Should We Repair Our Sewers?

It's not obvious that we should repair our sewers and leaking water pipes, and not because of any scepticism over the impact of twenty years of neglect or disagreement over who should "pay" for the work. What is required for investment in the public fabric is not money but real resources: labour and materials. As Keynes put it, "Anything we can actually do, we can afford". If those resources are not available, the money buys nothing. This means that the key question for public investment is not "How will we pay for it?" but where will those resources come from? In practice (for tasks of significant scale) this means what else will we forgo. That foregoing might be limited to the public sector (e.g. we upgrade the sewers instead of building new hospitals), or it might be concentrated in the private sector (e.g. a moratorium on private housebuilding), so we effectively transfer resources and thereby grow the public sector's share of GDP. Framing the debate as one of money ("There is no magic money tree" etc), and implying that money is somehow a real thing that is naturally limited (reification), is a way of avoiding this choice and thus simply a way of advocating the status quo.

Feudalism recognised the categorical difference between resources allocated to specific tasks (e.g. the corvée) and resources that could be exchanged (whether via money or barter is immaterial). In a pre-market society where money was in short supply, because it wasn't generally needed as a means of exchange and specie was naturally limited, "public works" - i.e. infrastructure of general utility, such as roads or bridges - could only be effected through such an allocation of real resources. This was possible because the seasonality of agriculture meant that there were predictable periods of labour time available for non-subsistence activities. Industrialisation, or more precisely proletarianisation, did away with the corvée and other feudal remnants through the move to wage labour. This also meant that resources for public works were now part of the market system, which in turn meant competition with private interests for labour and materials. The important point here is that the expansion of the market has always been in tension with public works. The result was that industrialisation and its consequent social ills produced not the Nightwatchman State but an expansion of government with a central role in appropriating and allocating real resources.

This not only addressed real needs but it opened up a new site for exploitation in the interface between government and private contractors and would create a new class of public assets ripe for rent-seeking. There were three notable trends in public administration over the course of the twentieth century in response to this. The first was the national or regional consolidation of many public services, such as health and utlities. The second was the gradual conversion of government from a primary employer of real resources to a contracting party of private suppliers through privatisation and outsourcing, which meant both the creation of de facto monopolies in the private sector (e.g. water and rail) and increasingly the limitation of local government graft to property development, i.e. exploiting the public asset of planning approval. The third trend was the move to more regressive taxation as working class incomes grew, which was consolidated in the 1980s both nationally (the increase in VAT and cuts in top-tier income tax) and locally (the introduction first of a poll tax and subsequently a household tax that hasn't kept pace with the inflation in high-end property values).

These three trends have meant that people today feel increasingly alienated from public services and regard local government as little more than a property developer that is unresponsive to local needs and vulnerable to graft. The first development has led to both falling levels of satisfaction and increasing antagonism towards the status quo, hence the renewed popularity of nationalisation, while the latter has led to growing disillusion with local authorities and the relative flourishing of independents and maverick parties, many focused on limiting housing development. While any individual "NIMBY" might be selfish and short-sighted, NIMBYism clearly reflects the tension that now exists between local democracy and local government. Meanwhile, the water companies have become national villains not simply because they have polluted our rivers and beaches with sewage but because they have come to symbolise the regressive legacy of Thatcherism in which the poor face disproportionately higher bills while the priority of the business is to deliver dividends to shareholders.

Repairing our water pipes and sewers is attractive for a number of reasons but three are worth focusing on in the context of the above. First, it would be a national programme, which would obviously open up the question of full nationalisation. Second, it would be democratic. All households could expect to benefit from lower water and sewerage bills and most people would consider the improved utility of clean beaches and rivers to be of value. Third, it would be a less contentious use of real resources than housebuilding, and more specifically of private housebuilding in suburban and exurban areas. However, unless there is a rebalancing between the public and private sectors, it would also mean denying real resources to other public works, such as public housebuilding in urban areas. Constructing inner-city council flats would be more popular than building on the green belt and is the only way in which we'll see any movement towards addressing under-supply, which is an issue of location and tenure more than capacity, and (eventually) a reduction in house price and rent rises, which Keir Starmer is now on record (if that means anything) as saying he wants to see.

