Michael Howard today (on BBC radio 4):
The point about public ownership is this: if you have the industry in public ownership, it has to compete for resources with health, with education, with the police, with all the other legitimate demands on the public purse, and water when it was in public ownership was way down the queue.
People pay water rates Michael. This is an income bearing asset that could have supported other public programs. Instead it’s been used to enrich the already wealthy at the expense of underinvestment in infrastructure, callous polluting, and the risk of damaging bancruptcy.
When you release it into the private sector, you have recourse to private capital. You can make the investment that’s needed.
Errr. Except a PLC’s cost of capital is higher than the cost of govornment debt, so any investment is going to be harder to make and ultimately will cost the public more. As evidenced by the fact that they have done exactly the opposite of “make the investment that’s needed” over the past 30 years.
Dear god, he can’t possibly be actually that dense. I have to assume he, and by extension his party that continues to support this stupid idea, is acting in bad faith.
I think his point is that private investment takes the place of public borrowing, which has an opportunity cost.
Private investment is going to maximise its return unless well regulated, which it isn’t.
It’s just yet more failed Tory policy, and this is pre even Cameron and Osborne’s fuck ups.
Howard completely ignores the profit motive though. Public ownership doesn’t have to mean subsidised.
Under public ownership what the customer pays covers operating costs plus long term maintenance. What we’ve seen is that under private ownership what the customer pays covers operating costs plus profits/dividends, and long term maintenance is ignored until a bailout is called for.
Yep on opex, but where would the capex investment come from in the public ownership model?
Ah yes the state really struggles to find money for massive infrastructure investment.
or
not
Again. The state has lower financing costs than PLCs in adition to generally better borrowing terms. It is in a stronger position to fund investment. This argument is DOA anyway because water utilities have demonstrably failed to make adequate capex during the last 30 years of private ownership.
I think the last sentence here is the killer for the opposing argument, really.
Personally (not knowing enough about economics and public borrowing), my common-sense view is “if it can make money for the private investors, why can’t it make money for the government with their low borrowing costs?” People throw around a lot of counter arguments that have varying degrees of merit, but no arguments I’ve seen against public ownership deal with the “private ownership has demonstrably failed for the last 30 years” argument. Doesn’t matter what your political/economic/social viewpoint is, that’s just fact at this point
I meant mainly that sensible planning means you build an allowance for a capex budget into what you’re charging. This would normally be the case for both models but when you have to cater for the needs of private shareholders’ demands for profits, it’s all too easy to ‘cost save’ by just eliminating that capex budget