As The Telegraph notes in an email this morning:
Thames Water took a further step towards nationalisation after shareholders said they would not provide it with a £500m lifeline.
The troubled utility company was told it had not satisfied the conditions to receive the first tranche of support outlined as part of its three-year turnaround plan.
It had been expecting the half a billion pound payment by March 31, but shareholders said they would not provide the cash as the regulatory requirements on the company make it “uninvestible”.
I believe those shareholders. I think they are right. Thames Water and the whole of the English water industry, is uninvestable. I made that case in a report that I published last summer, suggesting not just that this sector was in financial trouble, largely because of increased interest rates, but that it was also environmentally insolvent, because there was no practical possibility that it could adapt to the requirement that they both deliver clean water and clean rivers and beaches while simultaneously meeting net-zero targets.
My estimate was that this industry was not just a little short of the funding that it needed. Instead I suggested that it might be as much as £250 billion short of the money required to achieve these goals. The analysis was based upon official information produced for the government and commented upon in House of Lords reports.
It is, in that case, time for any government, including the one that we have in waiting, to wake up and smell the coffee. The idea that water can continue to be supplied by private companies seeking to make a profit from this activity is now so absurd that it must be consigned to history as one of the greatest follies of privatisation, ever. They should also acknowledge the enormous price that we have paid for this folly, represented in no small part by the vast quantities of human waste that now pollutes so many of our waterways and beaches.
However, can we really expect any such acknowledgement from the Conservatives? Frankly, I doubt it.
Can we also honestly expect Labour to admit that nationalisation might be an answer to a question, given its current heavily pro-neoliberal stance? Similarly, I cannot.
In that case, I have a horrible fear that both the Tories and Labour to come, will continue to pour money into absolutely useless franchise water operations that seemingly exist solely to reward the directors and shareholders of these operations for precisely no value added, and a complete lack of understanding or wisdom on their part.
That said, the crisis that is obviously unfolding at Thames Water provides a very clear litmus test for Labour. Will it, as I am expecting, stick to dogma over need? Or might it be that they finally come to terms with reality and realise that there is a role for the state? Their reaction to this issue might tell us what the answer to that question is.
I am not living in hope.
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Thank you and well said, Richard.
I share your pessimism, too. So does mum, who was at the Department of the Environment in the 1980s.
You use the phrase “the enormous price that we have paid”. That should also include the loss of the land, including natural habitats, that went with the privatisations of not just water, but railways, too, and closures and sales of county farms, agricultural colleges and military bases.
Between 1870 – 1980, the British government built up an estate that amounted to 20 – 25% of the UK’s land mass. It’s under 10% now. Imagine what could be done with that “natural asset”, the phrase in vogue in investor circles* as they hijack decarbonisation. New Labour and the Orange Order Liberals were as bad as the Tories.
*The wealthy, who we can’t afford, are not uninterested in decarbonisation. They just want to extract as much from the current system before leaving the rest of us with the tragedy and we have to run to them for salvation. Just ask Blair’s donors, the people providing Starmer with a shopping list to be sold as the Labour programme for office.
I’m very interested in land use, ownership and reform and how this relates to the environment.
Colonel Smithers: I assume you’re familiar with Guy Standing’s writings on land, commons etc?
In my (amateur and voluntary) activities with the Church of England, I’m part of a movement pressing for change in their land use (eg how their tenant farmers operate – free to choose, or encouraged and supported – or obliged – to transition to renewable, regenerative, organic, or similar options…)
I like Guy’s work
I like Guy
As far as I am concerned, no-one can own land. Who did they buy it from? If they stole it, as I believe, then they do not have ownership. I probably have to accept that, as the original theft of land in this country took place more than a thousand years ago, it will not be remedied, but there have been thefts since then as well, which are just accepted.
In principle, I agree that ownership is a difficult concept when it comes to land. Stewardship is possible, and come with responsibilities. But ownership does make little sense.
Doubtless all big accountancy firms, investment banks, consultancy firms, think tanks and other assorted parasites and lobbyists have already been preparing their pitches and reports to clients, media and anyone that will listen on the future of the water industry. The BBC and other media will doubtless report the think tanks and investment banks reports as a higher wisdom beyond question.
There will be large amounts of government money to grab, and political points to push. I dare say the think tanks will say that there needs to be more choice and competition and of course less regulation in the water industry. Whatever follows will cost billions to bill payers, give billions in bonuses to the fat cats and give a new higher polluting water industry that will fall apart in a couple of decades to give another repeat gravy train.
