Conference Presentation
Reference
Which regulatory state? Explaining the stability of the Keynesian state functions after regulatory reforms of network industries in UK and
Germany
PFLIEGER, Géraldine
PFLIEGER, Géraldine. Which regulatory state? Explaining the stability of the Keynesian state functions after regulatory reforms of network industries in UK and Germany. In: Workshop of the Structure and Organization of Government (SOG) group – RC 27 International Political Science Association. The Future of the Regulatory State: Adaptation, Transformation, or Demise?, Oslo (Norway), 15-16 september, 2011
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http://archive-ouverte.unige.ch/unige:22989
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What ‘regulatory state’?
Explaining the stability of Keynesian state
functions after regulatory reforms of network industries in the UK and Germany
Département de Science Politique
Institut des sciences de l’environnement – Université de Genève Dr. Géraldine Pflieger, MER
16 september 2011 – Regulatory state workshop Oslo
Cours Décision et politiques publiques – Introduction
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- Did the emerging regulatory functions cancelled former State intervention traditions (particularly welfare and redistribution) in post-reform public utilities ?
- If not, what is the articulation between old and new State interventions (mainly regulation and
redistribution) ?, are they complementary or in competition ?
- To what extent the mix of State functions varies with sectoral traditions ?
Questions and design
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Cours Décision et politiques publiques – Introduction
➡ From the Positive to the Regulatory State (Majone, 1997)
Regulation = Regulatory State Redistribution = Welfare state
Positive State
- after WWII
- intense activities of redistribution and public investment in social welfare
- direct intervention in the economy and mopolies/industrial policies
Regulatory State
- end of 1970’s
- opening up to competition
- focussed on market regulation
- b r o a d c h a n g e i n p u b l i c intervention and management
Questions and design
Cours Décision et politiques publiques – Introduction
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5 spatially disadvantaged) or a type of good or service (deemed socially or environmentally superior). It also covers incentives that enable actors’ behaviours to be directed towards consumption or production of one good or service rather than another, for the sake of political objectives. This function is exercised through fiscal policy (tax breaks or discretionary taxes) and through cross-subsidies between consumers. Historically these functions have been associated with the concept of the welfare state through public management of big monopolies, but we shall see that objectives relating to the environment, security and spatial solidarity have helped to sustain the redistribution function during and after reforms.
This focus on network services means that I have not studied macroeconomic policies or trends in stabilization functions. However, the recent revival of investment in rail infrastructure, against the background of economic crisis, may point to a reactivation of this type of function, which would merit further investigation after an appropriate period of time has elapsed.
Table 1 summarizes intervention mechanisms for each sector studied, pre-identified to enable assessment of whether or not each function continues to exist.
Table 1 Possible types of intervention by function, in the three sectors studied
Telecoms Electricity Rail
Regulation - implementation of rules and instruments to steer markets
- implementation of rules and instruments to steer markets
- implementation of rules and instruments to steer markets
Redistribution
-
universal service funds financed by equalization payments between operators-
universal service funds financed from public budgets-
continuation of partial public financing-
incentives toconsume or produce a given type of energy (fossil fuel, nuclear or renewable)
-
direct or indirect public financing for energy production or for infrastructure- public financing for infrastructure or services - aid targeted at public service provision
Basing my work on a compound research design model allowed me to make a sectoral and national comparison in the aim of assessing differences and similarities between sectors and nation-states (Levi-Faur, 2006).
Three reasons lay behind my selection of telecoms, electricity and rail. To begin with, I wanted to study the balance between the functions of the state in network services that are structurally different (in terms of European Union legislative framework, overall profitability, infrastructure cost, environmental externalities and coordination of supply and demand), in order to compare the effect of these structural differences on the use of a particular state function. Second, liberalization in the three sectors has not followed the same trajectory. While telecoms and electricity are in their second wave of legislation at European level, liberalization of the rail sector has been limited to the first stage of creating a market and regulating historical monopolies. Lastly, it is notable that these sectors have
Questions and design
Dimanche, 9 septembre 2012
- Two countries : UK and Germany
- Three sectors : telecommunications, electricity, railways
Questions and design
Cours Décision et politiques publiques – Introduction
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Results
1.- exception status of the telecommunication sector with a clear shift from the positive state to the
regulatory state, since 20 years
- but, a limited change regarding states’ past redistribution practices, before reforms
Dimanche, 9 septembre 2012
Results
2 - Electricity and railways : persistence of strong allocation and redistribution functions : support of renewables consumption and production ; public funding of railway infrastructure
-> energy subsidies : from coal to renewables,
a rapid rise of redistribution and transfer since
mid-2000s
Cours Décision et politiques publiques – Introduction
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Railway investments and subsidies :
Results
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public subsidies (i.e. !3.2 billion per year). Total investment in network expansion alone will be !7 billion over five years.
Figure 1 allows a comparison to be made between Germany and the UK, showing the high levels of investment spending in rail infrastructure maintained by Germany since the early 1990s and the effort made by the UK to catch up from 2001 onwards. This outlay appears even greater in the light of the fact that the UK has 16,450 km of track in contrast to Germany’s 35,900 km (Source: UIC, 2007). The data include not only investments made through public subsidies but also those using income from infrastructure access tolls.
In Germany, state involvement has remained constant since the early 1990s. The state uses two mechanisms to subsidize investments. Construction of new track and extension of existing track are subsidized under the Federal Railway Expansion Act (the BSchwAG). Projects are financed based on proposals from DB Netz which are then approved by the EBA as regulator and by Parliament. The state allocates subsidies for construction costs and grants interest-free loans for track replacement. In Figure 1, which shows total investment, the peak observed in 1999 is explained by the move from support partly granted through interest-free loans to plain public subsidies for infrastructure. This shift allowed investment projects to be stepped up. The second peak, which can be observed in 2002 and 2003, relates to the reallocation of income from the auction of 3G licences to infrastructure investment. Moreover, regional aid also remained constant. It consisted of packages of !4.5 billion and !6 billion between 1996 and 1997; in 2006 it was still rising and had reached !7.1 billion (Peter, 2008). A significant share of subsidies to regional services was devoted to allowing operators to meet high toll costs
9. Public subsidies to regional traffic therefore indirectly subsidized DB Netz, via the tolls paid by its subsidiary DB Regio. In 2004, DB Regio paid a total of !2.2 billion in tolls and received !4.5 billion in regional aid. Subsidies granted directly to DB Netz by the state have remained
9 Toll costs account for 40% to 50% of the total operating cost of the regional services. Indeed, in 2005, tolls accounted for an average of 60% of the infrastructure manager’s total expenditure in Germany, whereas they represented just 50% in the UK. (Source: OECD).
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Factors of explanation :
‣ European union intervention
‣ different levels of sectoral profitability
‣ weight of innovation (mainly for telecom)
‣ environmental externalities
‣ security and safety issues
‣ states’ public policies : national cohesion, economic performance
Results
Cours Décision et politiques publiques – Introduction
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Theoretical lessons :
➡ Redistribution remains a structural function in two of the liberalized sectors and not an exceptional or transitory one
➡ These functions are complementary of regulatory functions : supply and demand adjustment in the energy sector ; viability of infrastructure and of the whole railway sector
➡ Alternative functions are mainly linked to
environmental policies, energy independency and
public services obligation, territorial cohesion, security
Results
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