20 Years of Progress
We now have salmon in the Mersey, more than 100 Blue Flag beaches, and our drinking water is recognised as up there with the best in Europe. We have come a long way since the water and sewerage sectors were privatised 20 years ago.
In 1989, polluted beaches and rivers, and a neglected infrastructure meant we were seen as the ‘dirty man of Europe’. In 1990, less than 80% of England and Wales's bathing waters met the required standards. There was high industry debt, yet taxpayers had little appetite for spending more. Water companies were seen as inefficient, and the system meant there was little incentive for them to improve standards of service. Privatisation of the sector sought to tackle these challenges head on.
And we have come a long way since then. We now have salmon in the Mersey, more than 100 Blue Flag beaches, and our drinking water is recognised as up there with the best in Europe.
Leakage is also down by a third since its mid-90s peak. That's more than enough water saved to serve the daily needs of London, Birmingham, and Manchester. And the proportion of properties at the highest risk of sewer flooding has reduced by more than 75% in the last decade.
In achieving this, the water and sewerage companies will have invested more than £85 billion (at today’s prices) between 1989 and 2010. This is double the rate of investment before privatisation. Yet, we have been able to keep bill increases down by driving out inefficiencies from both sectors. Bills are 30% lower than they would have been without our regulation. A litre of tap water delivered and taken away costs less than a penny.
See the latest issue of AIP Today for more.....
Business transformation
and change in the utility sector ...and what it might mean for other public service organisations.
There has been an enormous change in utilities across the world over the last 20 years. And these new ways of working are now being explored by other similarly complex and asset-rich infrastructure organisations, such as highways.
Thirty years ago the complexity of utilities meant that the only way to run these businesses was by empowering local teams to manage cost, performance and risk in their area. Local managers held the resources, knowledge, expertise and budgets they needed. These approaches work very well with experienced people in post, who are led, in turn, by people driven by the lowest levels of self-interest. However, oversight of these teams is difficult and self-interest can take root, and performance and efficiency can tail off. Once this process has started, it is hard to recover lost ground.
The transformation of British water, wastewater, gas and electricity utilities has been particularly significant. On privatisation of many British utilities in the 1990s, the Government appointed regulators. Over time, these regulators have, quite rightly, demanded two things. First, they called for the industry to become as efficient and effective as possible. Second, they demanded that utilities demonstrate their progress towards frontier performance using facts.
An initial focus on setting hard, high-level targets in many areas prompted immediate change. With time, regulatory sophistication developed, and alongside that, a broad range of penalties and incentives.
Within utilities the challenge for utility leaders has been to find ways of breaking down high-level regulatory objectives into smaller objectives that are meaningful to individual staff. The really tough challenge, however, is to find ways to communicate and control service delivery without undermining the personal pride and accountability so many staff in public service take in their day-to-day work.
There is no simple solution for this. However, many leading asset-rich companies, particularly in the utility sector, have developed what is known as an ‘asset management system’ in response. These systems translate high-level principles into plans, and then into work. Asset registers and other systems ensure plans and proposals are all underpinned by facts.
See the latest issue of AIP Today for more.....