Who Should Own Utilities?

10 November 2022

Communism, Compassion, or Common Sense?

by Paul Branch

Our system of election and government has come in for a lot of scrutiny and soul-searching over the past few years, as initial carelessness and a degree of ineptitude has lately descended into incompetence, embarrassment and shambles.  The processes we have chosen to allow the likes of Boris Johnson and Liz Truss to hold the highest office in the land, and for others of either political persuasion to achieve or aspire to ministerial appointment, sometimes beggar belief.  Other countries have seemingly lost confidence in the ability of democracy to deliver political stability and economic well-being, notably across the Middle East and North Africa.  Just over a decade since the so-called Arab Spring, a widespread regional survey concluded that democratically elected governments are seen as weak, and that democracy is perceived as not being the perfect form of government which will fix everything for everyone.

Nations preferring a more authoritarian system, or which are more interested in “effective” government rather than the form it takes, included Iraq, Tunisia, Palestine, Libya, Jordan, Lebanon, Sudan, Egypt and Morocco (noticeable by its absence from the survey is Iran).  There was also a marked preference for strong leadership, defined as “a leader who can bend the rules to get things done”.  A solution there could be to change the rules, but never mind.  Of major common concern was the inability to afford to buy sufficient food on a regular basis, so the economy was seen as the overriding issue.   In which case a favoured alternative might be the Chinese model, an authoritarian one-party system with a mix of communist and capitalist principles which brought a huge number of people (but by no means all) out of poverty in the last 40 years.

You can obviously argue that such surveys in countries which differ radically from our own in terms of history, culture and beliefs are not necessarily relevant to how “Western” democracies get along.  But as with most things in life, there are always lessons to be learned if you look hard enough.  Perhaps an important point to bear in mind though is that with authoritarian states (sometimes referred to as hybrid regimes or flawed democracies, of which Russia might be one), effecting a change in government or its style can be difficult, if not nigh impossible without resorting to violence, if the leadership itself is not minded to change.  As we have proved conclusively and increasingly often to our own satisfaction, a democratically elected leadership that messes up can be removed and replaced almost in the twinkling of a misdemeanour or a mini-budget.

Our most recent prime minister pronounced the other week that we should not expect the State to fix every problem, which assumes the common sense approach that encourages us to look after ourselves wherever and however we are able.  Overreliance on a nanny state leads to lack of endeavour and initiative, resulting in the turgid mediocrity of the former USSR and in communism getting a bad reputation.  However, Rishi’s guiding principle can be seen as somewhat at odds with what many would take to be the prime role of government – to provide security and wellbeing for all.  So who or what was Rishi suggesting could be left out?   It certainly wasn’t those who can afford to adequately look after themselves and pay the price of soaring inflation in energy and food bills.  Maybe then it would be those less well-equipped to withstand the new economic climate:  those on minimal salaries or pensions, the unemployed or unemployable, those for whatever reason having no fixed roof over their heads, those in care, dependent on free prescriptions and willing the NHS and our frail care system not to disintegrate … the easy targets that society can sometimes forget exist, and who can otherwise be seemingly more trouble than they’re worth.   Sunak’s approach, commendable thus far, has been to throw money at almost everyone, and in so doing provide some relief to those in real need as well as those that really don’t need it.  He states that we can afford to give away only so much as the supply of money is finite.  Given that the Bank of England is starting, albeit slowly, to roll back the Quantitative Easing it started in 2008, he’s probably correct that printing even more of the stuff is no longer the answer.

We have to hope that the government’s compassion for the needy will at least reduce the immediate possibility of starvation, hypothermia or increased death rates due to other causes such as poor health care.  The longer term solution may be to look at the role of government in the more critical sectors of society and industry, and that inevitably leads to consideration of the nationalisation of key activities, or indeed renationalisation by turning back the clock.  The initial nationalisation process got underway in the period 1945-50 with the main industries being put in public hands to help post-war recovery.  Across coal, electricity, railways and steel the move led to increased outputs, more jobs, improved pay and conditions, and better services for remote areas.  On the downside was the cost of acquisition and the accusation that the government was propping up failing industries, especially when compared to foreign counterparts.  Other nationalisations followed, but the governments of Margaret Thatcher and John Major reversed the process so that steel, railways, air transportation, gas, electricity, telecoms and water were privatised in the 1980s, followed more recently by Royal Mail, in the interests of efficiency, productivity, regulation and the opportunities for increased share ownership across society.  It’s debatable whether these industries in their current forms clearly achieved any of these objectives save that of widespread share ownership.  What is clear in the case of energy in particular is the lack of long term practical strategies backed up by significant investments in the private sector unless the government provides significant subsidies or guarantees.  Which means the profits and dividends accrue to the shareholders (admittedly including pension funds) but the risk remains with taxpayers. 

One estimate of buying out our 5 major energy companies is that it would take £3 billion at current share prices, while others put the true cost much higher.  Against this is the cost of bailouts already provided by the government to energy companies this year alone, at around £8 billion to keep the lights on but with no tangible asset in return.   And while the government continues to sink money into HS2, other rail services continue on their mediocre way for want of private investment.  Our leaking water industry has also suffered from underinvestment, as has gas despite the prices we pay being among the highest anywhere, even accounting for the Ukraine crisis.

It seems that a governmental review of our industrial strategy and investment policy is long overdue.  The other concern though is whether in Westminster we have the talent and capability to assemble the data, assess it and decide appropriately this side of the next decade.  If we stick with democracy rather than try to unearth a charismatic and compassionate British version of Xi Jinping, maybe the answer is to regain possession of our critical national assets but outsource the way they are managed, in order to best serve the common good but in line with best commercial practice.  There must be several capable and wealthy captains of industry out there who would be only too pleased to help out.

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