Thames Water is an object lesson in the failure of privatisation.
The company inherited the infrastructure on the cheap and failed to invest in it, while hiking prices and paying out bumper dividends. Thirty-five years on from Margaret Thatcher’s sell-off, it is time our politicians started learning the lessons or paying the electoral price. We, the people, have been ripped off for years, and now our politicians are being presented with an opportunity to act in our interests and end this legalised larceny.
Thames Water has the cheek to be asking for a bailout from billpayers; the company has been asking the water regulator Ofwat for permission to hike water bills by 40 per cent (cost of living crisis? What cost of living crisis?). Thames Water should be left to rot, laden with debt. Its shareholders should pay for their poor investment choice in a company that has ripped off customers and polluted our rivers and seas.
Its shareholders include China’s sovereign wealth fund and a subsidiary of the Abu Dhabi sovereign wealth fund. It also includes some Canadian and UK pension funds – with diverse portfolios – so the collapse of Thames Water would not adversely impact their overall sustainability.
In 1989 when water was privatised the assets were inherited debt-free and the public sector kept the unprofitable parts of the nationalised system, establishing the Environment Agency to do the jobs like monitoring water quality, and flood prevention and resilience.
Privatisation has been a failure because it rested on myths about competition and market discipline.
There is no market competition, but one monopoly supplier. If I dislike the choices or prices available from a supermarket I can change brand. If one goes bust, its market share will be absorbed by another and I can go there instead. That is not true of water or railways – and so they either get bailed out or allowed to hike prices.
Since privatisation water bills in England had risen by 40 per cent above inflation by 2015. Not only that, but the GMB union, which represents workers in the water industry, tells me that Thames Water sold off multiple reservoirs since 1989. Last year Thames Water recorded £398m in pre-tax profits.
The problem for Thames (and other water companies too) is that these cash bonanzas – which I would argue are made from milking its customers like cash cows and selling off assets – have not been properly invested or put in reserves against a rainy day (or maybe a financial drought) but distributed to shareholders in dividends.
And so today, Thames Water is laden with around £15bn of debt, and is feared to be on the verge of collapse.
Where has the money gone? The answer is into the pocket of shareholders. Those profits are from your bills.
So what is the solution? Like with many of the UK’s largescale problems, our politicians dither and blather. Labour no longer backs public ownership (despite Keir Starmer promising to nationalise water in 2020). Today their shadow Environment Secretary, Steve Reed, says “consumers should not be left to foot the bill for Tory failure”, which is right – but solutions are absent.
Reed advocates tougher regulation and bigger fines – which may have been the right course of action a decade or three ago – but that will only accelerate more water companies collapsing, which then begs the question what to do then?
Academics at the University of Greenwich studied the finances of the water industry. They suggest the primary benefit of public ownership would be to stop the extraction of dividends to shareholders and to reduce interest payments on debt. These combined savings would be equivalent to a cut in water bills of about 25 per cent.
Of course some of that saving should be used to do what the water companies have not done sufficiently – and invest to stop sewage pouring into to our rivers and seas. In public ownership, water could operate in the public interest.
Thatcher told the House of Commons in 1989: “Privatised water is a better deal than nationalised water … Water privatisation, I believe, will go very successfully indeed”. The public weren’t convinced then with 79 per cent of voters opposed to privatisation. Today, polling shows 68 per cent of Conservative voters back public ownership of water.
So what are today’s politicians waiting for? Let’s end the legalised larceny of water privatisation and get a better deal for billpayers and our environment.
Andrew Fisher is the former executive director of policy for the Labour Party
Let Thames Water go bust
10
1
29.03.2024
Thames Water is an object lesson in the failure of privatisation.
The company inherited the infrastructure on the cheap and failed to invest in it, while hiking prices and paying out bumper dividends. Thirty-five years on from Margaret Thatcher’s sell-off, it is time our politicians started learning the lessons or paying the electoral price. We, the people, have been ripped off for years, and now our politicians are being presented with an opportunity to act in our interests and end this legalised larceny.
Thames Water has the cheek to be asking for a bailout from billpayers; the company has been asking the water regulator Ofwat for permission to hike water bills by 40 per cent (cost of living crisis? What cost of living crisis?). Thames Water should be left to rot, laden with debt. Its shareholders should pay for their poor investment choice in a company that has ripped off customers and polluted our rivers and seas.
Its shareholders include China’s sovereign wealth fund and a subsidiary of the Abu Dhabi sovereign wealth fund. It also includes some Canadian and UK pension funds – with diverse........
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