Tom Bennett is co-founder of water-tech firm UDlive and a Conservative councillor.
Britain and water have always had an ambivalent relationship.
It has been integral to our economic and military success as an island nation, but also a perennial cause for complaint. Sadly, that relationship is now at a historic low. Britain has a water problem.
Much of one of the world’s wettest nations is now in the seventh week of a hosepipe ban, with splash parks and paddling pools closed just when they would provide most benefit. Meanwhile, our rivers are in dreadful condition: just one in six achieves good ecological status; none achieves good chemical status. And our priceless chalk streams – one of the hydrological wonders of the world – have suffered chronic degradation.
That these problems are occurring at the same time is no coincidence. They are symptoms of the same failure: our inability to adapt water infrastructure to growing climatic and population pressures. If we cannot store more water during storms – helping prevent excess water from overwhelming treatment facilities and contributing to sewage spills – we are unlikely to build up sufficient reserves for dry summers. But how did the country that designed the modern sewer become so bad at managing water?
For many, the answer is simple: privatisation. That nationalisation would in one fell swoop wash away our water woes is not a fringe socialist view, it is received wisdom: four in five Britons now support public ownership of water. This view has solidified in the last five years as headlines about sewage spills have competed for space with those about water company dividends, executive pay, and vast piles of debt. No one could argue that the current model is going swimmingly.
At this point, an important caveat: part (but by no means all) of the reason Britain appears exceptionally bad at managing water is because we are exceptionally good at measuring it. Between 2010 and 2023 England went from only 7 per cent of storm overflows being monitored to 100 per cent . That rollout was driven by pressure from the Conservative Government, culminating in the Environment Act 2021 which mandated near-real-time reporting. As a result, we now have some of the most closely monitored sewers and waterways in the world. Conservatives can find some gallows humour in this: demanding this transparency was the right thing to do, but we all recall what thanks we got for it at the last general election.
Nevertheless, even taking better monitoring into account, we are still a long way from where we should be. So to what extent can privatisation be blamed? Looking at the record since water infrastructure was taken out of state hands in 1989, investment has roughly doubled, amounting to around £240bn. Over that same period, leakage is down by 43 per cent, and British tap water remains among the cleanest in the world. Had investment depended on general taxation – competing with hospitals and schools – it would surely have been lower. This is precisely the experience of Northern Ireland, where its taxation-based water system has repeatedly had investment constrained by competing demands.
Perhaps more to the point though, nationalisation is not affordable. Defra estimates the total cost would be around £100bn. That’s a lot of money to spend that wouldn’t add one reservoir or repair a single pipe. Campaigners argue that companies could instead be acquired for a nominal sum by writing down their value against their investment backlog. But such a retrospective write-down would be seen as a naked asset grab: inviting endless litigation, hitting institutional investors and pension funds, and sending a disastrous signal to anyone considering investing in British infrastructure.
So what is the answer if it is neither the deeply unpopular status quo nor an unaffordable nationalisation programme? In all fairness, the Government has made some small but positive first steps by committing to bring fragmented regulatory functions into a single super-regulator and move beyond the restrictive five-year planning horizons for major infrastructure, as recommended by the recent Cunliffe Report. Both measures are sensible: we need a better referee and longer investment horizons. But we also need to change the incentives facing the players.
Excellent stewardship must become the only way for companies to provide a return to shareholders.
To achieve this, water company operating licences should be amended so that dividends are tied in law to an independently audited scorecard. The scorecard would set clear targets for public priorities, including sewage overflows, drinking-water quality, and supply interruptions.
Meet the standard, and you can pay your shareholders in full; miss it and an automatic brake caps payouts and redirects money into a ring-fenced repair fund. Fail badly, and the dividend freezes entirely. Unlike the regulator’s existing (and oft-dodged) discretionary powers, this would be mandatory, automatic and plain for all to see. To rebuild some level of public trust in our water industry, the public now needs this level of accountability.
We must understand this won’t be cost-free.
