Commentary: Consumers' gain, shareholders' loss

The Liberal Democrats have delivered their definitive work on what should be done with the privatised utilities - and it is as radical as they bill it. The party advocates a bevy of trust-busting that makes President Theodore Roosevelt look like a pussy. But don't dismiss the ideas out of hand: Liberal proposals tend to end up in Labour and Tory manifestos.

The party wants to follow in part the American example, splitting BT into local, trunk and international companies. It would force British Gas to sell off its pipeline system, and break up the rest of the company into regional firms. In electricity, it would leave the regional supply companies intact but split up the generators, National Power and PowerGen.

British Coal would be privatised after a fashion, but the nation's coal reserves would remain in public control with the privatised - and fragmented - industry vying for licences to run the pits. Similarly, the railway network would be public property, with many franchisees running services on the lines.

In other words, if it is big, break it up. And if it is a natural monopoly, like water, make the regulations tighter. These market solutions make good sense for the consumer, for efficiency, and hence for the economy in the long run. But the shareholders get short shrift, whatever the promises in the prospectuses on which they based their purchases. The Liberal Democrats say that breaking big companies up can be good for the share price, but this is disingenuous in the case of monopolies and companies with considerable power over their markets. The consumers' and the economy's gain would be the shareholders' loss.