Water companies haven’t enjoyed the happiest of headlines so far this week.
They were found to have spent 3.6 million hours last year dumping sewage into rivers and costal water across England – double the amount of time spent in 2022. Now, Thames Water – Britain’s largest supplier of H2O – is demanding to increase bills by 40 per cent by 2030 after investors refused to put in an extra £500 million. Water, water everywhere, and not a drop to drink (because it’s full of turds).
Conscious that taxpayers would be forced to foot the bill if the company goes bankrupt, ministers and Labour have been equally quick to condemn the company’s leadership, with Michael Gove – long far from a fan – calling it “a disgrace”. Steve Reed, the Shadow Environment Secretary, has demanded the Government do everything can to “fix the broken sewage system”. Jeremy Hunt is ‘monitoring’ the situation.
Nonetheless, £90 billion price tage aside, calls for nationalisation abound. Rebecca Long Bailey has argued that the “Thatcherite privatisation of water has been an abject failure” and suggested “poll after poll shows huge numbers of the public want to see privatisation reversed”. Ross Clark – no Corbynista he – has suggested Conservatives should “admit that the privatisation [of] public utilities wasn’t all it was cracked up to be”. Should we?
The case against the water companies writes itself. Privatisation has allowed for the most essential of utilities to be asset-stripped by unscrupulous international investors who have wracked up huge debts whilst paying themselves fat dividends, failing to invest in infrastructure, and pumping filth into our waterways. Thames Water – with 15 million customers – teeters under a debt pile of £14 billion.
Nonetheless, readers will be pleased – if surprised – to hear that privatisation has been a great triumph for Britain’s waterways. Privatisation hasn’t turned our water companies into free-floating entities, exploiting monopolies on the stuff of life to fleece consumers and pollute our rivers. Water companies, like railways, are contractors, providing a service on the state’s behalf, according to the Government’s stringent requirements.
Privatisation was designed to provide water companies with the investment they had been starved of when under Whitehall’s control. Hitherto, improvements to our Victorian infrastructure had to compete with other public spending for the cash they required. Since privatisation, productivity is up 64 per cent, costs down 27 per cent, and bills £120 lower than they would otherwise have been. £190 billion has been invested since 1989.
As Matthew Lesh has pointed out, this figures outstrips the dividends paid by 250 per cent. In the decade in which Macquerie, an Australia investment giant dubbed the ‘Vampire Kangaroo’, owned Thames Water and paid almost £3 billion in dividends, they still invested £12 billion. You could suggest less should have been spent on dividends. But you can’t suggest they neglected their asset.
The companies could have borrowed less. But to do so – whilst also rewarding the investment of their shareholders – would have meant raising more from consumers. Yet the prices Thames Water could charge were limited by Ofwat, the water regulator. This sets the targets water companies need to hit, and instructs them of the investment they should make, whilst informing them of what they can charge the public.
As Robert Colville has expressed much more eloquently than myself, in these roles, Ofwat has done a far better job than campaigners so often believe. Ofwat has set targets on water leakage, pollution, and investment that water companies have been largely successful in hitting. Privatised English water is in a far better state than nationalised Northern Irish water. We invest the most in Europe.
Somebody has to pay for that investment. Under Thames Water’s proposals, that would be covered by rising bills. Hardly fun for those of us living in the South-East. But surely fairer than expecting taxpayers from across much less wealthy parts of the country to do so, as would be the case if the water companies were renationalised at a cost of £90 billion? Say it loud, say it proud: there is no money.
What on the turd-pumping allegations? As Steve Loftus recently explained for us, contrary to the popular narrative, our water ecology has greatly improved over the last fourteen years. Vastly increased monitoring of sewage outflows has produced an influx of data that has produced a misleading picture of declining water quality. In fact, across all major measures, England has improved.
By bolstering Ofwat’s powers, with increased penalties and enhanced environmental guidelines, the Government has ended the culture of high dividends and low standards previously common under Labour, under whom 66 per cent of all dividends were paid out. By contrast, over the next five years, 40 per cent of water infrastructure and ecology investment in Europe will be in England and Wales under Ofwat plans.
Date collection from outflow pipes only began in 2015, and last year reached 100 per cent for only the first time. It coincided with England’s 6th wettest year since 1836. Avoiding pumping sewage back up through toilets meant sending it into rivers, where our world-class detection regime detected it. Fixing the problem would cost more than three times as much as has been spent since 1989.
It might not be the best argument six or so months out from an election. But the Government should be honest with voters. If they want England’s waterways to continue to become cleaner, if they want the investment in infrastructure campaigners are so loud in demanding, they should be willing to pay higher bills. State control would only palm those costs off on other unlucky and ungrateful taxpayers.