Consecutive right-wing British Governments have promoted a privatisation agenda. It is argued that public ownership is incapable of operating a cheap, cost effective, efficient, economical, customer service. Whilst privatisation, meets all that criteria with two added bonuses. Firstly, private investment, which relieves the public purse, and secondly accountability through democratic shareholding, also known as ‘Popular Capitalism’. I do not accept that privatisation brings the benefits claimed nor that public ownership necessarily provides an inferior service. Moreover, I believe, some services are so important, such as water, energy, and public transport, that they should be in public control. Such essential, strategic national assets are unlike any other commodities and there is a worldwide drive to privatise them. Privatisation is bad for the people and for democracy.
Strategic national assets should never be owned by a few. It concentrates the power of corporations enabling them to govern society. Water privatisation demonstrates this. The world is running out of fresh water, a basic human need. There has been a growth in municipal and regional water systems coming onto the international market. Bolivia had their public water system in Cochabamba bought by the American Bechtel Corporation. For a mere $2.5 bn, they owned and controlled all the water in the metropolitan area. Bechtel had exclusive rights to all the water in the district including the aquifer. They installed meters and charged for water from co-operative wells and effectively privatised rainwater by prohibiting its collection.
Price increases made water expensive. Unpaid bills gave the company the right to repossess a debtor’s home and auction it. As a result, citizens were having to make choices between schooling their children or medical care.
Protesters known as the Water Warriors wanted a return to public ownership. The Government used the military police to enforce the private contract. The people’s continuing protests lead to martial law. Following a state of near siege, the death of one protester and many seriously injured, a new water law was passed.
In America, the cost of water has led to some families being without running water for months. Where a resident owes more than $150 or is behind on payment by 60 days, the water company can turn off the water supply. There has been an increase in e.coli, pneumonia, salmonella and severe blood infections.
Water bills exceeding $4,000 for six-months service had been received. Payment plans once agreed, meant that the bill could not be disputed and could include a lien on property. The problem is so extreme that a charity has been set up to help pay the bills.
In Britain water privatisation has seen healthy profits for the companies. Thames Water (TW) now an offshore company owned by the Australian business Macquarie1, have posted another annual increase in profits, and again failed to pay corporation tax. TW, the biggest water company in Britain, has paid out billions of pounds in dividends to shareholders. In the same financial year that TW hiked up consumer bills by 6.7%, they made a profit of £549 million and received a £5 million rebate from the Treasury. Nonetheless bills are set to further increase by 3.3%.
In spite of this, the tax payer is bank rolling the construction of TW’s £4.2 bn Super Sewer along with an annual increase of £80 to TW customers. If the benefits of privatisation is private investment and to reduce public expenditure, it is dishonest that the Government is using the public purse to underwrite the risk to private companies.
Water, like with many state owned assets that have been sold by the Government is a natural monopoly. Therefore, it is not possible for competition to exist to drive down prices. This leaves the pricing at the discretion of the company. Water bills have risen by 74%, with leakage rates up 30%. British water companies intend to increase charges by 40% by 2020. It is the first and only duty of companies to maximise profit. As Milton Friedman, said ‘ A corporation is the property of its stockholders.’ Their sole interest is profit.
Another benefit of privatisation we are told is efficiency. Yet, ‘Professor Chris Binnie, is now questioning whether the £4.2bn cost is value for money. He told the Guardian that ‘it is almost certainly a stupendous waste of money for very limited benefit’.
Although the Conservative Government now decries public ownership as unprofitable and inefficient when they began privatisation in the 1970’s it was with the sale of profitable public owned companies2. The promised shareholder democracy has never emerged as the companies hold more shares than individuals. It is therefore not possible to regulate these companies. It is not possible to control something that is not publicly owned.
The Bolivian water scandal focuses the mind on the real cost of privatisation. Private companies can own the basic needs of human beings, everywhere. This is a transfer of public wealth (asset and income) to the corporate few and most alarmingly a transfer of the balance of power. In reality privatisation is about who controls society. By acquiring natural monopolies, the company dictates the market, the workforce, and the price. There is no accountability. They take money from the Treasury, but none or very little comes back, that dictates our welfare system.
The cheap, competitive service funded by private investment has not materialised. Instead there is a perverse level of public subsidies and the exorbitant pricing. We must return natural monopolies to public ownership. This way governments are accountable to the people for essential services. In private hands, boards of directors are only accountable to shareholders.