Booker: the looting class prevails
Sunday 16 June 2013
 These were: to improve efficiency in the industry; to promote wider share ownership; to maximise sale proceeds and ensure a healthy aftermarket; to maintain the momentum of the privatisation programme; to privatise within the lifetime of the existing Parliament; and to privatise all ten water authorities together. The official report on the sale, however, did point to the real reasons for what many people think was a privatisation too far. The Heath legacy had left us with orphan water authorities, the component operations expropriated from their largely municipal owners.
Then, more than a decade of under-spending had left an industry needing massive capital investment in order to meet European Community water quality directives. Two years after privatisation, with the new investment not materialisng, the British Government faced the humiliation of being dragged before the European Court of Justice as the "dirty man of Europe". Unwilling to add the cost of implementing EU directives to the public borrowing requirement, the Major government had to act.
Thus, as Booker recounts in his column today, in 1991 the regulatory model was changed. With the arrival of Ofwat, protecting the interests of consumers was kept up in lights but it had to compete with the new requirement of allowing the new water company owners "a reasonable return on capital". With that, the pricing structure that has emerged allows the water companies to base their charging on what is known as the "regulatory capital value" (RCV) which has soared from the original 1989 sale value of £3.6 billion to, currently, about £60 billion. Each year, water companies are allowed to increase their charges by the retail price index, based on this value, plus a mysterious "K" value, set generously so as to encourage investment, with the Government having "stacked the cards" in favour of shareholders over consumers, and thus enhancing the capital accumulation process. With the use of the RCV as a baseline, it has been called "a prime example of corporate welfare". By this means, average domestic water charges have increased threefold since privatisation, and the regulator has effectively been "captured", regurgitating industry propaganda to justify its existence. Thus, in February of this year, we saw Pamela Taylor, Chief Executive of Water UK. the trade body for the British water industry, declare that, but for the "considerable and significant efficiencies" since privatisation, the average annual bill of £390 would be £130 higher. Yet, in fact, we see Scottish Water - traditionally producing water at a higher cost than in England, now undercutting English companies by more than £50, while remaining in public ownership. Shocking, when we approached Ofwat for details of the charging scheme, it volunteered, unbidden, the industry propaganda line, telling us that "Ofwat's challenge means companies are significantly more efficient now than they were at privatisation … Without this challenge (i.e. if companies had carried at the same level of efficiency as in 1989) bills would be more than £120 higher". And now, as Booker points out, in recent years all but seven of what are now 19 companies, each enjoying a local monopoly, have been sold off into the ownership of a multinational array of financial concerns. British consumers, as Corporate Watch reports, have become helpless milch-cows, with almost one third of the money spent on water bills going to banks and investors as interest and dividends. Particularly aggrevating then are the tax dodges which the companies are now employing, and especially the use of the "Eurobond" tax loophole that exempts shareholders from having to pay a 20 per cent withholding tax. This, the Government said it would close, but attempts have been abandoned. All this thus has the hallmarks of a regulatory failure, and the only real hope of ending this state-sanctioned theft to continue must lie in concerted action between the Government and Ofwat. Yet, as Booker concludes, the draft Water Bill shortly to go through Parliament proposes only that the financial constraints imposed on the industry by Ofwat should be further relaxed. The looting class must be served, and the consumer interest continues to take second place. COMMENT THREAD Richard North 16/06/2013 |
Politics: criminalising government waste
Saturday 15 June 2013
 Interestingly, both countries have their campaigning organisations, in the UK the Taxpayers Alliance, and in Germany the Taxpayers Association, both of them beating the same drum. In fact, most countries have similar organisations – there are 29 of them in total in Europe. There is even aTaxpayers Association of Europe although, rather like the Taxpayers Alliance in the UK being a front for the Tories, this one seems rather too close to the EU. Looking at the two organisations in the news, of the two, I think the German Association is preferable. It is more focused and is far more analytical. As regards waste, it notes that while public failure is as common as it is costly, this is not so much an immutable law of nature as a "system of collective irresponsibility". One of its suggestions is that much of the federal spending should be transferred to state level, where there is more scrutiny and accountability – a nostrum we very much endorse in terms of The Harrogate Agenda. Given that you have a functioning and effective system of truly local democracy, the huge epidemic of waste that we see linked with central governments – wherever you go – could be avoided. To add to that, though, the Association has come up with a new campaign. Just complaining about waste, it says, is simply not good enough. It wants to make waste of public money a criminal offence. In their campaign brochure, the case is closely argued, the premise being that personal criminal liability is used to counter the "It's not my money!" mentality of decision-makers. The Association draws a parallel between tax evasion, for which the citizen can be punished, and waste, for which there is no penalty. It sees the two as different sides of the same coin, calling for full civil, criminal and legal responsibility to be applied to public servants for their actions. The mismatch between the prosecution of tax evasion and the lack of action against tax waste, it says, "is now striking". Thus, the Association wants to see a new offence of "Financial Infidelity" in the criminal code, to facilitate the prosecution of civil servants and public officials when tax money is wasted. In addition, a special duty is imposed on those responsible for granting or spending public funds, which permits penalising poor performance. And this should apply through all levels of government, including municipalities and corporations or institutions where public law is applicable. Alongside this, there should be new reporting requirements, to improve scrutiny and to enable possible offences to be detected, and individuals identified. And, to match the increasingly powerful controls acquired by tax collection authorities, public auditing bodies should be given greater investigative powers. Thus, as tax evasion is vigorously addressed, so should be waste of taxpayers' money. Unlike our own Taxpayers Alliance, which seems to devote most of its time and energy to empty stunts, here there is a organisation which is actively pushing for something that could have a real impact on the growing burden of government waste. As importantly, the German Association is addressing the mismatch between citizens and public officials. The one group is held criminally responsible for its actions yet the other is not. Changing that balance is vitally needed to correct the reality of modern government, where there are rules for us, and none for the looting classes. And in this, the Germans are making a start. COMMENT THREAD Richard North 15/06/2013 |
Water: what can they have been thinking?
Saturday 15 June 2013
 This is an establishment totally out of touch, one that is completely divorced from popular sentiment and has not the first idea just quite how devastatingly insulting this gesture is. In the history of the nation, this is a "let them eat cake" moment, when people realise that our ruling classes have lost it, that there is not one redeeming feature to them. COMMENT THREAD Richard North 15/06/2013 |
Sunday 16 June 2013
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