It's worth noting that the UK public fabric in other respects is quite healthy. Contrary to the "private affluence and public squalor" trope of old, we have built a lot of new public works over the last forty years, from hospitals to the Elizabeth Line. But while governments since Thatcher can take credit for this, the legacy they have burdened society with is the regressive Thatcherite model of financing in forms such as PFI and privatisation, while some of the greatest successes have come when that model has failed so badly that renationalisation (or takeover by regional authorities) has proved unavoidable. The problems of the NHS, social care and poverty aren't due to a lack of buildings or infrastructure but to low wages restricting spending power and leaving vacancies unfilled. These really are areas where a magic money tree (i.e. money creation in the manner of QE but directed to social rather than financial assets) would work wonders. That said, there are obvious opportunities beyond sewers and council flats for public infrastructure investment, notably improvements to rail transport in the North of England and an accelerated transition to renewable energy. In sum, there's a lot that could be done but we need to recognise that this would entail a change in the relationship of public and private activity.

In other words, we need a comprehensive programme of investment in public works that would significantly expand the public sector. This can be done without shrinking the private sector by a comparable amount, but only if we expand the key resource of labour, which doesn't mean getting disability benefits claimants to harvest potatoes but encouraging migrant labour. Otherwise, we must transfer resources from the private to the public sector, which is not only anathema to anti-state Tories but also conflicts with Labour's somewhat incoherent commitment to growth through business expansion and raised productivity. Were we to increase migration, the demand for non-labour resources would also increase, however that ought to be an opportunity for import substitution in many areas. That in turn highlights how such a programme of public works would necessitate a formal industrial policy by which the state could intervene to direct capacity planning and even private investment. Is this politically feasible? The short answer is no. 

Not only has Labour made clear that it will be "fiscally responsible" (and if you think they'll change their tune in government you obviously don't understand who they are), but it has already indicated that its priority is to make Thatcherite taxation less obviously regressive, but not to otherwise change the model. Nationalisation has been ruled out while the suggestion that shareholders who have reaped decades of dividends should be expropriated without compensation is simply not up for discussion (at best you'll hear demands for "equity injections"). Labour and the Liberal Democrats have both talked of making the water companies foot the bill for repairs rather than the taxpayer, despite taxpayer funding being more progressive than additions to water bills. If recent history is any guide, the most likely outcome is an increase in charges to consumers obscured by new, more stringent targets for repairs by the water companies and larger fines for spillages (though in practice with Ofwat being ever more reluctant to impose them).

This is not to say that a big plan won't be mooted, but that without a firm ideological underpinning (let's call it "socialism") a public works programme and industrial policy are both likely to be captured by capitalist interests, much as the previous attempts to repair the UK's fabric during the New Labour years were captured by the financial sector and business consultancies, and much as the Labour Party institutionally has been recaptured by business since 2019. The suggestion that the Labour leadership's priority is to revive social democracy, rather than restore the authority of the state and the credibility of the establishment, is laughable. The ultimate choice for Labour is not what gets done (Bevan's "The language of priorities is the religion of socialism" is not a statement that bears much scrutiny) but who gets to do it: the public sector or the private. So long as Labour prefer the latter, which is clear in everything from their burbling about "choice" in the NHS to the lack of substance in the proposed Great British Energy company, then the outcome will continue to fall short of popular demands. 

The sewage crisis is simply an appetiser (if you'll excuse the metaphor) for the main course of the housing crisis. The government-mandated moratorium on council housebuilding from the early-80s onwards represented the largest privatisation of the last half-century. It is often forgotten that privatisation means shifting provision from the public to the private sector, and not just the sale of public assets such as state-owned businesses or individual council houses. Insofar as the Conservative Party has ever managed to shrink the state, it is in this movement of housebuilding activity from a mix of public and private (almost 50/50 in the late-60s and early-70s) to exclusively private. Fixing the housing crisis requires a reversal of this, moving real resources from the inefficient building of car-oriented starter homes in the exurbs to building energy-efficient flats for social renting in cities. But it won't happen. There will be no moratorium on private building and what limited social housing is funded by the state will be parasitised by private developers. Stopping sewage leaks and spreading the cost of doing so over a decade of water bills is the limit of our ambition.