COMMENT - Government witnesses backlash against privatisation

First there was BT, then British Gas and water. Now consumer dissatisfaction is running rampant over the UK’s privatised railway system with the news that Railtrack has underspent its capital investment budget and South West Trains, owned by Stagecoach, has seriously mismanaged its driver redundancy programme.

Never mind the fact that British Rail, as was, became a byword for the inefficiency, shoddiness and corruption of the public sector, or that a recent report by National Economic Research Associates (NERA) has identified major improvements in utilities service levels – there is a public perception, as shown by poll evidence, that privatisation is synonymous with higher prices and lower standards.

Clearly a poor job has been done in publicising the benefits increased competition has brought to the consumer. Privatisation has also been tainted by the wider unpopularity of a discredited government and the arguments over boardroom pay and conditions, particularly as many of the share incentive schemes that have enraged the public relate to maximising shareholder return rather than customer satisfaction.

Finally, there have been the missed catches in the regulatory field with privatised industry watchdogs having to revisit pricing regimes that they had only just recently laid down.

But while there is no shortage of advice on the need for more regulatory accountability, there is much less in evidence on corporate accountability.

And this is where the real difficulty lies.

One of the major drawbacks to the privatisation regime has been the entrenchment of divisions between consumer and shareholder interests. The result has been that it has been all too easy to point fingers at the legitimacy of these businesses particularly when it comes to customer satisfaction.

The Government’s answer has been simply to offer more privatisations – the London Underground and the Post Office are on the agenda for a fifth term. Whilst Labour’s response has been a windfall tax of dubious merit.

Until the political debate addresses the legitimacy issue more directly, consumers will continue to feel they have had the short end of the stick.