Thursday, 9 August 2007

Sweating the assets

I used to think that failing to maintain things was a public sector problem. Everywhere I have lived, Government offices have been tackier than the glass-and-marble palaces of the private sector. Even newer public buildings seem to get ragged around the edges in next to no time. And compare your local NHS hospital with the nearest BUPA clinic.

However, I may be forced to change my interpretation of this phenomenon. Driving around this morning, I found myself listening to a vaguely nauseating discussion on rat infestations. There was a homeowner from Luton, a member of Luton town council, a representative of (privately-owned) Thames Water, and a pest control expert. The homeowner complained that nobody was fixing the rat infestation problems in her area, and the councillor and Thames Water guy took turns blaming each other for that. The latter was happy to hide behind the fact that the local authority had the ultimate responsibility for pest control, and kept saying that rats didn't actually live in the sewers.

Then the pest control guy stepped in, and said that there had been a big increase in the rat population over the past ten years. His group had done some research and found that one of the main causes was...privatisation of the water companies. Apparently when these companies were publicly-owned, they placed rat bait in "hot spots" in the sewers twice a year as a matter of course. Thames Water's approach is only to place bait when an actual rat problem is identified, and then only after a householder has complained to the local authority and the latter has notified Thames Water.

It's hard to believe that the public health authorities have had much input into Thames Water's "maintenance" practices. Anyone who's ever had a rat problem will know that prevention is better and easier than cure. That, of course, goes for maintenance generally: if Thames Water takes the same approach to the upkeep of its vehicles, I'm going to be giving them a wide berth in future.

Moving on to BAA -- not much of a leap, if recent stories are anything to go by -- it's starting to become clear that the main way that Ferrovial, the new owners, plan to make money from the company is by cutting back on operating expenses in general and maintenance in particular. Heathrow has always been a bit of a pit, with even the relatively new Terminal 4 fraying badly -- you don't want to be a non-UK passport holder trying to get through immigration there at peak time. (A couple of years ago I came in from Amsterdam with an Aussie colleague. Seeing the size of the line, I left him to fend for himself and headed for the office. I took the train to Paddington, then the tube to Moorgate, waited for a coffee at Starbucks and went to the office. I called hin as soon as I got to my desk -- and he was still in the immigration queue!)

This way of making money is called "sweating the asset", and it's a favoured approach in all privatisations. Fans of involving the the private sector in the provision of public services see it as an essential part of the more "efficient" private approach. Within reason it may well be, but BAA is not the first private owner, and won't be the last, to take it to an unwarranted extreme. (Amazingly, BAA is also asking that the performance criteria built into its contract be suspended when Terminal 5 opens next year. In effect it's saying in advance that it doesn't think it can manage the job).

I now think that what encourages lack of maintenance is not public ownership but monopoly. Thames Water and BAA face no real competition so they feel they can scrimp on things like service and maintenance, at least until somebody squeals. It ought to be easy to fix this at BAA -- take away the monopoly, which seems increasingly likely to happen. It's harder to see an easy way of setting it right at Thames Water.

I haven't flown through Heathrow in over a year but I have to do so next month. I'm really looking forward to it -- wonder if I'll see any rats.

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