âLeverage is the reason some people become rich and others do not become richâ - Robert T Kiyosaki
The privatised water companies have been demanding price rises of between 24% and 91% over the next five years according to the Consumer Council for Water. The mainly foreign owned "English" water companies want to invest ÂŁ96bn in water and sewage restructuring between now and 2030. New reservoirs, the first for over 30 years, will be built, leaks will be reduced and less sewage will be pumped into our waterways and seas.
Amen to that! But waitâŚ
âEnglish water firms have handed ÂŁ57 billion to shareholders in the 30 years after privatisation.â (The London Economic: 28/10/21)
We, the consumer, having generously contributed to foreign share dividends for three decades to the tune of ÂŁ2 billion per year, are now expected to part with even more money to pay for 30 years of private water company neglect. Meanwhile, the CEOâs of these private companies gave themselves a 20% pay rise for the year 2021-22, pocketing ÂŁ24.8 million.
None of these facts are particularly new but what really irked me yesterday morning was an interview on BBCâs âToday" programme with David Henderson, CEO of Water UK, the organisation that represents all of the privately owned water companies.
Stressing the countryâs need for âeconomic growth", Henderson said this would not be possible unless the water companies were allowed to drastically raise the price of water to cover the cost of investment needed to upgrade our water infrastructure. Talking of the need to increase water supply he stated:
âWe have not built a reservoir in 30 years, even though our population has risen by 20% in that time. And thatâs because we have been blocked by regulators and by planning officials around the country.â
The cheek!
According to New Civil Engineer magazine (01/09/22)
âThere is a seemingly direct link between the 1989 privatisation of water companies in the UK and the ceasing of new reservoirs being built. While there have been a number of flood alleviation reservoirs built by the Environment Agency in this time, the water companies have not invested in potable drinking reservoirs.â
While I have no doubt that some applications for new reservoirs have been refused by planning authorities the main reason for inadequate reservoir capacity is the reluctance of the privately owned water companies to spend money on investment. Despite what David Henderson said on the Today programme this is a headline from the Express:
âWater firms âsold off reservoirs that could have eased drought' - Profit ahead of supply" (10/08.22)
In defending the private water companies Henderson was merely doing his job - after all that is what he is paid to do - but unfortunately their behaviour is indefensible. The reason that our waterway infrastructure is near collapse is not because investment plans have been blocked by âregulators and planning officials" but because of greed.
When Margaret Thatcher privatised the previously publicly owned water companies she sold this national asset for a grand total of ÂŁ7.6bn. In addition she gave the newly created privately owned water companies a âgreen dowry" of ÂŁ1.5bn. At time of purchase the water companies were totally debt free.
Fast-forward and what do we find?
âWater firmsâ debts since privatisation hit ÂŁ54bn as Ofwat refuses to impose limits.â Guardian: 01/12.22)
The water companies have spent the last few decades borrowing money, not to improve the water supply and sewage disposal infrastructure, but to pay dividends to shareholders. According to Ofwatâs own figures the water companies have been running ratios of debt to capital value as high as 80%. Water company share holders (70% owned by foreign investors) have received ÂŁ65.9bn in dividends and it is calculated that 20% of household water bills go towards paying for the debt that rewards these shareholders.
Rachel Reeves much heralded national wealth fund is supposed to be a central plank of the Labour governments âGreen Prosperity Planâ but Labourâs earlier promise to nationalise the dysfunctional private water companies has now been abandoned.
David Henderson has issued what in effect is a blackmail ultimatum to the new Labour Government that without massive price rises in consumer water bills, the Labour Party can kiss their dreams of economic growth goodbye.
Today Ofwat, the water regulator, sanctioned an average increase in water bills of 21%, some companies charging as much as 44% more over a five year period. This is a third less than what the water companies demanded, but even a 21% rise over five years is an increase of 4% a year, twice the inflation rate target of the Bank of England.
An interesting case study will be that of Thames Water which has dire financial problems due to building up a debt of ÂŁ14bn (while still paying out tens of millions in dividends to its shareholders). It remains to be seen if Thames Water will be allowed to go bust or whether the new Labour Government will step in and bail it out but maybe this headline gives us a clue:
âLabour abstain on bid to criminalize water companies for sewage pollutionâ (Canary: 17/05/24)
