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Thursday, 23 March 2017

US and British Politics: Contrasts

Today the US Administration introduces its legislation to 'reform' Obamacare. This is very soon after the US election, and it shows that the Republicans in the House and the Senate have been working on this, alongside the Trump team. There will be a massive number of amendments considered before the final shape of the legislation is clear, but as almost all Republicans share the same general objective it is to be expected that the whole package will be enacted in the first half of the year. Trump is fulfilling his promise to move quickly: and he can do so because he has the two houses of Congress with him on this matter.

Also today the UK political class is again agonising about energy prices: only thirty-odd years since privatisation of gas and electricity supply and distribution. An elaborate structure of regulation was set up with privatisation - which has been much modified subsequently - and still everybody but the regulators is unhappy with the outcome. A charade of competition between suppliers has been bedeviled by the imposition of subsidies for 'green' sources of supply [paid by the customers], the early closure of viable coal-burning power stations [built and demolished at the expense of the customers] and the elaboration of complex pricing structures [to confuse customers]. The econocrats who are employed as regulators have in their minds the synthetic ideal of consumers making free, fully-informed choices in an ideal market; and they try to impose it on the customers. Their recent actions are designed to force customers to spend time [and to tax their brains] in deciding when to 'switch' from one supplier to another, one tariff to another, one layout of bill to another. The more customers change 'supplier', the more 'competition' is claimed to be succeeding. The supply all comes from the same gas-fields and power stations, along the same national grids to the individual homes, regardless of who the 'supplier' is: the 'supplier' simply simply provides the retail interface with the customer. The cost of advertising the rival retail services of 'suppliers' can only be paid for by the customers, who also have to pay for the corporate costs of the competing suppliers, including the return to shareholders. The whole great charade provides employment for economists in the companies, in OFGEM and in the Competition and Markets Authority: who are all determined that their game should continue to be remunerative for them.Today the econocrats are lining up to shout down the government's flirtation with the concept of capping prices. I find it quite hard not to agree with the Labour left, who argue for the renationalisation of the whole sector: which has certainly proved that pretend-competition does not work.

In another area, where privatisation has not yet delivered 'competition' for 'retail' customers, Thames Water has been subjected to a massive fine for evading the observation of the regulators [in this case, OFWAT and the Environment Agency] in releasing raw sewage from their works into tributaries of the Thames repeatedly over many months. There is no proposal on the agenda of either regulator to develop competition in the sewerage system. Thames has been, and will remain, a monopolist; and this case shows how complacent a monopolist can become: even when stinking filth in the rivers killed fish and made people ill. Employees recorded occasions on which they had reported the firm's failure to comply with basic requirements, when managers had suppressed and ignored their reports. The advocates of privatisation had argued that such complacency would inevitably occur in bureaucratic state-run supply systems: as a general rule, that was not true. The people who ran public utilities had a high sense of duty to the public; which is absent from privatised firms whose objectives include circumvention of regulatory requirements where they find that cost-effective and convenient.

Privatisation has not been a panacea: it has been a complex, costly charade.

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