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“Late Soviet britain” Abbey Innes – delivers the reasons why regulation of water, electricity, rail, etc cannot work.
In summary: information asymmetry between the regulated (who know everything) and the regulator (who can only ever regulate using a very limited data set).
Over the last 25 years we have seen the results of this – empirically. We see the results now: uncontrolled quantities of turds in rivers.
That LINO thinks “better regulation” will solve it shows that: like the Bourbons, they have forgotten nothing & learned nothing, & are incapable of learning anything.
The way forward lies in Wales & Scotland – next year. Ideally a total & complete electoral wipe out of LINO – no seats, nothing.
It is not even a case of they have poor policies, it is a case of, presented with evidence that regulation does not/cannot work – they continue down that path.
LINO as a party needs to be wiped out. Next year offers the possibility to start that process.
Agreed, entirely
In Scotland’s General Elections we have a two-part process of proportional representation – the Additional Member System. The Constituency vote part is FPTP and the second part is the Regional or List Vote – using the D’ Hondt method – where we vote to balance out the fact that FPTP leaves some voters without parliamentary representation. The more constituency votes a party gets the fewer List votes it will garner as its voters are already represented. The List seats make sure the other voters get some representation in our Parliament.
The bad news is that it’s very unlikely that LINO will be ‘wiped out’ in the Holyrood 2026 election. LINO only need about 5.5% of the List votes to get 1 parliamentary seat. For the purpose of the General Election, the country is divided into 8 regions and each region elects 7 additional members under the List vote. It’s not at all likely that LINO will have no seats in 2026.
You’ll have to wait for the next UK General Election to have any hope of a total LINO wipeout. Sorry.
The report was not allowed to consider nationalisation, and we all know why.
River pollution increased by 60% over the last year alone[1] so Steve Reed’s pledge to bring down sewage releases by 50% in 5 years time looks like a complete piss-take to me.
[1] https://www.bbc.co.uk/news/articles/cg5zl75dmm0o
” River pollution increased by 60% over the last year alone ” – It’s BBC speak for government and regulator admissions of it have gone up 60%…
Thank you, Matthew.
Whenever I hear of commissions being set up by the government etc., I look at the personnel involved. Having worked with Cunliffe, ex Treasury and Bank of England, I knew that nationalisation was not an option.
I don’t know why his appointment did not make waves. Cunliffe has no expertise in the field, but can be relied upon to parrot whatever the Treasury wants.
Dad was in the RAF and often involved with enquiries. One of his former commanding officers and predecessors was an aristocrat, related to a former PM, the PM responsible for THE declaration now one of the causes of the current genocide. That commander told dad that when appointed to an enquiry, one must know and not (have to) be told what the government wants. Some years later, John Stalker appears not to have got that memo.
Agreed
It has the feel of rearranging the deckchairs on the Titanic. Water is a natural monopoly so public ownership makes sense, but it is not necessarily a panacea.
Can we look at what other European countries do. Some have entirely or almost entirely nationalised water and sewerage, eg Germany. Does that work well and why? Others have largely privatised water and sewerage supplies, eg France. Not like the UK – usually smaller localised leases and concession. Again, does that work and why?
My suspicion is that the UK has failed because regulation has been inadequate. Water companies break the law every day and there is no enforcement action, no regulatory demands for action, no prosecutions or fines. It is shameful. And the solution it seems is to carry on as we are for another decade but to give the regulators new hats and shiny badges. Why should a new regulator be any more effective than the current ones?
The folks at ‘The Europeans’ podcast have picked up on this idea and launched a series ‘Who Does it Best?’ in which they will investigate and critique the ways in which the various European countries are addressing major social issues. There has been huge interest and they have crowdfunded the entire series in record time, and it is now in production. You can find it here
https://www.europeanspodcast.com/who-does-it-best-blog
and the main podcast episodes are at
https://www.europeanspodcast.com/episodes
For those who don’t know it, The Europeans is an excellent podcast by two young Brits who have relocated to Europe. It is entirely independent and refreshingly critical yet positive – well worth a listen. It really throws a light on how stale, narrow, pointlessly confrontational and depressing political discourse has become in the UK ….
