The nationalisation challenge: Understanding the possible drivers behind support for public ownership of utilities

With both Labour and Conservative parties set on a more interventionist course in relation to the utilities, and polling continuing to demonstrate steady and significant support for public ownership, energy and water companies are well aware that 'the nationalisation challenge' is one they need to meet head on.

However, in order to do so, and in order for some perhaps simply to survive in their current form, there must be concrete action from companies to build customer and citizen trust – and this action must be driven from a firm understanding of why many people appear to so favour public ownership in the first place.In getting 'behind the headlines', it is also important to note that public ownership is not necessarily the same thing as nationalisation.

The current state of play

The Legatum Institute's 2017 report, Public opinion in the post-Brexit era, found that an enormous 83% of people were in support of nationalising the water industry, with a similarly high 77% in favour of the public ownership of electricity.While support was higher among Labour voters, public backing for the policy straddled party lines, with more than three-quarters of Conservative voters wanting to see water companies run in the public sector.Similarly, support was relatively consistent across age groups.

The Legatum Institute's report is only the latest in a series of polls indicating widespread backing for nationalisation.2017 polling by YouGov and Survation respectively demonstrates majority support for the measure, while British Election Study results since 2014 show steady and consistent approval – shared by around seven in 10 of British voters – for the idea that 'private companies running public services has gone too far or much too far'.What might be driving these figures?

Possible drivers behind public support for public ownership

First, there appears to be among large sections of the UK public a growing appetite for a more active state.This is true across the piece and is likely to be influenced by the effect felt from government cuts in public spending since the global financial crisis of 2008.The 2018 British Social Attitudes Survey shows that support for more tax and spend is at a 15-year high.At 60%, the number in favour of government increasing levels of both tax and public spending has almost doubled since 2010.Public support for nationalisation is meanwhile not restricted to the utilities; the Legatum Institute study also found half of people supported nationalising the banks and almost a quarter backed publicly-run travel agents.

These views are by no means uncontested, with a majority of the UK public continuing to believe that 'austerity should continue' – a timely reminder of people's ability to hold competing and conflicting views simultaneously.Indeed, there are those who perceive a halt in tax increases to be the key for winning political popularity in a post-Brexit world, as set out in Boris Johnson's recent set-piece speech in which he outlined how a 'national programme of social cohesion' could involve '[creating] the most favourable tax environment with no new taxes and no increases in rates and no one rich or poor to pay more than 50% of their income in tax'.

Nevertheless, calls for a more active state run parallel to a widespread mistrust of big business and a broadly negative public perception of business behaviour.Edelman's 2018 Trust Barometer shows less than half of the UK public trust UK business, with this figure falling even further for young people.This corresponds to a trend over time.According to YouGov, only marginally more people trusted those who run large companies to behave well in October 2018 (22%) than in March 2003 (20%).This is perhaps particularly true of concentrated markets like energy and water, the Social Market Foundation's Concentration, not competition report pointing to a link between higher levels of market concentration and lower levels of consumer trust.

This public sentiment is wedded to political push factors in the form of politicians and parties now much more eager to intervene in markets than in the past.This is clearly the case for the post-2015 Labour Party.Jeremy Corbyn has clearly committed Labour to bringing electricity networks and water into public hands, part of a political project aimed at a 'decisive turn to collective action', but also specifically marketed as a means of halting threats from climate change.

While Corbyn has pointed to ideological continuities from the 1945 Attlee Labour government when discussing his plans for the utilities, Labour's model differs from previous nationalisations; the 2017 Alternative models of ownership report commissioned by Shadow Chancellor John McDonnell lays out how, 'In the energy sector, national state ownership of the grid and infrastructure of electricity and gas sectors could be combined with local, regional and community ownership', perhaps along the lines of council-run not-for-profit bodies like Nottingham's Robin Hood Energy.However, the Conservative government under Theresa May have also signaled a more interventionist approach to the economy, first through proposed policy initiatives such as workers on company boards and the energy price cap, but also the recent declaration that 'austerity is over'.

The kinds of interventionist proposals set out by both Labour and Conservative parties again have attracted some public favour.On the one hand, material or socio-economic circumstance is an indicator for how people perceive public ownership.94% of the Legatum Institute's 'Left Behind' sample supported nationalisation of electricity compared to 64% of more affluent 'Optimistic Centrists', figures borne out by similar studies.This serves to highlight the importance for energy and water companies of putting significant effort and resource into the consumer vulnerability agenda.

A way forward for energy and water companies?

If companies are to build trust with the public, they must think about how the democratic deficit that has opened up in large sections of the utilities markets since privatisation may be best addressed.Increasingly, people are demanding accountability, transparency, and participation from private companies.Edelman's Trust Barometer highlights how in addition to the concerns one might expect from consumers – a belief that executives are overpaid or that companies do not pay their way when it comes to tax – they are also worried that businesses fail to operate in a transparent and open way.When asked specifically by YouGov what steps large businesses could take to regain trust, people ranked the fair treatment of others above all other potential measures, followed by improving operational standards and having a clear purpose and set of values.

In one of the few pieces of polling that explicitly probes the drivers for public support for public ownership, the single biggest reason cited for favouring nationalisation – above reduced costs, improved treatment for workers, and increased efficiency of service – is that public services 'should be accountable to taxpayers rather than shareholders'.This presents a challenge to government and regulators as well as companies themselves, with political players increasingly framing their proposals in terms of fairness and transparency, for example the report commissioned by Shadow Chancellor John McDonnell and released in January indicating that Labour's thinking around proposed reform of the UK's regulatory infrastructure is driven by a perceived need for greater 'accountability' and 'democracy'.

However, there is perhaps an opportunity for companies to help shore up their long-term futures in the form of facilitating a 'just transition' to low-carbon.New UKERC research into public perspectives on paying for energy transitions shows how the UK public strongly supports energy system change and would be personally willing to accept some of the associated costs – but that this is dependent on the actions of energy companies and politicians.Those surveyed strongly supported the idea that a company's profits should go towards transition costs rather than to shareholders.The public also expressed concerns around transparency and companies' perceived closeness to politicians.The report recommends companies' '[provide] clearer, more understandable information in relation to energy costs…but also greater transparency of wider decision-making and practices', '[greater] clarity and justification…for how money is spent by government and energy companies', and notes that '[for] regulation to be seen as credible, robust and consistent evidence of clearer separation between government and the energy industry is recommended.'

Concrete action is therefore needed to institute and embed fairness and public purpose in the day-to-day practice of energy and water companies, as well as regulators and government.There is a clear link here to Sustainability First's Fair for the Future project and the publication of our strawman 'Sustainable Licence to Operate', the four pillars of which – public purpose, philosophy, and public service values; making best use of 'capital'; roles and responsibilities; and strategy and narrative – may help form some of the bases for addressing not only the nationalisation challenge but some of the other significant disruptions (environmental / climate and technological) that the energy and water sectors face.