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Yet Another Anon

I rather favour Private Charities Limited by Guarantee running such monopoly services and also schools, hospitals, National Parks and companies such as British Waterways, Met Office, Ordnance Survey, NATS etc.... it would however be unreasonable to expect private shareholders not to make a profit while the assets remain owned by them where they are already.

As I understand it a few years ago the water companies and the government agreed contracts that included a clause requiring a 25 year notice of any nationalisation, naturally they would presumably expect similar notice if they were to be required to convert to not for profit companies or the assets to be transferred to such.

Given that Gas is a fossil fuel and so the aim should be to move towards phasing it out, is there not an argument for deregulating the Gas Industry except for safety matters and no longer classing it as an essential utility and focusing on Nuclear Power and renewables.

So far as airports goes and consumer functions of the CAA shouldn't these be deregulated and the remaining civil airports that are publically owned be sold off.

Network Rail should takeover and merge with Post Office Counters and given charitable status with the rest of Royal Mail Plc being privatised - Network Rail actually is a not for profit company already.

Phil Taylor

This idea is pretty dumb and ignores how useful profit is.

Companies try to make lots of profit. Great! Much of it it gets recycled into taxes and pensions. When they make profit a regulator can see it and tighten the screw if it is unwarranted.

Where you have a not-for-profit company or charity you will almost certainly find that the cost base grows and grows over time as there is no profit incentive to chop it. You will find there are many handsomely paid staff sitting in beautiful offices with top of the range IT systems. Actually you will probably find that the staff aren't in the office much as they will forever be jumping on planes going to international utility conferences. Eventually you will find that the roads, pylons and pipes are horribly over-engineered and that charges for these services are galloping ahead of inflation.

Profit is great.

TomTom

Public infrastructure should be funded through a Roads Holding Company, a Railtrack Authority etc selling Bonds to Pension Funds and the National Insurance Fund.

The returns from rentals, road pricing etc should flow to the Bondholders.

This way National Insurance and Pension Funds would be invested in infrastructure instead of National Insurance Funds being used to pay rentals on PFI projects which enrich private banks and leasing companies both on the capital account and on the income account; yet produce no income for National Insurance Fund contributions

Denis Cooper

I half agree with this. There's certainly a question whether it's sensible to privatise activities which taken by themselves are inherently unprofitable, but which we wish to maintain for social reasons or because without their continuation the state would end up paying additional and greater costs in other ways. Much of the railway system falls into that category, where profits and therefore dividends essentially come from the subsidy provided by the taxpayer, not from the operation of the business. I would also question how one could allow retail customers to choose between genuinely competitive suppliers of water without them laying parallel systems of pipes, and as it's difficult and expensive enough to solve the problem of leakage with just one system, what would be the point of (almost certainly) increasing that maintenance cost, and therefore the cost to consumers, by having two or more competing distribution systems? The same with the postal service: it's one thing having couriers making special deliveries to widely-spaced individual addresses at extra cost, but as it's difficult enough to maintain a reliable universal service with daily deliveries to every address in the country, six days a week, would it really make sense to have two postmen from two competing companies following each other round the streets, each delivering part of the mail, two pillar boxes standing side by side in the street, two sets of collection and sorting equipment and staff? I realise some people will immediately say "use email", but not everything can go by email, and more importantly there's a large chunk of the population who cannot or will not use email. Yes, OK, many of those are just old fogies who fought or went through the war, so once again some people will say "who cares, they'll be dead soon", but is that the approach which a responsible government should take?

Yet Another Anon

two pillar boxes standing side by side in the street
Maybe collection could be done by Local Authorities with different coloured stamps for different companies and they could deliver the mail to each of the nearest sorting offices respectively for the particular stamp applied to - that way there would only need to be one set of post boxes, the respective sorting offices then could sort them according to where they were going.

Kevin Davis

Whilst in principle I agree with this, because I run a NFP, I am afraid you cannot "buck the market". We should not be going aorund forcing this to happen as it owuld not be dissimilar to re-nationalisation. I am not sure that turning Network Rail into a NFP has made much difference to its performance and until the NFP market is more mature I would also caution against massively expanding this.

