Things not to do: Renationalize the utilities

Most of those who advocate renationalizing the utilities can have no idea what the utilities were actually like when they were publicly-owned. The term itself is an illusion, because the public could exercise no ownership rights; these were exercised by politicians, civil servants and labour unions. When telecoms, energy and water were state-owned, they were characterized by high costs, high prices, inefficiency, lack of modernity and under-investment.

In the absence of competition, customers were effectively captive, so their needs and wants did not have to be addressed. Economists spoke of "producer capture," since the utilities served the interests of the producers in the absence of any consumer power. They were invariably over-manned, since the monopoly gave the unions huge power to dictate terms of employment and to oppose any job losses that new technologies and efficiencies might bring.

They were mostly loss-making, supported by subsidy from taxpayers. Crucially they were under-invested because there were always more demanding claims on public funds. Politicians satisfied electorally powerful groups, but infrastructure renewal carried no votes. In the 1970s the state telephone service would allow you to rent with quarterly payments a handset designed in the 1930s. Phone calls were costly, and overseas calls were prohibitively so.

Water was conveyed along cast iron pipes laid down in Victorian times, and burst water mains in cities were reported daily in the news.  

Gas appliances were bought from gas showrooms in high streets, but customers had to go in person because the showrooms all had unlisted numbers to avoid being bothered by telephone calls. Electricity was inefficient, losing vast amounts of power in transit. It was also expensive, and disconnections for non-payment were common.

They were all transformed by privatization. The formula RPI – X for maximum prices meant that prices came down for nearly all of them, X being the savings anticipated from technological innovation. In the case of water the formula was RPI – X + Y to give the water companies the funds to renovate the storage and conveyance that was so badly outdated.

The greatest change was that they were opened to competition, to give customers the choice between competing providers. What had been thought of as natural monopolies were opened up by allowing different providers to use a common transmission network or grid.  

Privatization made them efficient and cost-effective and gave customers a choice. Renationalization would turn the clock back to the over-priced, inefficient and shoddy services that prevailed under state ownership.