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.
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.
A rowing boat on the River Thames Putney, London, March 27, 2024
THE crisis of capitalism is running out of your taps and pouring into our rivers. Britain’s water industry is lurching towards calamity, poisoned by the priorities of profit and abetted by politicians in the pocket of the privateers.
The largest water company in the country, Thames Water, appears to be on the edge of insolvency after its investors refused to pump in cash essential to the company’s survival — apparently because the reluctance of regulator Ofwat to authorise even steeper increases in bills to households made it an unattractive bet.
And alarm was spread about the annual Oxford-Cambridge boat race on Saturday having to row through the sewage-ridden Thames, with doubts being cast on maintaining the tradition of throwing the cox of the winning crew in the river on health and safety grounds.
Now there are calls for the government to declare a national emergency as discharges of raw sewage into rivers and seas across Britain reach a record high.
These are the fruits of the handing over of the most basic resource to the tender mercies of monopoly capital. The sewage in the rivers is one side of the coin, the riches sitting in shareholders’ bank accounts is the other.
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Nationalisation may be forced on the government in the case of Thames Water. But state control can only work in a context of planning, investment and a role for both workers’ and consumer interests.
That was Labour Party policy until Keir Starmer abandoned it. It is time the labour movement demanded its reinstatement.
Raw sewage discharges are allowed to be released from storm overflows on the network only in exceptional circumstances, such as very heavy rain. Photograph: Ben Stansall/AFP/Getty Images
Exclusive: Environment Agency figures due out on Wednesday to reveal 129% increase in total discharges on previous 12 months
More than 4m hours of raw sewage discharges poured into rivers and seas last year, a 129% increase on the previous 12 months, new figures are expected to reveal on Wednesday.
Total discharges from the 14,000 storm overflows owned by English water companies that release untreated sewage into rivers and coastal waters increased by 59% to 477,972, making 2023 the worst year for sewage spills, according to an early estimate of the Environment Agency figures seen by the Guardian.
Senior industry sources were preparing for the government to turn its guns on water companies after the record year of discharges. The Environment Agency said it was setting up a whistleblowing hotline for people who work in the industry to report any activity that concerns them.
The heavy rainfall over the autumn and winter is likely to be blamed by the industry for the huge rise. Storm overflows are supposed to be used only in extreme weather but for many years they have been used routinely, discharging raw sewage even on dry days in some cases. The academic Peter Hammond has shown how water companies are routinely using storm overflow discharges in their water management.
Green Party Co-leader Adrian Ramsay. Wikipedia CC.
The Green Party has repeated calls for water companies to be brought into public ownership in response to the latest State of Our Rivers report. This has found not a single waterway in England is in good overall health. The Rivers Trust study reveals that the impact of pollution from treated and untreated sewage and agricultural and industrial runoff means rivers are in a worse condition than ever.
Green Party co-leader Adrian Ramsay said:
“The state of our rivers is a national scandal. Despite public outcry over our polluted waterways and coastline the latest State of Our Rivers report shows things haven’t improved since the last report in 2021.
“For too long water companies and consecutive governments have failed to act. Taking our water companies into public ownership, so they work for people, not profit, will be a clear Green Party manifesto commitment.
“For decades, money that should have been invested in improved infrastructure has been siphoned off to water company executives and shareholders. It’s time to flush this failed experiment with privatisation down the drain and for a service as vital as water and sewage to be run for the public good.
“It should also be acknowledged that agricultural pollution contributes to 62% of waterways in England failing to meet good standards. We need to learn from the many innovative farmers who are using regenerative and organic farming methods that prevent chemical runoff into rivers.
“Our rivers should be havens for wildlife and biodiversity and healthy places for people to enjoy. In too many cases they more closely resemble open sewers. Green MPs will make cleaning up our act on water pollution a key priority.”
