Utilities drag the chain on investment levels
Wednesday 05 June 1996
It is hard to generalise across the gas, electricity and water industries, but it seems to be the case that after an initial burst of activity when spending was indeed dramatically higher than prior to privatisation, the utilities are now falling back into bad old ways. Last year, for instance, spending across these three industries was nearly a fifth lower in real terms than the year before.
Much has been made of apparently poor investment levels in the UK economy. But if the utilities are stripped out, the position actually doesn't look that bad. Progress is admittedly not brilliant, but at least investment in the rest of the economy is rising.
So what is happening with the utilities? Are they under-investing? Both the water and electricity regulators profess themselves satisfied with the situation. What is now happening is characterised as a trough after a prolonged period of high spending. Furthermore it may be the case that the utilities are becoming more efficient in their use of capital. The water industry in particular seems to be getting a lot more for a lot less than anticipated at the time of privatisation. To some extent the benefit of this is already being shared with customers.
But this is by no means the whole story. Price controls were set on the assumption of particular levels of investment spending. As the gas regulator has already pointed out, if spending is not as great as anticipated, it means, in effect, that we are being overcharged. The evidence of this is in the huge repayment of capital to shareholders being undertaken by the electricity and water industries through share buy-backs and special dividends. These companies have got more money than they know what to do with. Rather than investing it, or cutting their charges, they are handing it over to shareholders. Nobody is saying they are breaking the rules, but there may be an element of cutting investment to maximise profits.
In the case of a monopoly utility, there is actually a very reasonable case for arguing that the money should be ploughed into investment whether or not it is commercial to do so, for there is an ill-defined general public and economic benefit in having a spanking new infrastructure. The Channel Tunnel will undoubtedly one day be of great economic benefit to Britain, but nobody would have invested in it had they not been hoodwinked into believing it a commercial enterprise. But perhaps not. Even Labour these days finds the idea of non-commercial investment a pretty heretical one. No wonder it believes the case for a windfall profit tax - an alternative of sorts - has been strengthened by the new investment figures.
- 1 Crystal meth addict 'gouged out his eyes and ate them' while high on drug, Australian MP claims
- 2 Saudi Arabia 'seeking to head United Nations Human Rights Council'
- 3 Group of students refused entry to Leicester nightclub 'because they are black'
- 4 Irish people are travelling home from all over the world so they can vote to legalise gay marriage
- 5 Arsenal fan asks the Queen for tickets to the FA Cup final - gets a reply from Buckingham Palace
Ireland's same-sex marriage vote: Dublin in party mood ahead of historic poll result
Saudi Arabia 'seeking to head United Nations Human Rights Council'
The ten most unequal developed countries in the world
Toddler throws a tantrum at the White House – in front of Barack Obama
Irish people are travelling home from all over the world so they can vote to legalise gay marriage
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
The day that Britain resigned as a global power
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...