UK water privatisation looks little more than an organised rip-off

Privatisation is an example of a market-based supply-side policy. Selling off public sector assets helps to raise funds to reduce the national debt and increases efficiency as firms respond to the profit motive. However, the record of privatisation has been rather patchy. The government has been accused of selling public assets at too low a price, reducing potential benefits to the taxpayers that funded their creation. In addition, the efficiency gains have been rather tepid. Instead, we have seen the growth of monopolistic and oligopolistic firms who deliver poor quality and charge high prices, enriching directors and shareholders in the process.

This article by the FT explores the dismal record of water companies and the regulator, OFWAT, in recent years. Households and firms often have no choice in who they buy from, directors know this, investors know this, and, as a result, consumers are exploited. Until the regulator takes a harder line or the industry is nationalised, a recent Labour party proposal, we can expect to see a lack of investment, high¬†prices, ‘fat cat’ pay, and more “crappucinos”.

Source: UK water privatisation looks little more than an organised rip-off


Evaluating Sources – A* Evaluation

Questioning the objectivity of data provided in the extract can be a good way of scoring evaluation marks. If you recognise the source consider any potential bias. Take, for example, this recent article in the Telegraph.

The author has clearly cherrypicked data to back his ideological belief in the Laffer Curve, that lower tax rates may actually lead to an increase in tax receipts. This is because firms and individuals are less likely to use avoidance tactics, and lower tax rates can encourage employment and investment. It is a key supply-side policy.

However, the reality is somewhat different. The headline corporate tax rate has been falling since 2008.

However, corporate tax receipts are still lower than they were 10 years ago. Receipts have gone up and down, mainly the latter. You can find official HMRC data here.

Notice the author makes no reference to a time period where lower rates were met with lower receipts. After all, this is contrary to his ideological belief.

If you recognise the source and any potential ideology that bring in to question the objectivity of any data presented, make a note when commenting on the data (it works for both the left and right).