The government run by the Conservatives or not quite the conservatives Labour will be in full agreement with this and senior former MPs and ministers will accept directorships and consultancies in the industry.
Nationalisation won’t get a look in.
I fear that they will do their utmost to avoid it
The issue is no longer “nationalisation or not” – but rather the method by which water & sewage-related assets are pulled back into public ownership and funded such that rivers are no longer open sewers – and coastlines no longer contaminated with sewage.
The tories have no answers and LINO are vaccuous in the extreme – thus, as with health – neither of the main parties have any answers whatsoever. Neither are interested in people’s health, neither are interested in clean rivers or clean seas. Oh they will claim they are, but policy actions/ideas are completely absent
Voters you have been warned. Neo-liberalism & the Thatcher “experiment” is finished.
The idea that any private company would ever ‘do the right thing’ when that damages shareholder profits is, and always has been, laughable. Apart from anything else, directors’ fiduciary duties to shareholders may well legally constrain them.
The only way that privatisation could possibly work would be to have such strong regulation that it was impossible or uneconomic to get away with not doing the right thing. Of course such regulation would a) cost so much that the case for privatisation would evaporate, and b) make the companies un-investable, as has happened anyway with Thames Water.
The sooner we reverse these farces the better!
As Cat Hobbs from We Own It said yesterday in an interview:
“What we are doing is allowing these privatised water companies to use their customers as a cash machine and our rivers as a toilet. The whole structure of this is a monumental rip off. The mountain of debt, the volume of dividends, the leaks, the increasing bills, the sewage is a mess in every sense of the word. Tinkering with bosses’ bonuses is not a policy (from Labour) that is going to solve this.”
She describes how the water companies can and should be taken into public ownership.
https://m.youtube.com/watch?v=4FNZH96Zjg4
If you’re an ignoramus who believes in the necessity for action limiting fiscal rules then of course you’re going to stick with Thatcher Neoliberalism or Market Fundamentalism!
Why isn’t the blindingly obvious to most of the public not so with our politicians, especially the so called Labour Party?
It seems that the term ‘organised crime’ could easily include privatised monopolies and their regulators. A million here and a billion there and no need to send someone round to break legs.
https://www.theguardian.com/business/2023/jun/30/in-charts-how-privatisation-drained-thames-waters-coffers
https://www.theguardian.com/business/2021/aug/09/macquarie-wades-back-into-uk-with-majority-stake-in-southern-water
https://www.theguardian.com/business/2023/jun/27/thames-water-boss-steps-down-amid-backlash-over-environmental-performance
https://www.ft.com/content/279eede4-01f3-4189-aca9-2904e07e9eaa
https://www.theguardian.com/politics/2023/jul/01/water-privatisation-was-right-says-michael-howard-amid-debt-concerns
It’s hard to comment on each of the above links since each one just gets staggeringly worse.
Thank you for these links. I am working on a web site for Independent candidates standing in the next national elections. These will be useful bullets to build the case for permanent nationalisation.
Mike Parr
I would also recommend the excellent Channel 4 investigation carried out by Joe Lycett as a very accessible explainer and expose. Highly recommend. He’s funny too.
https://www.channel4.com/programmes/joe-lycett-vs-sewage
Presumably if its nationalised it will be temporary – with the state taking on all the outstanding debt, rather than letting it go bust and the state getting it for nothing.
Who knows?
The rules on this as embedded in statute are quite absurd and the assumption of no compensation is not enshrined in that thinking
As well as flooding in to our waterways it is now hitting the fan in the board room.
This blog has already kicked around a few options and it appears there is consensus among the public across the political divide along similar lines; Equity holders wiped out, bond holders given a severe haircut…. possibly 100pc loss although my idea would be 25pc loss for senior operating company debt to 75pc loss on sub debt.
The problem is that the government AND opposition are completely out of touch with public opinion.
I am currently stormbound on the south coast with a dozen youngsters who angry, very angry about water quality. I am embarrassed to be part of a generation that have failed them.
Good luck with getting ashore
The failure of my generation is an utter disgrace; forty years of systematic, brazen self-interest and rank hypocrisy has come to its inevitable denouement; the collapse of the whole house of cards in, at best stupefying incompetence, or even worse.
Thames Water; a phoney domestic energy market; a failed railway system; the Post Office. C4 News last night presented what appeared to be a ‘smoking gun’, in the form of recordings between the investigating accountants and senior management of the Post Office, establishing what they knew about the computer system – in 2013. The recordings, played to Lord Arbuthnot, brought him to the edge of tears. A lawyer and Conservative MP, he had fought doggedly for the Postmasters in Parliament for about fourteen years. He was shocked, above all that a major British institution could behave as it had done.
