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Infrastructure blog

Nationalisation of infrastructure: what could this mean for the sector?

14 November 2018
ICE has published a discussion paper on the potential effects that nationalising parts of Great Britain's economic infrastructure, namely rail, water and energy, would have on investment and service delivery.
Nationalisation of infrastructure: what could this mean for the sector?
In the Labour Party’s 2017 manifesto ahead of that year’s general election, details on the following were outlined:
  • Rail networks would be nationalised as each private franchise expires;
  • The water ownership system would be replaced with a network of regional publicly-owned companies;
  • The ‘Big Six’ private energy firms would have operator license conditions changed, and there would be a gradual transition to a publicly-owned, decentralised energy system.
With this in mind, alongside high public support for nationalisation, it’s important to examine the potential implications that public ownership on this scale may have on Great Britain’s infrastructure. This includes finance and investment, the jobs infrastructure sustains and creates, as well as the long-term viability and need to meet future challenges.

In compiling this discussion paper, ICE has conducted desk research and spoken with key stakeholders in the rail, energy and water sectors, as well as political parties and independent infrastructure experts.
The paper itself doesn’t represent a series of ICE policy positions. Instead, it outlines the potential costs, benefits, practical and technical implications that could result from nationalisation, providing a source of impartial advice for policymakers.

Strong public support and the realities of nationalisation

One key area of focus for ICE’s paper was to contrast the possible implications of nationalisation within the context of public perception. In opinion poll after opinion poll, the public is often overwhelmingly in favour of public ownership of the utilities and rail.
Questions have been asked around market competition, excessive dividend pay-outs and executive pay, public subsidies, rising consumer costs, corporate governance arrangements and levels of company debt. These are valid concerns, with some recognised by the government and action now underway to address them.
But there’s another side to this coin. As anyone in the media will say, good news doesn’t always sell.
The day-to-day safe and reliable operation of the utilities and railways, something that didn’t always occur under public ownership, and huge increases in investment and productivity are often not recognised.

And while rail prices remain high, UK water and energy bills are actually less expensive than many other developed countries’ state-owned utility networks.
Indeed, when the public were presented with a poll on nationalising the water sector with arguments for and against, support fell significantly.
While backing for nationalisation is a simple binary answer to give to a poll question, it’s unclear what real risks the public are prepared to take in enacting sweeping changes to the country’s infrastructure systems.

The bigger picture

Climate change, a growing population with more people concentrated in urban areas, and the digital revolution will all change the demands placed on infrastructure and shape how it’s used.
When the ownership of infrastructure assets is considered, meeting these challenges is paramount, not to mention the need to continue upgrading and maintaining existing assets.
Doing this will require heavy and sustained investment, as well as sensible regulation, good governance and accountability in order to provide best value to consumers.
Hence, one of the central arguments that’s put forward in ICE’s paper states that whether services are in public or private ownership, consideration must be given to these investment requirements and how they are to be best delivered.
  Download the discussion paper
  • David Hawkes, head of policy at ICE