When England’s water industry was privatised in 1989, we were told it would lead to ‘shareholder democracy’. Instead, what we’ve seen is a monopoly which has resulted in consumer bills soaring, while infrastructure deteriorates and the debt of water companies soars.
Since the 1990s, investment by the 10 largest water and sewage companies has fallen by 15%. Now new research published by the Financial Times has found that 16 water monopolies have paid out a total of £78bn in dividends in the 32 years since privatisation.
The paper states: “The £78bn payout is nearly half the £190bn the companies spent in the same three decades on infrastructure. The utilities meanwhile chalked up more than £64bn net in debt over the same period, despite being sold at privatisation with no borrowings.”
The FT also finds that water companies in England and Wales paid £2.5bn in dividends and added £8.2bn to their net debt in the two financial years since 2021.
‘There is a growing perception that the water industry cares more about profit than the service it provides.’
Public trust in water companies has hit a new low.Less than one in four people believe water companies will help protect the environment.
Just 23 percent of water consumers in England and Wales say they trust their water companies to “do what’s right for the environment,” marking a 9 percent drop from 31 percent two years ago.
These were the findings of a consumer survey commissioned by Ofwat and the consumer watchdog Consumer Council for Water (CCW). The Savanta study was conducted between December 4 and 18, 2023. It surveyed 2,399 UK adults in England and Wales.
The research found that satisfaction with the quality of water services has fallen to 58 percent from 65 percent in 2021. Similarly, consumer satisfaction with wastewater and drainage services has dropped to 49 percent from 56 percent.
The water regulator Ofwat says the findings underscore the importance of the need for a transformative change in the water sector, so that it “delivers better outcomes for customers and the environment.”
“Wes Streeting says that if the NHS doesn’t change, it will die. But it is inadequate funding that has left our NHS in a poor state of health, not lack of reform.
“Between 2010 and 2019 the UK had a lower level of capital investment in health care and 18% lower average health spending than 14 EU countries.
“So to say that the public is paying a heavy price for failure is an insult to hard-working NHS staff, who are doing their level best despite being overworked and underpaid. It is the failure to invest adequately and pay staff properly that is at the root of dissatisfaction with the NHS.
“The public agrees. They don’t want endless reforms; neither do they share the Conservative or Labour appetite for creeping privatisation. They want the current model to work and to see the NHS available to everyone free of charge and primarily funded through taxes. A tax on the super-rich billionaires and multi-millionaires can provide the funds needed to fix our cherished NHS.
“The Green Party has never had any truck with the profit motive in health care and will continue to push for a fully publicly funded NHS.”
England’s privatised water companies are an example of vulture capitalism
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
England’s privatised water companies are an example of vulture capitalism unleashed by neoliberal obsession with privatisation of essential services. Its poster child, Thames Water, the UK’s largest water company, wants a 40% price increase and guaranteed returns. Its investors based in China, Abu Dhabi, Canada and the Netherlands are holding the government, regulators and people to ransom by stating that unless their demands are met they won’t invest and let the business collapse. Any concession to Thames will enable other water companies and corporations to do the same. It is time to tackle vulture capitalism head-on, let Thames go bust and bring water back into public ownership.
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The industry was privatised in 1989 for a net price of £6.1bn, £7.5bn price minus a dowry of £1.5bn to give companies a debt free start. So far water companies have paid more than £75bn in dividends, and neglected investment. Customer bills have increased by over 350%, double the rate of inflation. Companies operate through complex opaque corporate structures and are adept at shifting profits to low/no tax jurisdiction. They pay little or no corporation tax. In 2023, sewage was dumped into rivers/seas for 3.6 million hours, compared to 1.75m hours in 2022. Some 3bn litres of water is lost every year due to leaks from a dilapidated infrastructure. No new reservoirs have been built since 1989.
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Privatisation has failed and water industry needs to be brought back into public ownership. However, acknowledging that privatisation has failed would be a bitter pill to swallow for the Conservative government. In an election year, the government will try to prolong the life of Thames Water. During his leadership campaign, Labour leader Sir Keir Starmer promised to nationalise water, but has since reversed his position. A crisis looms for both parties.
Profiteering is the root cause of the crisis, and that can’t be addressed by handing the company to another profit seeking operator. The profit element needs to be removed and surpluses need to be ploughed back into building the infrastructure. Public ownership whether through a not-for-profit, a community owned, or a mutual organisation is the best way forward.
dizzy: 350% seems far more than double the rate of inflation so there may be an error there. I wonder if there is a case of criminal neglect here since water companies’ conduct affects pollution and health.
AS BELEAGUERED customers faced further price hikes today, the scale of Britain’s energy rip-off was revealed.
The energy firms have collectively reaped profits of £420 billion since 2020, according to research by the End Fuel Poverty Coalition.
For comparison, the annual budget of the Department of Health & Social Care, which includes the NHS, was £181.7bn in 2022-3.
Though the Ofgem-imposed price cap, limiting what customers pay for each unit of gas and electricity that we use, fell today to £1,690 a year for a typical household, the average standing charge rose from £303 a year to £334.
These charges, which have to be paid even if no gas or electricity is used, have risen by 147 per cent since the 2022 outbreak of war in Ukraine.
Those cashing in on the profits dividend include not only the energy providers but also the firms that own the wires and pipes through which electricity and gas supplies travel, all publicly owned prior to privatisation in 1990.
