Developments: Privatized Utilities and the ‘Third Way’

The Government is planning new regulations to ensure that utility companies ‘reflect a sense of social responsibility’. Their intention to overlay social objectives on the regulatory frameworks inspired by free market economics can be seen as an attempt to find a ‘Third Way’ policy for the utilities. Neoliberals would argue that social policy has no place in the privatized utility sector, which is now well established. Interference in regulatory processes to achieve social objectives is likely to be counter-productive by distorting prices and inhibiting the incentive system designed to achieve efficiencies. Rather than requiring the companies to act as instruments of government policy, the Government could achieve its social objectives through subsidies, or through the social security system, leaving the regulatory framework to operate unfettered.