Bleed them dry

The warm weather has got me thinking about hose pipe bans. I’m not sure whether they are instigated by the water companies themselves, or by a statutory instrument of government, but either way, it is at the hand of the water companies themselves, complaining about the lack of water. Sometimes this can be attributed to exceptionally dry weather, but often it can just be the case of the private sector cutting water reserves in an attempt to extract more profit.

Therefore, in my opinion, if a water company fails in this way, they should be fined. And fined heavily, because water is quite important.

But extending this, we could regularly fine them, and restrict the profits, for the greater good. Utility companies, and indeed many other natural monopolies that were previously nationalised and have since been sold off, often report large profits. This is just more money passing to the rich, from the poor. Which is bad.

However, we privatised them anyway, because we’re told that private companies run more efficiently.

But why do we let them make such high profits?

Consider if we bled them dry. We hardly let them make any profit because of the price caps and fines we imposed on them. Would this make them less efficient? I suspect not. I think, if anything, they would be forced to run themselves more efficiently in their desperate bid for survival. It would encourage the very efficiently we originally privatised them to bring.

The consequence however was that private investors were less likely to invest in infrastructure. But how much money actually ends up being invested in infrastructure now? Clearly a lot less than could be given the profit given out to the shareholders.

More importantly, if you have just skimmed most of the profit from a private company and taken anything they have left back in fines, you suddenly have a lot of spare money. Money that can then be used by the government to subsidise investment in infrastructure.

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This entry was posted on Monday, August 26th, 2013 at 11:47 am and is filed under Religion & Politics, Thoughts. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.