In many ways there is not a lot of difference between a profit making company and a NFP company. They both make profit, but it is what is done with that profit that is important. A NFP does not have shareholders to distribute profit, which leads us to the problem of who would invest if they do not get a return.

The Government has tried to cure this with the Community Interest Company, but to date that has had little real experience with the size of business you are exploring here.

Tom

The key difference between monopoly providers(eg government) delivering a service and private organisations is not whether they make a profit, but whether they are capable of making economic calculations about the costs and rewards involved.
Monopoly government providers sustained either wholly or mostly through subsidy based on taxation have no mechanism by which to perform economic calculations, and hence they are by definition going to be inefficient in their delivery of economic resources.
Privitisation will never be a success where an industry continues to rely almost wholly on direct subsidy, since that industry will continue to be run on uneconomic grounds (the survival of Network Rail depends not on the efficient use of economic resources, but on pleasing political masters. The decisions it makes therefore, are not based on rational economic calculation, but on political judgement).
This applies equally where the government has no direct involvement in running the industry and all of the participants are (allegedly) profit making. Farming in the West is not an economic industry, it is a politically-run wealth redistribution scheme.
To return to the policy at hand, while changing the organisations involved from being profit-motivated to not-for-profit might appeal to the public, it won't have any impact on the performance of the industries if the structure of the market isn't changed at the same time.

Roy

The case for public ownership is that a natural monopoly (urban roads) should be subsidised for general use by taxpayers.

Even here, the running of the service (road maintenance) can and should be run by a private company.

Economic efficiency of the economy is generally reduced the further away from the "natural monopoly" concept you go.

The corollary is that the minority of taxpayers who pay the majority of taxes (the usual 80% of taxes paid by 20% of people) will pay higher taxes to provide this subsidy for the general public.

The voting public naturally prefers these taxpayers to subsidise their services, so there is always a tendency for the voting public to approve generally subsidised monopolies such as education and health.

A conservative government should be on the side of reducing these publicly subsidised services to the policially acceptable minimum.

This proposal does the opposite, so I vote NO.

Wat Tyler

I share many of Eleanor's concerns about the performance of our privatised natural monopolies, but I don't think we have much evidence things would improve if we moved these infrastructure utlities out of the for-profit sector.

Indeed, I'd prefer to tackle some of the problems by introducing MORE market. The best example is water shortages, where if we imposed (er, yes, imposed) metering on all consumers, it would be much more worthwhile for suppliers to maintain continuity of supply. We'd soon have TV ads encouraging us to water our gardens more- but of course, because we'd be paying according to usage, we'd all plant drought-resistant stuff anyway. Le marchais in action.

I agree with others that profit is the cruel master that drives efficiency. But as with any monopolies,what we do need is astute regulators and joined-up regulation. Sadly, tht'a not what we've got right now(see eg http://burningourmoney.blogspot.com/2006/05/danger-uxb.html ).

Sean

While I am a capitalist, I view public infrastructure as best being in the hands of the Government (though subcontracting construction et al can, and should, be given to private firms) but I differ in that I think nationalisation of utilities will get anywhere in this modern era. It will be costly in the short run and will cause investment to flood out of Britain in the medium term. If you nationalise water how about airlines? Many questions will be asked leading to a drop in investor confidence.

Locking the gate after the horse has bolted is not a good policy. But keep up the good work and I feel that this policy will spark off a lively round of debates as to the extent of government ownership of infrastructure.

Bob B

Famously, the late Nicholas Ridley always opposed the privatisation if the railways, which he believed would always require public subsidy for social reasons. But the market economics of telecommunications, electricity and gas supplies are very different.

Competition between producers and providers is possible and consumers greatly benefited as a result of privatisation and the introduction of competition. In the 1970s, it was necessary to beg BT for a new phone line. And besides, I take it that no one is seriously challenging that consumers of the services of public infrastructure should pay for interest and amortization charges for the capital employed.

The serial problem with NFP provision of public infrastructure is carrying the heavy burden of the cost-push mindset in management.

TaxCutter

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