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Solutions for the water industry in the North – Privatisation?  State ownership? Or something else? 

James Carr

12 January 2011

One of the most common solutions proposed after the water crisis has been that privatisation would sort out the problems of investment, efficiency and governance.

Supporters of privatisation however are unable to answer criticisms that while the move to a more commercial footing has reduced staff numbers in NIW and presumably made it more efficient it does not appear to have removed inefficient management. 

Commercialisation has led to an army of expensive consultants who have been at the centre of procurement scandals where value for money has been the last thing that could be demonstrated.  The employment of the Steria Company for billing and customer services, which were to be deployed with the introduction of direct charges, has involved a huge increase in costs, scandalous mistakes in billing customers and latterly a multi-million pound bill to taxpayers when the contract between this company and NIW had to be ended.

Large parts of NIW are already privatised, not only through use of consultants, but with 50 per cent of water and 20 per cent of wastewater being provided by private operators.  No one, not least NIW, has even tried to demonstrate just how these operators provide value for money.

Supporters of direct water charging have failed to advance convincing arguments or evidence demonstrating how charging will increase the conservation of water. They are unable to explain how an industry with huge fixed costs could fairly charge customers in a way that would accurately reflect costs while encouraging efficient usage.

Control

Conor Murphy has talked ‘left’ as he has criticised the current governance model and has implied it has stopped him taking the direct control he needs to make the industry work.  He also claims that by doing so he could protect jobs from the demands of the Utility Regulator which advises on the financing, investment and prices charged by NIW.

Most job losses however have already come under Government control and ownership.  There seems to be no impediment to Conor Murphy’s influence and control of the company since he was able to sack all but one of its non-executive Directors and put his own political appointees in their place. 

Most obvious of all - what does he want to do that would improve things that he cannot demand now?

Socialist

So is there a socialist answer?  We think that there is but before setting out what we believe this is we should dispose of some ideas that come from the left that purport to offer socialist solutions.  The first of these is that straight-forward ‘nationalisation’ is the answer.

While socialists should oppose privatisation we should not support the idea that the socialist solution is ownership and control by the capitalist state.  All the scandals, service failures and milking of taxpayers’ funds by consultants and PPP private companies have taken place under state ownership.  Whoever thinks that ownership and control of the water company by the bureaucrats of the Department for Regional Development and Minister Murphy is socialist is therefore seriously mistaken.

The calls for increased investment are correct but let’s be concrete about this, what exactly does this mean?  It means giving the water company more of our tax money for the company in turn to give it to private contractors to build more treatment works, sewers and water pipes - more money to private contractors to make profits.  What’s particularly socialist about this?  Given the procurement scandals in NIW how could we be sure it wouldn’t waste it as it has been accused of doing in the past?

Waste

This brings up the question of efficiency.  NIW is supposed to be very inefficient so why would workers simply give it more money to hand over to private contractors?  We are kidding ourselves if we believe that this doesn’t matter because it is largely financed by the state through our taxes or would be acceptable if we were directly charged.

If there are too many staff employed to be efficient are socialists in favour of this when we claim that socialism is more efficient than capitalism?

Of course we are opposed to companies, whether private or state, making workers redundant because we are opposed to the oppression and exploitation of the working class, because generally we are also members of this class, and because socially and politically unemployment makes the working class weaker.  But we are in favour of useful and productive work, of fulfilling and enriching employment, and this can never come about through wasting our time or labour.

It is not enough to say these aspects must wait until ‘socialism’ or ‘till after the revolution.’  We are talking about a programme of socialist measures that will demonstrate the superiority of socialism now, in fighting to defend workers’ interests and showing the superiority of workers’ running society.

This means rejecting the idea that the water company should be a glorified job creation scheme.  It should be run efficiently with the additional staff trained inside the company to develop new lines of service and production, including advancing its research and development potential, such as clean energy production and conservation.  In the meantime there is ample work in replacing and fixing broken pipes and other plumbing type jobs on private homes and businesses or installing water conservation fittings in residential and business properties.  During the recent crisis these workers could have been quickly mobilised to deal with leaks and re-establish water supplies.

State ownership is generally an obstacle to developing new lines of work and private ownership finds it easier to sack workers in order to make profits than to invest in training and research and develop new lines of production or service.  Only a water company owned and controlled by the water workers themselves could embrace and achieve such objectives.

Amid the calls for privatisation, mutualisation, continuing ‘GOCO’ status or direct incorporation into the DRD the socialist answer is workers’ control through a worker owned cooperative.  This of course would not be the only piece of the jigsaw of a solution, because it would still be necessary to make the water service accountable to the population it serves but it would be the most important step forward.

Water Charges

This does not deal with the method of financing the water company with proposals for the introduction of direct charging the one most often advanced as a panacea for numerous problems including water conservation, adequate funding and imposition of the appropriate incentives on the company.

Some campaigners have opposed direct charging because it would involve double charging and this is true.  The water service is already funded – by the Government – which in turn is paid for by mostly working class tax payers.  Direct charging could only be ‘fair’ if the amount directly charged led to reduced taxation.  Since the Stormont Executive does not control taxation the imposition of charges would simply give the Executive more money to spend.

This is often supported on the basis that more could be spent on health services for example.  Government accounting changes may be introduced (should the water company remain in Government ownership and it does not introduce direct charging) that may mean increased costs charged to the Executive by the Treasury in London, which would leave the local administration with less money to spend.  The problem is that we can have no confidence that any additional funding provided by charging for water and wastewater services would be spent for the benefit of the people and not either wasted or used to subsidise the stupid and reactionary proposal to reduce local corporation tax to the same level as the South. 

Thus while socialists are generally in favour of the greatest transparency in how workers are taxed, with direct charging obviously being clear in this respect, in the current situation the introduction of charging would be an assault on workers’ living standards, a step towards privatisation, an invitation to more scandals driven by incompetence by the water company and possibly an invitation to either a waste of money by the Executive or subsidy to a local private sector which has already proved over decades that it is a failure.

Next Steps

The Executive has announced that two investigations will take place; one into the causes of the crisis and a second into the role of the DRD.  It is not clear that the two can really be separated but there is no mechanism within the present institutional arrangements to ensure that this could be carried out by a single genuinely independent body.

To a great extent the knowledge of what went wrong, at least at the operational level, is known by the water workers themselves but it is unlikely that they will have the opportunity to provide their testimony.  The only way to ensure that their knowledge of what exactly went wrong is heard is a workers enquiry into the crisis, which could be organised either by the trade unions or by an unofficial group of workers.  In any case they must find a way to give their view and begin to establish some measure of control over the direction of the company if it is not to stagger on to further crisis, to the sclerosis of DRD control or exploitation through privatisation.

 

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