Really, Lord Arbuthnot? There, I submit, is our problem. I wish I could have held on to my naivety as long as you have managed to do; if only to postpone the inevitable, and total disillusion. In retrospect our youthful illusions are the product of Britain’s greatest success; the masterly perfection of its effortless hypocrisy and urbane double standards; which it passes from one generation to the next, carrying off the innocent and gullible on a wave of grandiloquent, nostalgic, political piffle and waffle. Until we face up to our endemic weaknesses, we will never learn anything at all.
I agree
We failed
But we can at least acknowledge the fact and pass on the lessons learned
Mr Warren, I think you are a bit hard on yourself. As Malcolm X observed “if you want me to be a diner – you have to let me dine”.
Most of the commentators on this blog (and UK subjects generally) have close to zero involvement in politics/connections with political parties.
When they try, they are often cold shouldered. Back in 2016 a political associate joined Labour and observed that newcomers in his local party were not welcome.
The desire was to keep it a cosy club.
Doubtless the situation is the same in the tory party, lib-dems etc. (perhaps not the Greens – but they have a different set of problems).
The UK’s political system (and the penumbra of institutions that surrounds it) is closed and self-referential – a cosy club which is uncomfortable with outsiders.
That said, one can see this replicated in almost any body-politic – the EU is no different – who you know, not what you know – matters in Brussels.
Discussions are on nuance not fundamentals.
This leaves the question: how to effect change, how to open up the system. The next election could offer a chance to do that.
Keep going, Mike
Mr Parr,
We may have gone in as diners, but we came out as dinner.
We are all, in a way, shareholders in UK. We have things to gain from this relationship and also responsibilities.
I am unhappy with the condition of our roads and believe the situation is univestable, should I refuse to pay road tax for my bike?
:rhetorical: :smileyface:
I really don’t like being the idea of shareholders in U.K. plc be wise I know too much abiotic that relationship
But, stakeholders I buy, although the term could be improved upon, I am sure.
‘Citizens’ would be a good term to use, except that we are not citizens but subjects.
Agreed
Please note: my blood pressure cannot keep reading this misinformation about the status of people in the UK. I’m sorry that it isn’t really relevant to the TW discussion.
The term “subjects” applies to very few inhabitants of the UK nowadays. We are mostly citizens – and have been since about 1983.
https://www.gov.uk/types-of-british-nationality
I am not sure that website is right
We are subjects of a monarch, not citizens, as far as I know
I always thought we were British Subjects but according to various websites (not just the gov.uk we are now citizens). The term “British Subject” became obsolete for all but a tiny remnant category of British nationals when the British Nationality Act 1981 came into effect at the start of 1983 apparently.
Noted
Shareholder status presumes only a transactional relationship, with expect some kind of dividend or capital growth.
The whole concept of the nation as “UK plc” with the population as individual sharehoders in a profit making entreprise with a managerial class and a working class is redolent with 19thC capitalist assumptions, and I think it is right to question these as often as is required. .
A stakeholder has much wider interests, including reciprocity, and these are not necessarily monetised. It would definitely be very useful to add some meat to the bones of the definition though, as it has become just another jargon word in consultations, and cynically, where opinions expressed by ‘stakeholders’ will be ignored or marginalised.
Given the leasehold scandal (millions now trapped in the vice of new developments); which is a lively example of feudalism, still breathing, perhaps we should brush off and reconstitute the best description of the average British voter, Waspi woman, immigrant, Postmaster/Postmistress, zero-contract scraper-by, or whatever: – and use a functionally accurate term for the humble operatives who make neoliberalism work for rentiers, just for once:
SERFS..
For those of us who grew up at a time when water authorities were stable, reasonably competent organisations, steadily dealing with the often competing requirements of water supply and were financed by a tiny quarterly water rates charge, the current situation is a perfect example of the ignorance, waste and incompetence with which Britain has been governed since 1979.
In a sane world any new government would start with a detailed analysis of why so much in Britain does not work.
First to make sure that it can never happen again and secondly to develop credible plans for the future. Meanwhile a start could be made by making sure that all Britain’s future energy provision is nationalised.
”In a sane world any new government would start with a detailed analysis of why so much in Britain does not work. First to make sure that it can never happen again and secondly to develop credible plans for the future.”
What would most people consider to be the purpose of government? With evidence of social and environmental failure stacked high, the idea that it is to improve the lives of all citizens these days almost seems laughable. Political priorities are most definitely guided by the interests of the few, not the many. They are of course interested in making things work better for their wealthy and powerful allies and backers, and coming up with plans to ensure that nothing changes the hierarchy of power.
