed carriages. Firms rightly recognise that there have been issues with the delivery of some services, and that they must drive change. But we would be foolish to take for granted the enormous improvements private companies have driven across the UK’s infrastructure.
In the rail sector, there are a quarter more carriages on the railways, services have increased by nearly a third, and the frequency of services on many long-distance routes has doubled since the franchise system began. In energy, the £100billion invested since privatisation has seen the number of power cuts fall by half and the length of power cuts has decreased by well over half since the start of the millennium, against a backdrop of more than halving emissions since 1990. Investment in the water sector is double that of pre-privatisation levels. Leakages have been reduced by a third since the Nineties. Customers are five times less likely to suffer supply interruptions now than pre-privatisation, while low water pressure is becoming a thing of the past.
In just five years, Royal Mail has transformed its inefficient, loss-making operations to financial sustainability, higher productivity and better staff pay. These companies have improved because they are well-regulated, and because it also makes obvious business common sense to keep striving for a better service for their customers.
There are more improvements to come. Rail companies have committed to running 7,000 new carriages by 2021. Energy companies continue to reduce emissions as they transition to renewable sources. And domestic water bills are expected to fall by 4 per cent in real terms from 2020 to 2025.
One political intervention that may appear an easy-to-grasp comfort blanket – but would prove hugely damaging for consumers and the economy – would be to bring those industries back under government ownership. The Seventies was a decade notorious for chronic underinvestment in the railways, poor labour relations and government interference. The water network had to compete with other key industries for investment, and regularly lost out, leading to crumbling infrastructure. And the energy industry was in dire straits, with strikes prompting the Government to implement the infamous three-day week.
The truth is, we cannot afford to return to the failing state-run services that brought such strife to the UK. The market value of energy network companies is over £55billion, water companies over £86billion and Royal Mail £4.5billion – a total of over £146billion. Pay market rate and that’s an awful lot of taxpayers’ money. Pay below market rate and that’s a nasty shock for pension funds and savers, the value of which could well decrease if the fund has invested – as is common – in these industries. And, of course, the Government would have to take on the massive future investments that are still needed. If we keep returning to failed solutions, we risk not only going back to a system that had serious flaws but also getting trapped in an endless generational pendulum swing of squandered potential, while failing to tackle real customer concerns.
Ultimately, what most people want to know is “am I getting a fair deal?” Putting customers at the heart of decision-making and embracing new technology can help ensure this is the case. The water sector is ahead of the game here, operating customer challenge groups to hold companies to account. In energy, technology is being used to support proactive switching. In rail, “one click” automated claims systems help right problems.
With the eyes of the world on us as we chart a new future for the country post-Brexit, we need to go above and beyond to make the UK as attractive a destination as possible for the very best in global infrastructure investment. Giving investors a reason to head elsewhere is the last thing we can afford to do. Businesses and politicians need to be honest – about the challenges, but also the many benefits that the private sector has brought to our infrastructure. Consumers will be the real winners if we have a debate based on evidence, not ideology.