I think Granny Herald must have shares in Infratil, based on her rubbish editorial today:
Particular fervour is reserved for private-sector participation in this sector, perhaps because water is one of life’s necessities. Rarely is it conceded that, in reality, it occupies the same utility bag as electricity, which in this country and elsewhere has been shown to sit comfortably in private hands.
Um, no. It’s one of life’s necessities.
Rarely, either, is it admitted that, in matters of utilities and infrastructure, private-sector involvement is often essential to bridge the disparity between the demands on the public purse and the resources available to meet them.
Huh? Where do private sector owners get the money from? Oh yeah, the customers, who are also the people who pay for public services. There’s no free lunch here. Either we pay for a public service or we pay a private company, which is just out to make a buck (from your wallet) and isn’t accountable to the public.
As well as providing much-needed investment, private participation brings cost efficiencies and financial discipline.
And, pray tell, what evidence is there that the private sector brings cost efficiencies over and above the cost of the private companies’ profits? Evidence from outside a first year economics textbook, please. And, how does the private sector provide investment? Oh, right by borrowing the money, which has to be repaid with interest (at higher interest rates than the government can borrow at), ultimately paid for by the customer.
Boot (build, own, operate, transfer) schemes have, however, been widely used in Australia, albeit not always successfully.
Yes, great! Let’s copy a failed model!
The secret, from a ratepayer perspective, is safeguards that ensure the public partner does not have to bear more than its share of bail-out costs if a project fails to meet expectations. The private company must be in no doubt about the risk to itself.
Um, and again, fail on the basic economics. How does a company cover itself against risk of loss? By buying insurance or building up cash paid for by passing the cost on to, you guessed it, the customer.
At the same time, however, such companies need to be able to make any project profitable. A fair return is essential
Or, we could just continue to pay for local government to provide the services and not pay anyone’s profits. No?
the law will be changed to stop councils controlling the management of privately run water services but they will retain a final say on pricing and policy. That backstop may answer some of the concerns of those who fear the cost of water services will escalate. But it could also offer a considerable disincentive to private investment. If councils are inclined to meddle, companies may see themselves having too much of a burden of risk and too little chance of a viable return.
So, that passage admits that councils would have to let water prices rise if water companies are privately run. Wow, I’m really getting sold on this idea.
In England, the private sector has shown a ready appetite for investing in water services. The experience has been somewhat chequered, with critics pointing to price rises and queries over water quality.
Yeah, let’s have some of that here.
In time, the degree of private-sector interest will show if it has got the balance right.
Basically, Granny’s saying ‘let’s have a great experiment with the provision of a critical resource following the disastrous example set overseas. We’ll know it works if companies swoop in to suck profits out of us!’ Sounds fun. But, hold on, I thought success was people getting dependable, high quality water cheaply. Silly of me, I was thinking that this was about the interests of the people, not the corporates.
Currently, we have perfectly adequate publicly-owned water services but, apparently, a ‘balanced’ approach means allowing foreign-owned companies to come in and make a profit off them. There’s no balance there – just the blind, self-serving ideology of the right.
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