Climate change might be thought of as a wild card, disrupting the ages-old power-struggles: change is coming regardless! On the surface it may seem that our leaders and those who can currently afford to are not taking climate change seriously, but anyone with half a brain knows we won’t be able to do that for much longer without committing collective suicide. The coalition of minority/elite interests that we might call the Establishment View will seek to tightly manage the inevitable eventual transition to a more ecologically sustainable society with the intention of minimizing threats to existing power structures. Their preferred responses to climate change will, if insufficiently opposed, likely bring about the development of a kind of feudalistic green fascism. Even now steps are being taken in that direction, while their servants in the mainstream media alternately ignore, ridicule and fight tooth and claw alternative views/voices of sanity that see social, economic and ecological justice as different aspects of the same problem.
If Thames Water are nationalised or something similar what would happen to the shareholders holdings? Clearly TW can’t ‘fail’, irrespective of its finances it has to keep pumping water and treating sewage etc but simply pouring in loads of state money can’t happen without some ownership.
I will post about this – but maybe not until the morning
Is it not time for a review of the obligations and legal status of directors and shareholders and the relationship that exists between them. Limited liability shareholders can way away from their investment and directors can disappear within the revolving door having taken dividends and salaries whilst leaving behind a total mess. Effectively no-one takes responsibility for their actions over the longer term.
Agreed
I believe the duties and responsibilities of Directors are covered in the Fraud and Companies Acts of 2006. (as modified)
Some years ago I tried to get Companies House to confirm who has the legal duties for monitoring and enforcement of Directorial duties and responsibilities under the Companies Act, and it is .. apparently ….
……. nobody ……
( … and certainly not me guv Companies House who claim to be merely a registration agency with absolutely no legal responsibilities.)
That is unless the Insolvency Service get involved over malpractices, and they are highly selective.
Thus limited liability becomes no liability.
Notwithstanding corporate level defaults, such as by Thames Water et al, any director in a cowboy builder business (or other rogue trader) can therefore act with impunity , and there are no comebacks.
The basic cowboy builder scam is so easy I could outline it in one sentence, and given almost total impunity, I don’t know why there are any honest traders at all…
(Unsurprisingly 56% of homeowners are reported to have suffered at the hands of a cowboy builder. )
S172 of the Companies Act 2006 defines the duties but literally no agency anywhere exists to enforce them as I noted in the Taxing Wealth Report.
Companies House is massively overdue for major reform, not tinkering.
The 2006 Fraud Act ironically preceded the Financial Crash by one year, and there proved only to be little more effective in the financial sector than the previous one; hardly anyone was ever prosecuted, for anything; a reasonable test of fitness of purpose for the law to pass I would think; unless you hold there was no wrong doing whatsoever, which is possible of course, but seems to me improbable.
Fines were handed out (lots of them, on it seemed a cost-of-doing-business they became so regular), by the Regulator, not the Courts; for something called “mis-selling”, which seems to have been considered a form of accident or untoward Act of God. I remember reading an expert legal critic of the 2006 Act in the context of finance, dismissing it as little improvement on the notably useless ones of 1968 and 1972. In addition, and more generally Professor Ian Dennis argued “the new Act contains no definition of dishonesty. Presumably, therefore, the courts will continue to apply the Ghosh test, and leave fact finders to apply whatever they conceive the current standards of honesty to be”. It now seems the Ghosh test has come under criticism by the Supreme Court. I am not a lawyer; i have no idea where that leaves us, or it.
If Starmer is telling everyone he can’t help the councils then he’ll only be re-nationalising the water and sewage services temporarily at best. This man is just another grifter politician like Blair working on behalf of the wealthy and himself! The tragedy is so many superficial voters not willing to make the effort to understand what’s really going!
Arguably they should not have to make an effort to understand. If the media did its job then these matters would part of general conversation.
How’s the media going to do its job when its mostly owned by the wealthy? Remember the Murdoch and the Milly Dowler scandal? That should have driven a coach and horses through the fantasy the media is there to serve the public need!
https://www.theguardian.com/uk/2011/jul/04/milly-dowler-voicemail-hacked-news-of-world
Myhusband is not ‘a political person’ and rarely pays much atention to the news. Nevertheless I was astounded yesterdat when, hearing about the Oxford boat e-coli scare, he actually said ‘the rivers are a hell of a lot cleaner now than they ever were’.
I don’t think his level of knowledge is unique.
