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People in general generally don’t want to have to think about infrastructure.
Being forced to think about it because it’s not working is a sign of systematic failure.
Trouble has been brewing in the privatised English waste water sector for many years, and it has now spilled over into a three part Channel 4 docudrama, Dirty Business. Its heroes are Windrush Against Sewage Pollution and Surfers Against Sewage; the villains including everyone in charge at the Environment Agency.
I would say that in England the privatisation of water and waste water in 1989 made everyone angry mostly because it made them think about it. Things like boil orders and droughts suddenly became unacceptable, and not simply because someone was now profiting by them. Water company CEOs became the archetypal fat cats, though they weren’t paid more than other company bosses.
Water and sewerage are just too close to the bone; we want them to work safely and reliably out of sight. We didn’t actually ask for them to be competitive.
The deal was that there would be vigilant government regulation on all fronts. Control over drinking water quality, effluent discharge, leakage and charges.
But waste water and environmental protection got relabelled bureaucracy, and someone in our last crazy Conservative government decided waste water operatives could ‘self-regulate’. They could tell the government when they broke the law with illegal sewage releases into the rivers and sea. After all, why would they lie?
Yeah, right.
That and asset stripping/ borrowing against the assets to pay out to shareholders, including to the Vampire Kangaroos.*
It turns out they quickly found it was cheaper to pay the fines than invest in fixing the assets anyway. The argument that we needed private capital to invest to solve the mess, well, that just doesn’t seem to work in England.
The companies involved have now asked for fifteen years’ grace (no fines) to not fix them again.
Not sure this is a sustainable economic model for infrastructure?
Note: England here mean England, not Scotland or Northern Ireland. The majority of the private companies are responsible for both water and waste water.
*No prizes for any Australian who guesses who they are!
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Regulation can be an admission of failure – failure of a sector to do what it should do.
And the realisation that many organisations only take Asset Management seriously because some branch of government tells them they must can seem like our failure, failure to convince them AM is for their own benefit.
And some stop doing it when they are no longer pushed…
What incentivises someone in a position of some power in a public agency to do the right thing? More particularly, what encourages them to think longer term?
CEOs and other senior managers have several kinds of short-term incentives: personal annual targets and maybe bonuses. Local politicians with their own short-term ambitions for re-election. Immediate approval or disapproval from their communities.
Public-sector managers can pick up assumptions about their careers from the private sector. Moving onward and upward by moving organisations – or moving on before anything catches up with you.
On the other hand, whatever their views on their own careers, people in government regulations are normally set the objective of improving the efficiency and effectiveness of what they are regulating over time.
Of course there are poor regulations, and poor regulators. One urgent concern is governments depriving regulators of teeth and funding to enforce the regulations – the UK Environmental Agency’s ability to enforce the law on sewage releases into rivers, for example.
But overall, their incentives are far more aligned to longer-term Asset Management than the average manager. They realise they can’t change things overnight, that it’s about processes and competences and a longer-term perspective. The regulators I have known are generally firm, but patient. They know they have to be.
Infrastructure is too important to be left to ambitious executives alone.
Are we working closely enough with the regulators?
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