AstraZeneca pulled out of a planned vaccine manufacturing plant in Liverpool after a cut in Treasury support – giving the lie to government claims that it is regulation that is holding back the economy. Photo Gencat (Public domain).
In the last issue we looked at the background to how regulation operates. Here, we examine not just whether Britain is being held back by too much regulation, but also whether capitalist monopolies can ever be regulated…
When you read some stories in the press you hardly know whether to laugh or cry. As, for example, when chancellor Rachel Reeves “hauled in” the country’s top regulators in January to tell them – apparently – to scrap rules that hold back growth.
If you thought you’d heard all this before, you have. Three months earlier in October the new science minister, Peter Kyle, had announced the creation of a body to do precisely that. The new Regulatory Innovation Office, housed in the Department for Science, Innovation and Technology would, we were told, “reduce the burden of red tape”.
Back further than that, before the last election, Tulip Siddiq (a now disgraced ex-minister) had promised the finance industry that a Labour government would “streamline the regulatory burden on financial services and tear down the barriers to competitiveness and growth”. Not that she had any concrete suggestions, mind you.
Of course, it takes more than the announcement that something has been created to actually get it up and working. The Regulatory Innovation Office has yet to find someone to chair it, or even a website to show its credentials to the public.
The idea that Britain’s regulators are so fixated on safety and the avoidance of risk that they are holding back the country from a golden era of economic glory has been doing the rounds for decades. It’s a measure of the government’s desperation that it’s jumping on the same old bandwagon.
Vaccines
What’s really holding back hi-tech growth in Britain is not regulation. It’s the lack of investment. That was graphically illustrated two days after Reeves’s intervention. That’s when pharmaceutical giant AstraZeneca pulled out of a supposedly done deal to build a £450 million vaccine manufacturing plant in Merseyside after Reeves’s Treasury cut support for it.
And as the last issue of Workers showed, when it comes to the giant utilities and financial corporations there’s hardly any actual regulating going on. Mostly, companies have convinced government that the very best regulation is self-regulation. We are all living with the damaging results.
Our utilities have become the playthings of international finance. While Welsh Water is not-for-profit and the Scottish water companies are in public ownership, England’s water companies are more than 90 per cent owned by foreign companies.
If you want to see where that leads, take a look at Britain’s largest water utility, Thames Water. In 2001 it was bought by a German energy company, RWE. Five years later, the Australian financial services giant Macquarie Group paid £4.8 billion for it.
Macquarie’s intentions were made clear that same year when it more than tripled the dividend to £656 million – an astonishing £415 million more than the profit for the year. And to varying degrees, the asset stripping continued.
Complex
It was a complex deal involving Macquarie taking on £2.8 billion in debt. Macquarie then contrived, using offshore companies, to repay £2 billion of that debt by moving it to Thames Water.
When the utility was privatised in 1989, it had been debt free. In March 2024 its debt, according to an estimate by credit ratings company Moody’s, was £16.5 billion. That’s after piping billions over to investors since privatisation.
Macquarie also took over control of Southern Water in 2021. The picture there is much the same: poor performance, rising debt and higher bills.
‘What’s really holding back hi-tech growth in Britain is not regulation. It’s the lack of investment…’
In the face of massive evidence that dividend payments were being made at the expense of consumers and vitally needed investment, Ofwat, Britain’s water regulator, took on new powers in March 2023 enabling it to stop a company’s dividend payments “if they would risk the company’s financial resilience”.
“These changes to company licences reduce the risks that a company’s poor financial health may pose to customer interests and its ability to invest to protect the environment. If the company falls short, Ofwat will be able to step in and take enforcement action,” the regulator said.
Now, two years since Ofwat’s blather about increasing resilience, Thames Water is on the verge of bankruptcy. It wants to bring itself back to solvency by shuffling its debts and increasing prices by 52 per cent between now and 2030. Ofwat has said no.
So far, so promising. But when you look further you find that Ofwat has said Thames can raise prices by a huge 38 per cent over the period. Consumers – that’s all of us – are going to have to dig deep whatever happens.
Bills rise
That’s true not just for those in the Thames Water area but for households across Britain. On 30 January Ofwat announced that water companies could increase bills by £31 a year for the next five years, or £155, but for 2025/26 it helpfully allowed the water companies to increase them
by an average of 26 per cent, or £123 in cash terms. They call this extortion “front loading”.
Following this news was the announcement that the water companies, between them, would invest £104 billion in infrastructure to improve water quality and supply over five years.
“This is an ambitious programme of work…,” said Ofwat, promising, “Where companies underperform, or investment isn’t delivered, we will hold companies to account and protect customers.” Bill payers may be excused for being sceptical, given Ofwat’s history of underperformance and failure to protect consumers.
The essence of social democracy is the idea of peaceful coexistence with capitalism, that workers – both at work and at home – and capitalists can sort out their problems. In this context, regulation is portrayed as the way to keep capitalists in check.
Class interest
It’s an impossible task, given that the class interests of workers and capitalists are diametrically opposed. All regulation tries to do is to allow the best interests of capital to prevail, a tricky task since capitalists rarely know what is in their best interests.
In fact, the main product of regulation is increased prices for consumers. Companies just treat the risk of regulatory fines as a cost of doing business, and price up their products accordingly.
Last year the Financial Conduct Authority issued fines totalling more than £176 million. There’s even a website, Violation Tracker, dedicated to following the number of enforcement actions taken by government regulators. At the time of writing, the website lists the staggering figure of 117,000 cases since 2010.
The fines for poor service keep coming. And prices keep rising.
More of the same
Even those who believe in regulating capitalism and taming the monopolies recognise that regulation hasn’t worked. For them the answer is more regulation (or when it suits them, less regulation).
There are already a lot of regulators, exacerbated by devolution – around 90 of them according to 2024 official figures, including at least eight for the water industry alone.
And for connoisseurs of the absurd, there’s another idea. Why not set up a regulator to regulate the regulators? That, precisely, was the suggestion of the House of Lords Industry and Regulators Committee last year. The solution, it said in its report, published in February 2024, was to set up an Office for Regulator Performance (Ofreg?). Dream on.