But scary, nonetheless
I’m probably missing something here, but the government website says ‘Your company must not pay out more in dividends than its available profits from current and previous financial years.’ How do the water companies make profits from which to pay dividends if they have mountains of debt?
Debt interst is a cost. Debt itself is not.
And profits are measured over all time, not just the currtent year.
But there are very good questions to be asked of Thames’ accounting, in my opinion.
[…] 28 March 2024 – Dozens of articles on the crisis at Thames Water.> Reuters: UK’s Thames Water in crisis after shareholders refuse to pay up.> The Guardian: Michael Gove has ‘zero sympathy’ for ‘arrogant’ Thames Water in funding crisis.> ITV X: Thames Water scrambles to find cash after investors pull funding.> BBC News: Thames Water boss says bills need to rise by 40%.> University and College Union (UCU): UCU calls for Thames Water to be renationalised.> Tax Research :Will Thames Water finally force Labour to address the nationalisation issue?. […]
I recall that the brilliant Tory trade deal joining the Trans Pacific Partnership includes a section that if for example the UK nationalised Thames/Southern Water and wiped out Macquarie Bank’s investment the UK gets sued for compensation in the “TPC Court”.
Even The Boat Race is going to be affected by the dreadful quality of Thames water!
“In a statement to the Guardian, the Boat Race said it supported the research carried out by River Action and confirmed that it would be implementing similar safety measures for thte race on Saturday. “Water quality is an ongoing concern for the Boat Race,” it said.
“We have put in place a series of precautionary measures this year to protect the health of our athletes, which includes guidance regarding the covering up of open wounds, regular handwashing, a cleansing station at the finish area and highlighting the risks of entering the water.”
Full article here:
https://www.theguardian.com/sport/2024/mar/27/boat-race-organisers-warn-rowers-not-to-enter-water-after-e-coli-discovery
But why did they take notice when the toffs got involved?
Like so many issues it comes down to “finding the money” – and it seems it just can’t be found for anything other than “national security”, like Trident’s £200 billion plus.
Imagine if the government had chosen to fund the upgrade of its antiquated sewage system: the jobs it could have created, the business and profits it would have generated for British companies.
This is Rory Stewart (who thoroughly agrees with austerity: listen to The Rest Is Politics: Question Time: Austerity, diaries, and impostors, 9 Jun 2022) talking about when he was Minister for the Environment (2015-2016).
“So how do we end up in this situation? I think, so I’m now going to play the role of trying to explain what it’s like being a minister dealing with these situations and how we got ourselves in the poo, as it were, or my memory of how we got ourselves in the poo. So first thing to understand is that the British system basically has our sewage and our [storm] water flowing in the same pipes.
And in a sensible modern system, you don’t do that. You put your rainwater in a different pipe to your sewage. If you put your sewage and your water in the same pipe and you get a lot of rainfall, you get the sewage potentially overflowing out of that pipe.
And you can overflow it in one of two places. You can either overflow it close to the location, so close to people’s houses, schools, and that sometimes happens. I remember as an MP in Cumbria, the lot of sewage on the edge of people’s houses in Penrith, or you put it into rivers, which was traditionally, of course, what we always did in Britain.
The cost of actually changing, well, this is what we were told, and it was true, but the cost of actually changing to a system where the water drainage and the sewage was separate, we were told, was between 350 and 600 billion pounds. And that probably would have … landed on people’s bills. So that would have meant for the next 30 years, you’d be paying 600 to 1,000 pounds more on your water bill to try to sort it out.”
From The Rest Is Politics: Working for Truss, Blackpool with Clinton, and Sewage, 24 Aug 2022
https://podcasts.apple.com/au/podcast/the-rest-is-politics/id1611374685?i=1000577154078
See https://www.taxresearch.org.uk/Blog/2023/06/29/cut-the-crap-accounting-for-clean-water/
Here’s all you need to know about Sir Keir “Thatcherite” Starmer:-
“I can’t pretend that we could turn the taps on, pretend the damage hasn’t been done to the economy – it has,” he said. “There’s no magic money tree that we can waggle the day after the election. No, they’ve broken the economy, they’ve done huge damage.”
https://www.theguardian.com/politics/2024/mar/28/starmer-says-he-cannot-turn-the-taps-on-to-fix-crisis-in-council-funding
Overturning a Thatcher privatisation would be hugely significant in public perception. Once it’s seen to be possible, others would follow. The Tories won’t do it for obvious reasons. LINO won’t do it because they’re frightened of their own shadow. I’m afraid a buyer will eventually be found and subsidised through some opaque channel.
That is my fear
Probably Chinese
Or another Canadian pension fund