Inequality, poverty and the privatization of essential services: A ‘systems of provision’ study of water, energy and local buses in the UK

This paper is concerned with the distributional effects of the deregulation and privatization of essential services in Britain since the 1980s, based on a cross-sector study of water, energy and local bus transport. Our approach locates end users within the structures and processes, and prevailing narratives that underpin both production and consumption. This framework highlights the ways that the provisioning of these vital services is contested, contradictory and underpinned by power relations. We show that, at one end, investors in these sectors have made generous returns on their investments but their methods of profit maximization are often not in the public interest. Meanwhile these profits are financed by end users’ payments of bills and fares. Many lower-income households face challenges in terms of affording, and even accessing, these essential services. Regulation has failed to provide adequate social protection. We argue that adverse social outcomes emerge from systemic factors embedded in these modes of provision. A narrative of politically-neutral, technocratic solutions belies the underlying contested nature of privatized monopolistic shared essential services. Moreover, a policy preoccupation with markets and competition obscures the inequality embedded in the underlying structures and processes and undermines more collective and equitable forms of provisioning.

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Over the past three decades, households in Britain have become ‘revenue streams’ for global finance via their consumption of essential goods and services such as water, energy and transport facilities (Allen and Pryke, 2013; Loftus et al., 2016; Meek, 2012). Some low-income households have suffered disproportionately, in some cases resorting to extreme coping mechanisms (such as ‘self-disconnection’), and many have failed to be protected by social policy. State intervention is dominated by market-oriented ideology, with policies centred on increasing competition or creating pseudo-competitive constraints on monopolistic providers. We argue that these policies have created adverse social outcomes which result from systemic factors embedded in the underlying processes and structures by which privatized services are provided.

In constructing these services in market form, providers and end users have been redefined as investors and customers. For consumers, the process of ‘market-making’ imposes a responsibility to manage access and affordability, ostensibly in isolation from the underlying production processes. The state has multiple and contradictory roles, charged with both protecting the rights of citizens and residents as well as creating an attractive investment climate. As we discuss below, a narrative of neutral technocratic solutions belies the underlying contested nature of private provision of monopolistic shared essential services, and the seemingly technical task of regulation is infused with political judgements.

Our approach connects investors with end users as part of an integrated system with attention to the structures, the core agents and the financial flows as drivers of inequality. This paper begins in the following section with an overview of privatization in Britain, and the way this has developed in practice in each of these sectors. This is followed by three separate sections each devoted to a segment of agents in the system: producers, consumers and the state. These sections are connected by the theme of the revenue stream. The final section concludes.

Overall our analysis shows that provisioning systems for these vital services have been consistently configured in the interests of producers rather than consumers, and high returns to capital at household expense have been tolerated, and even encouraged, for many years. For low-income households this can translate into multiple deprivations, as is demonstrated in these three essential services. Recent regulatory moves towards tighter controls are not embedded in the regulatory process but have emerged in response to political pressure. Elsewhere in the economy, a bias towards capital at the expense of households has been observed in the wake of the 2008 financial crisis. For example, the share of gross domestic product allocated to labour has fallen (Kohler et al., 2018) and the post crisis ‘recovery’ is regressive (Dagdeviren et al., 2020; Meek, 2012). This paper contributes to this literature, indicating that a similar bias in favour of capital can be found in the ways in which basic needs are met in Britain.

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