With this report, Johnston Birchall intervenes into the debate about alternative models for the ownership of industries that are currently in either the public or for-profit private sectors. A public interest company form and social enterprises have been suggested as a way of running public services, tackling social exclusion and modernizing local government. It seems worth approaching the debate from the point of view of looking at the desired goals and outcomes in particular industries for customers and for the wider public interest, and then considering what mix of organisational forms would best achieve these. That is what the author does in relation to the water industry and rail transport.
The report begins by looking at how the ownership of natural monopolies has evolved over time, with its move from private forms to public and back to private again, and with a continuing search for ways of regulating private interests so that they serve public purposes. Then it examines the record of the privatised water and rail industries and finds that they have failed to deliver what they promised.
The author finds that regulation has also failed because it is inherently unstable; either the interests of consumers and other key stakeholders are sacrificed or the profitability of the company is undermined. He then shows how opportunities have arisen for a new form of organisation to own water and rail track assets that would put the customers and the wider public interest back into the centre of the business. He analyses in some depth the various elements that would go into the design of a new utility mutual or non-profit, finding that there are three key elements: membership, ownership rights and representation.
The report defines the difference between non-profits and mutuals in terms of whether the organisation gives individuals ownership rights to governance and the financial surplus. Working through the theoretical permutations of the three elements, it finds five types of organisation: a nonmember non-profit, a single stakeholder non-profit, multi stakeholder non-profit, single stakeholder mutual and multi-stakeholder mutual. It then subjects these to various tests and make recommendations in relation to water and railway sectors.
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Birchall, Johnston. 2002. A Mutual Trend: How to run rail and water in the public interest. London: New Economics Foundation. http://www.neweconomics.org/gen/z_sys_PublicationDetail.aspx?PID=115.