Comments on the continued dumping of sewage into rivers yesterday prompted Owl to find this July press article. It is a discussion about the financing of water companies.
England’s water system: the last of the privatised monopolies – for now
Phillip Inman www.theguardian.com
Selling Britain’s state-owned water authorities seemed like a good idea to Conservative ministers in the 1980s, when they looked at the bill for upgrading a labyrinth of Victorian sewers and a leaky network of mains water pipes.
Why not let the private sector inject some energy and much-needed cash into a project that a tired public sector management was ill-equipped to handle, they argued.
But since 1989, when 10 regional water authorities were sold, there has been claim and counter claim about the benefits that can be credited to the new private sector owners.
But the industry has defended its record – most recently when the former Labour leader Jeremy Corbyn threatened to nationalise it in 2017. The industry regulator, Ofwat, claimed £130bn of investment had been made since privatisation and bills were £120, or 30% lower than they would otherwise have been.
Meanwhile, the firms say privately that climate change is responsible for the heavy downpours that cause sewage overflows so is not something they can control or be blamed for.
Critics point out that Margaret Thatcher’s government wiped out the industry’s debts prior to privatisation and since 1989 the industry has loaded it back up again with £48bn at a cost in annual interest of £1.3bn.
Research by David Hall and Karol Yearwood of Greenwich University found that the debt was not used to fix leaky pipes or treatment works but went straight into shareholders’ pockets. Adding up the shareholder dividends paid since 1989, they reached a total of £57bn.
In that time, customers’ water bills have increased by 40% above the rate of inflation. It is the water users who have paid for upgrades to the network, such as they are, while shareholders walk off with cash paid for by higher debt.
This is a strictly English problem. Welsh water became a not-for-profit organisation in 2001 and Scottish Water went into public ownership.
England’s water system hosts the last of the privatised monopolies. You can shop around for gas and electricity, telephone and broadband. Not water.
Environmental groups argue that climate change means water companies must become part of a coordinated effort to protect water supplies and that this cannot be done while they remain private.
At the moment, they have the resources to outwit the poorly resourced regulators in Ofwat and the Environment Agency. Local councils, which also play a role in protecting watercourses, have also seen their budgets cut and experienced staff losses, leaving them without the clout to confront private sector operators.
Paris and Barcelona are among the world’s major cities to take water under direct control and integrate policies that promote its better use by households, businesses and landowners. It must be only a matter of time before England follows suit.