Andy Burnham talks about ‘public control’ of the utilities but it’s a minefield. We can lead him through it | Will Hutton and Andy Haldane

Andy Burnham campaigned on the promise of greater "public control" over UK utilities such as water and energy. His aim was to reduce the "privatisation premium" paid by consumers and enhance service quality. However, two months later, the government has not clarified what exactly it means by "public control." One proposed option is to establish regional political bodies to oversee water companies; but this alone would not provide the necessary control.

The uncertainty surrounding "public control" is imposing real costs on both the affected companies and the UK government. As a result, bond issues by utility companies that would finance investment are being postponed, and their costs are rising. Thames Water is currently in a state of uncertainty due to the lack of clarity on its ownership and regulatory structure.

Good governance for public services requires a balance between incentives and expertise. Public ownership would align incentives with customer interests while providing the necessary expertise to effectively deliver services. Conversely, privatization faces problems as investor incentives are misaligned with the public good. Full nationalization would align the company's incentives with the public good, but without commercial discipline and expertise, there is little reason to expect it to be run efficiently.

Therefore, "public control" should mean governance structures that align the company's objectives with those of the general public. This does not necessarily mean public ownership or operation. Instead, turning utilities into public-benefit companies with a primary objective of delivering high-quality services, with profitability as a secondary aim, could be a better approach. This can be introduced within the current ownership and licensing regime.

The government could take a "golden share" at a nominal cost to maintain domestic ownership. Utilities should have more demanding governance requirements, such as complying with international environmental standards or developing industry-specific standards. Enhancing governance further could be done by requiring a minimum fraction of shares to be publicly listed, promoting transparency and market discipline. Publicly quoted utilities tend to perform better across various metrics.

Executive pay could be linked to public-benefit outcomes, and an independent customer group could be established to incorporate customer views in decision-making. This approach would shift the culture and architecture of regulation, ensuring that utilities prioritize delivering high-quality public services. The government must quickly clarify its intentions to secure the best possible services at a reasonable cost.