Making dividends conditional on performance may increase the cost of capital, at least initially. And whoever owns the industry, bills will need to rise in the short term to fund the investment needed to repair ageing assets. But that is an honest reckoning with the situation we are in. The alternative is not free water: it is allowing problems to compound until consumers or taxpayers face a much larger bill. And in the long run, clear, predictable rules may well prove cheaper than today’s regulatory uncertainty.
Nor does greater investment mean waiting decades to see results. Yes, completely ending overflows by separating our entire combined sewer system would cost £350-600bn and take decades, but there are major improvements that can be made far quicker. Capture the particularly polluted first flush in retention tanks, screen outfalls for wet-wipes and plastics, add UV disinfection near bathing waters and reed beds as natural filters, and within a few years we could make substantial improvements to our rivers. We have the data necessary to do this too: the sector has invested heavily in sensors and telemetry over the last fifteen years but too often fails to translate information into intervention.
Of course, some improvements, such as building reservoirs, will take longer. After a thirty-year hiatus, England is finally building reservoirs again, with Havant Thicket well underway. If we want that to be more than an anomaly, there are structural changes we must make. Firstly, we must avoid the classic British affliction of a stop-start investment cycle that repeatedly disperses skilled workforces and supply chains between projects. This means a creating a national multi-decade pipeline with a degree of central coordination. Secondly, we must adopt the 10-, and 25-year investment horizons Cunliffe proposes for major infrastructure projects. Finally, we must overcome the planning inertia and NIMBYism that has killed such schemes in decades past. Reservoirs and other major improvements to our water network must receive Government backing as Nationally Significant Infrastructure, with tight statutory time limits on planning decisions and a clear, legally binding compensatory framework.
None of this is glamorous or fits on a placard.
You can hardly imagine the chant: “What do we want? Responsibly managed utilities providing fair, inflation-protected returns while operating in the public interest! When do we want it? Over an appropriate investment horizon!”
But it does offer an alternative to the false choice between nationalisation and the status quo: preserve the private-sector advantages of access to capital and efficiency, while making returns genuinely conditional on stewardship. Get it right, and our nation’s water might yet find its way out of our newspapers and back into our hearts.
Tom Bennett is co-founder of water-tech firm UDlive and a Conservative councillor.
Britain and water have always had an ambivalent relationship.
It has been integral to our economic and military success as an island nation, but also a perennial cause for complaint. Sadly, that relationship is now at a historic low. Britain has a water problem.
Much of one of the world’s wettest nations is now in the seventh week of a hosepipe ban, with splash parks and paddling pools closed just when they would provide most benefit. Meanwhile, our rivers are in dreadful condition: just one in six achieves good ecological status; none achieves good chemical status. And our priceless chalk streams – one of the hydrological wonders of the world – have suffered chronic degradation.
That these problems are occurring at the same time is no coincidence. They are symptoms of the same failure: our inability to adapt water infrastructure to growing climatic and population pressures. If we cannot store more water during storms – helping prevent excess water from overwhelming treatment facilities and contributing to sewage spills – we are unlikely to build up sufficient reserves for dry summers. But how did the country that designed the modern sewer become so bad at managing water?
For many, the answer is simple: privatisation. That nationalisation would in one fell swoop wash away our water woes is not a fringe socialist view, it is received wisdom: four in five Britons now support public ownership of water. This view has solidified in the last five years as headlines about sewage spills have competed for space with those about water company dividends, executive pay, and vast piles of debt. No one could argue that the current model is going swimmingly.
At this point, an important caveat: part (but by no means all) of the reason Britain appears exceptionally bad at managing water is because we are exceptionally good at measuring it. Between 2010 and 2023 England went from only 7 per cent of storm overflows being monitored to 100 per cent . That rollout was driven by pressure from the Conservative Government, culminating in the Environment Act 2021 which mandated near-real-time reporting. As a result, we now have some of the most closely monitored sewers and waterways in the world. Conservatives can find some gallows humour in this: demanding this transparency was the right thing to do, but we all recall what thanks we got for it at the last general election.
