In the UK the continuing feed of dire news, in particular for supply of energy and water, is disheartening. It seems that provision of these basic and essential utilities is more challenging than ‘they’ (whoever ‘they’ are) can cope with. Booked as I am to deliver a keynote address on ‘Intelligent Infrastructure for an Intelligent Nation’ at ISNGI22 in September I thought I should ponder the matter.
I am not concerned with the allocation of fault or blame to individuals, companies or governments. To do so would be fruitless – the current situation is an emergent property of the elements and organisation of the system so perhaps we should change the system? What could and should we do? What are the elements of the system which, if changed, could lead to a different outcome? There are many; each individual physical element, the networks that connect those elements, the interdependencies between them, the supply chains, the business model, government policy, regulation and so on. Intervention(s) in any one or more of those elements might lead to change, in prices, in service, in resilience, in availability. However, drawing on the work of Werner Ulrich (Ulrich, 1983) it seems to me that ultimately, what will have the biggest influence, is addressing the questions:
Whose interests are served by the organisation of the system?
Whose interest ought to be served by the organisation of the system?
After the second world war, the incoming government saw fit to take a number of industries, not least the utilities, into public ownership – gas, water, electricity, railways, coal mining and steel-making. The experience of the subsequent 40+ years was that such public ownership was not always successful in meeting the needs of the customers nor of maintaining efficiency and relevance. A blog is too short an instrument to explore causes but we can consider the contemporaneous governmental shift in balance of spending away from investment in physical infrastructure to social investment in healthcare, education and housing. This was accompanied by a necessarily bureaucratic management approach required to demonstrate accountability for resources in a time of shortage. The inability to invest in the physical infrastructure, absence of a focus on customers (with no competition why is it needed?) can be thought to have led to deterioration in performance, uncompetitive increase in costs (relative to an emerging global market) and so on. The industries were, in many cases, being run in their own interests rather than those of their customers.
From 1979 onwards a reversal of this process began, some industries were sold off by the state and in effect others closed down. Some such closures were related to economics, some might be considered to have been primarily political in pursuit of the mantra of economy, efficiency and effectiveness (though it is widely believed the last was never achieved). However, regardless of the driver, a number of infrastructure providers were broken up and sold off to investors. Initially many of these were private individuals. However given the financial gains available from improving efficiency or productivity and reducing costs, larger corporate investors also participated including investment banks and non-UK state investment vehicles pursuing the obligation of profit maximisation. Those of us who have lived through both periods may argue that some aspects of these are much improved, although by no means universally so. What is clear to any observer, especially given the current evidence of performance, is that some of those industries are still being managed in their own financial interest. The only difference is who owns the shares! Capital is still unavailable for investment in supplying and cleaning water or stopping leaks, gas storage is limited, electricity provision is dependent on overseas suppliers both through inter-connectors and the skills to design, build and maintain energy generation facilities. Meanwhile profits are being reported and dividends paid to the shareholders.
Some people, including parliamentarians, either continue to defend this socially indefensible position or call for the renationalisation of certain industries. It should be clear to any observer that neither solution works in the interest of the public at large.
In my 2010 report, commissioned by Prof. Brian Collins, then, Chief Scientific Adviser to BIS (now BEIS) ‘Infrastructure Resilience Matters’ (Beckford, 2010) I wrote that the resilience of infrastructure could be enhanced by an alternative ownership model, one in which the government on behalf of the citizens might invest in a ‘resilience share’, the provision of ‘just in case’ capacity that would not be commercially viable for a privatised utility. A methodology was proposed for resilience assessment across water, waste, energy, transport and ICT with discussion of the critical interactions of energy and ICT and international supply chain resilience as key factors.
In the 12 years since that report the situation has deteriorated, not just nationally but through substantial shifts in the global political situation. Time for a change.
In Intelligent Nation (Beckford, 2021) I wrote that:
‘Alternative ownership and investment models including community participation may be more appropriate to the needs of an intelligent nation’
It seems to me that we need to develop a form of community ownership for utilities; one in which the individuals who use or buy the services are also their beneficiaries and in which the measurement of ‘values’ extends to social and environmental aspects as much as it does the financial. Stafford Beer wrote in 1985 that:
‘the purpose of a system is what it does’
If a utility is to serve the community (a community on which it depends for its continued existence) then its purpose is fulfilled only when it does so. A utility exists to provide a service (electricity, water, gas etc) to a community and its success should be measured by the extent to which it does so. Measuring success and value in this way means that, Beer 1985 again, ‘profit is not an objective but a constraint upon the continued existence of the organisation’.
So, the organisation must earn more than it spends and what it spends must fulfil its purpose. That is a model which can only be fulfilled by:
Community Ownership (it is not for sale to anybody, ever);
Customers meeting the fair cost of the provision of the service;
Surpluses (should there be one) being either reinvested in the organisation (if it is falling short of capacity) OR being returned to the customers (if it is not).
Capital raising for such an organisation (which would need both professional management and a council of members) could be achieved through a system of bonds or debentures with fixed long-term rates of interest (and redemption where appropriate). This would be attractive to long term, low speculation investors (states, pension funds etc) while retaining within the organisations the profits needed to sustain the service. It would of course be necessary to provide a regulatory regime designed in such a manner as to appropriately protect the interests of all parties, informed by the desire for social, environmental and economic justice.
This is necessarily incomplete, much work requires to be done to develop an effective community ownership model so we had better get on with it before the heating goes off and the taps run dry. We can look for inspiration to the examples from the USA and Denmark I mentioned in Intelligent Organisation (Beckford, 2021). There will be challenges, perhaps myopia of politicians and the self-interest of the current owners (who would of course need to be appropriately compensated).
The current situation is not sustainable, resilient or moral.
Beckford, J., 2010 https://beckfordconsulting.com/wp-content/uploads/2019/11/Infrastructure-Resilience-Matters.pdf
Beckford, J., 2021 The Intelligent Nation: How to Organise a Country, Routledge, Oxford, UK
Beer, S., 1985 Diagnosing the System for Organisations, Wiley, Chichester, UK
Ulrich, W., 1983 Critical Systems Heuristics of Social Planning, Haupt Verlag, Berne