That may be useful
To Andrew — Maybe find out how Scotland (currently part of the UK, by the way) manages its public-owned water—which is considered excellent drinking water.
But make no mistake, if the SNP/Greens lose the Scottish Parliamentary Election in 2026, our public-owned water will be sold off to private concerns ASAP by whatever other party—Labour, Reform, Tory, LibDem—gets the majority vote. And it won’t matter which of these parties wins either, because they all vote together for anything the SNP votes against. They’ve been doing that for years.
You can smell this coming. Every time a water main springs a leak somewhere in Scotland, suddenly the media is all over the Scottish Government and Scottish Water about wasting taxpayers’ money, yadda yadda yadda.
Joni Mitchell was right: You don’t know what you’ve got, till it’s gone.
Regulators cost the government (hence, the citizens) a lot of money if they are going to properly regulate, inspect, and enforce regulations. At the same time, the private sector is taking a portion of the price of water and giving it to CEOs and shareholders (many in other countries). That’s all money that could go towards infrastructure and lower water bills if water were nationalized or even owned locally by municipalities which is the case most places in Canada.
“My suspicion is that the UK has failed because regulation has been inadequate.”
This, as my post shows is a wholly false starting position and is a category error. The “let’s do better regulation”… of a complex monopoly (e.g. water or electricity) CANNOT work becuase of information asymmetry. Although I have not worked in the water industry (a complex monopoly) – I am a power engineer – I know how power system function – I understand their complexity because I worked in the industry.
Until about 2014, Ofgem employed exactly ONE electrical engineer. In the period 2008 through to 2018 I had close intereactions with senior people in the DNOs. They ran rings around Ofgem. I’m not offering theory here – this is reality. Return on assets for the UK elec utilities was well north of 6% even when interest rates were close to zero & this is repeated across Europe. There was the most almighty court battle German energy regulator vs German TSO – the regulator had the temerity to reduce the RoA (return on assets) from circa 9.5% to circa 6% (regulator won). German TSOs are privately owned by the way. The pattern repeats, across Europe/UK – private owners of monopoly assets price gouging.
“Better regulation” (of mono[poly utilities) is a category error – so is “tax and spend” & I don’t see many people defending that meme – thus I am puzzled why anybody would think that “better regulation” works. It doesn’t & the circa 35 year experiment in making it work – HAS FAILED.
FAILED – electricity pricing, FAILED, electricity networks fit for renewable future, FAILED, strategic assets mostly in foriegn hands.
FAILED.
Agreed
Agree.
They like to fiddle and look productive while Rome burns.
Einstein’s apocryphal definition of insanity
I read reports yesterday that that habitual and shameless bandwagon-jumper Nigel Farage has said that the water companies should be allowed to fail and the shareholders lose their money. If so then, for once, I may have found common ground with him. He may also dial up the pressure on LINO to consider the only realistic option i.e., re-nationalisation of an industry (at little or no cost to the public purse) that no one wanted privatised in the first place, where the new companies had had their debts written-off beforehand and the new owners were handed a green dowry to upgrade the infrastructure. Instead the only profitable extraction that has taken place is not water from aquifers and rivers but billions in shareholder dividends whilst the infrastructure has crumbled. What an advertisement for privatisation!! The public outcry that may follow, with hosepipe bans already in force and ever rising bills whilst the water companies lose massive amounts of water through leaks from unmaintained infrastructure and our rivers and coasts are riddled, literally, with shit, may herald the beginning of the end for the neoliberal obsession with privatisation and de-regulation. Unfortunately the current cohort of political mid-ranking brand managers that make up most of LINO have not yet cottoned on to this, unlike Farage.
I hate to say it, but it seems how knows more about corporate valuation than the entire Cabinet and Treasury.
The point about Farage and Reform, is that he wants 50% state ownership, and 50% UK pension fund ownership.
Farage’s beef is that ownership of the water companies is about 70% foreign, due to them being stock market listed, and anyone can buy the shares.
But what of his form of nationalisation? First, those UK pension funds, many of which are already invested in water companies for the dividend, are going to want to make money from it, otherwise, they are not going to want to be invested. Not sure how Farage can force them to buy a stake. Of course, if he is in power, he could probably force all the public sector pension providers to invest up to a certain level.