Nevertheless, even taking better monitoring into account, we are still a long way from where we should be. So to what extent can privatisation be blamed? Looking at the record since water infrastructure was taken out of state hands in 1989, investment has roughly doubled, amounting to around £240bn. Over that same period, leakage is down by 43 per cent, and British tap water remains among the cleanest in the world. Had investment depended on general taxation – competing with hospitals and schools – it would surely have been lower. This is precisely the experience of Northern Ireland, where its taxation-based water system has repeatedly had investment constrained by competing demands.
Perhaps more to the point though, nationalisation is not affordable. Defra estimates the total cost would be around £100bn. That’s a lot of money to spend that wouldn’t add one reservoir or repair a single pipe. Campaigners argue that companies could instead be acquired for a nominal sum by writing down their value against their investment backlog. But such a retrospective write-down would be seen as a naked asset grab: inviting endless litigation, hitting institutional investors and pension funds, and sending a disastrous signal to anyone considering investing in British infrastructure.
So what is the answer if it is neither the deeply unpopular status quo nor an unaffordable nationalisation programme? In all fairness, the Government has made some small but positive first steps by committing to bring fragmented regulatory functions into a single super-regulator and move beyond the restrictive five-year planning horizons for major infrastructure, as recommended by the recent Cunliffe Report. Both measures are sensible: we need a better referee and longer investment horizons. But we also need to change the incentives facing the players.
Excellent stewardship must become the only way for companies to provide a return to shareholders.
To achieve this, water company operating licences should be amended so that dividends are tied in law to an independently audited scorecard. The scorecard would set clear targets for public priorities, including sewage overflows, drinking-water quality, and supply interruptions.
Meet the standard, and you can pay your shareholders in full; miss it and an automatic brake caps payouts and redirects money into a ring-fenced repair fund. Fail badly, and the dividend freezes entirely. Unlike the regulator’s existing (and oft-dodged) discretionary powers, this would be mandatory, automatic and plain for all to see. To rebuild some level of public trust in our water industry, the public now needs this level of accountability.
We must understand this won’t be cost-free.
Making dividends conditional on performance may increase the cost of capital, at least initially. And whoever owns the industry, bills will need to rise in the short term to fund the investment needed to repair ageing assets. But that is an honest reckoning with the situation we are in. The alternative is not free water: it is allowing problems to compound until consumers or taxpayers face a much larger bill. And in the long run, clear, predictable rules may well prove cheaper than today’s regulatory uncertainty.
Nor does greater investment mean waiting decades to see results. Yes, completely ending overflows by separating our entire combined sewer system would cost £350-600bn and take decades, but there are major improvements that can be made far quicker. Capture the particularly polluted first flush in retention tanks, screen outfalls for wet-wipes and plastics, add UV disinfection near bathing waters and reed beds as natural filters, and within a few years we could make substantial improvements to our rivers. We have the data necessary to do this too: the sector has invested heavily in sensors and telemetry over the last fifteen years but too often fails to translate information into intervention.
Of course, some improvements, such as building reservoirs, will take longer. After a thirty-year hiatus, England is finally building reservoirs again, with Havant Thicket well underway. If we want that to be more than an anomaly, there are structural changes we must make. Firstly, we must avoid the classic British affliction of a stop-start investment cycle that repeatedly disperses skilled workforces and supply chains between projects. This means a creating a national multi-decade pipeline with a degree of central coordination. Secondly, we must adopt the 10-, and 25-year investment horizons Cunliffe proposes for major infrastructure projects. Finally, we must overcome the planning inertia and NIMBYism that has killed such schemes in decades past. Reservoirs and other major improvements to our water network must receive Government backing as Nationally Significant Infrastructure, with tight statutory time limits on planning decisions and a clear, legally binding compensatory framework.
None of this is glamorous or fits on a placard.
You can hardly imagine the chant: “What do we want? Responsibly managed utilities providing fair, inflation-protected returns while operating in the public interest! When do we want it? Over an appropriate investment horizon!”
But it does offer an alternative to the false choice between nationalisation and the status quo: preserve the private-sector advantages of access to capital and efficiency, while making returns genuinely conditional on stewardship. Get it right, and our nation’s water might yet find its way out of our newspapers and back into our hearts.