Correspondent Kate Willcox writes:

The latest scandals to hit the water company industry  – raw sewage being pumped into Lake Windermere and cryptosporidium found in the water supply of south Devon residents –  is yet more evidence that the privatised water companies are unfit to run this industry.

The Briefing Room on Radio 4 on Monday evening 13^th May sets out clearly the reasons why the water companies are performing so badly.  Firstly, the water companies used their reliable income stream – water bills – to finance their activities and then borrowed heavily against the public assets that were handed over to them. The water companies had further cash from the tax payer to ensure that they could raise money for infrastructure investment. Shareholders’ money was not invested to maintain and improve the infrastructure; they just got dividends  of 77 million pounds to date for buying water company shares with no risk to their investments.  OFWAT failed to address this misuse of the assets which should have been used  to maintain and expand the water infrastructure.

The government ignored warnings at the time of privatisation that companies could fail to invest in the water industry and just reward shareholders and themselves, without strict regulation of the use of money raised against its assets, but these warnings were not acted upon.

The Government hobbled the regulatory bodies that are supposed to ensure that the companies run the industry effectively.  The Environment Agency had its funding cut to ensure that it could not carry out its duties effectively in regulating the water companies. The revolving doors between OFWAT and the water companies and the Government’s requirement that OFWAT do not prejudice the balance sheets of the water companies by enforcing their regulatory powers, has resulted in very gentle slaps on the wrists to the water companies. Now the water companies are coming back to the long suffering consumers demanding that water bills rise to pay for improvements to the water infrastructure that has already been paid for by consumers but spent on enriching shareholders and directors of the water companies.

Sir Dieter Helm Professor of Energy at the University of Oxford argues that the current extremely bad regulation of the water companies requires bringing in the special administrators to wind up Thames Water.   This approach could be used with all the privatised water companies to pass the water industry on to new and better organisations with a new regulatory model which will ensure that our water industry is run properly.  Wouldn’t it be great to look forward safe bathing in seas and rivers, safe drinking water and healthy rivers.

Yours sincerely,

Kate Wilcox