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Privatisation's flaws


The success of the UK's public infrastructure privatisation has been to lever in investment at a rate central government could never have afforded.

The failure is that this investment is not always targeted at what's best for the nation.

This problem will soon be underlined by Ferrovial's takeover of airports operator BAA last week. No longer will government be able to rely on a willing but private partner to further its development ambition.

For the last two decades, privatised BAA has enjoyed a special relationship with government and has been pretty much relied on to help with aviation policy.

All this is set to change.

Ferrovial is almost certain to break up the BAA airports portfolio - it may even be forced to - and so will inevitably have to adopt a more commercial, market-driven approach to its investment strategy. The result will be that, no matter what government wants, Heathrow, not Stansted will be the focus.

Government is about to face the same intractable problems securing investment to underpin its air travel policy that it faces with other privatised utilities.

Take the water industry. The sheer cost of bringing an underinvested clean and dirty water network up to modern standards prompted privatisation in 1989. Since then we have seen massive investment and massive improvement across the UK.

Our beaches are cleaner, our rivers in better condition and our drinking water is purer than ever before.

But lack of a national policy means that drought orders are being imposed in the south east and government is powerless to do much if anything about it.

Then there's the ports. Last year we witnessed the culmination of the planning farce surrounding the proposed Dibden development on the south coast.

Operator ABP spent some £45M in its failed attempt to tiptoe through government policy.

Now we have delays at Shell Haven while government ponders whether or not to grant planning approval - despite promoter P&O's commitment to help with investment in road links to the new facility.

So while the UK has a massive shortfall in container handling and distribution capacity, government seems incapable of taking the difcult planning decisions needed to help.

And look at government energy policy. The market will decide whether to invest in nuclear power, clean coal, gas or renewable technologies, regardless of the outcome of the energy review next month.

Unless that is, government puts serious cash and planning sweeteners on the table. It has has vowed not to.

Government's powerlessness to drive policy against a privatised background is everywhere - at London Underground, in waste, in sustainable development. It is a big problem.

Infrastructure - whether airports, water pipes, treatment plants, ports, power stations, roads and railways - underpins the nation's commercial success. But as we saw with the railways and specically the Railtrack adventure, the market can only get you so far.

Beyond that the harsh and dif cult reality is that public cash must be available and decisions made to underpin policy and ensure that the nation benets with the private sector.

If we want the private sector to help deliver integrated public infrastructure - and history suggests that we should do - government must help. It isn't and right now everyone seems to be losing out.

Antony Oliver is NCE's editor

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