The general arguments for competition – arguments about quality, innovation and cost control – don’t apply very clearly to the supply of domestic water. The provision of fixed water supplies is one of the strongest cases of a “‘natural monopoly”; the quality of the product has to be uniform; and there are strong public goods argument to say that the provision should not be subject to the choices of providers or consumers. No house in the UK is considered fit for habitation if it does not have an internal fixed water supply providing drinkable water. So it’s already questionable whether the arguments for ‘competition’ being forwarded by the regulator, Ofwat, offer any clear advantage to citizens.
That makes the recent statements of Ofwat’s Chief Executive, Cathryn Ross, somewhat puzzling. She claims:
“We are living in an age of retail revolution, but water customers are being left behind. Customers tell us they think they should have the freedom to choose and don’t understand why water is the only retail market in which there isn’t some form of competition.”
Who, I wonder, are these customers? How many of us think of water as a ‘retail market’? Are we baffled by the lack of competition? Are there really deputations of villagers standing there with pitchforks and firebrands, demanding that their services be privatised?