E.g. Local government pension funds in Greater Manchester, London, West Yorkshire, Merseyside and Lancashire together own 7.5% of Anglian Water (which provides to the East of England).
https://corporatewatch.org/who-owns-your-water-and-how-theyll-try-to-keep-it/
For Reform this might be a vote winner when you consider how much water bills are going up now (Mine went up by 26% this year), and how much they are predicted to go up over the next five years. Labour are doing nothing to stop this. In opposition, they said they would. Many votes to be lost there given the ongoing cost of living crisis, and austerity for many.
Labour are against nationalisation. Reform, in favour — sort of. Either way, Reform would inherit a water industry that will have robbed us for years. That will appeal to many voters.
There is nothing in any way coherent abiut what Reform is saying..analysing it makes no sense as a result.
and meanwhile the Water ‘bosses’ and the shareholders get wealthier receiving the funds that should be invested into the water infrastructure. Thames is a fine example.
The City is making so much money from private water and other privatised services there will be nothing to rock the boat with blue Labour.
Some on the right are concerned that water is showing just how badly the private sector actually is, so Reform are currently in favour of nationalisation. Reeves Starmer and co have the zealotry of the convert rather than the cynical flexibility of the Tories so will continue on the rigid neo liberal path.
Krishnan Guru-Murthy, “Water companies say they’re putting billions in”
Feargal Sharkey, “They took £84 billion in dividends and created £74 billion of debt.. We’ve been cheated”
“There is no pollution control in this country anyone, the companies are out of control”
“These companies are treating their customers and the environment with contempt”
Krishnan Guru-Murthy, “Renationalisation is hugely expensive”
Feargal Sharkey, “It’s not.. Thames Water is fundamentally bankrupt, the government should force them into special administration and renationalise it”
“We need to remove the profitability element from these companies”
and
Feargal Sharkey
@Feargal_Sharkey
“Oh what have we become.
Apparently now so bereft of ideas and grappling childlike with how to deal with the water industry, in a speech later today govt will yet again make another attempt to claim responsibility for policies and ideas that were actually developed and launched under previous Tory administrations.
Examples.
1. “Record investment: with £104 billion.” Had nothing whatsoever to do with this govt, it’s the result of work started in Oct 2022, 2.5 years before the 2025 election.
2. “Ringfence customers’ bills for upgrades.” Once again work which had been completed early 2024, before the election. Ofwat were due to make the announcement but were prevented from doing so because of purdah rules.
3. “Reinvesting company fines into local projects:” Policy was actually announced by Tory govt on 9th April 2024, 3 months before the election.
4. “The Water (Special Measures) Act: banned unfair bonuses.”
The industry dealt with that idea with a rather contemptuous display of arrogance last Thursday. Southern Water is one of the 10 companies ‘banned’ from paying bonuses. What did the company do, why doubled the CEO’s salary instead that’s what.
Oddly govt were warned that’s exactly what was going to happen by none other than the chairman of Thames Water. In fact the same TW that discussed, at a board meeting, how to get round the ban and then promptly paid managers £2.5 million in bonuses.
Apart from destroying your credibility in a heartbeat by trying to claim responsibility for other people’s work what leaves me totally baffled by all of this is that No10 signed off and approved it all. Or did they?
Either way, mind blown.”
Thanks
Thank you, Hannah.
That nonsense from the likes of Gurumurthy, whose sister is married to one of Starmer’s advisers and speechwriters, is influenced by the fact that many on the airwaves have more lucrative side hustles, voicing over corporate films, moderating panels, making opening remarks at events etc.
British hacks prefer to dine with the people they should be dining on. The worst examples are probably the Spectator summer and Christmas receptions.
It’s also why the likes of Richard are rarely on air or in print.
British Regulation always fails. Britain designs regulation to fail. Here is a short list, provided without even thinking. All British regulation designs the regulator to serve the industry it regulates before the public interest. That is why British regulators fails so often, and for the same reasons; time after time after time.
Building regulation: (Grenfell, fire hazard apartment blocks – still not fixed).
Department of Agriculture and Fisheries. Failed industry regulation so badly it was extinguished.
Financial Services Authority. Failed banking regulator that was extinguished. The regulatory failure cost Britain a financial crash in 2007-8, from which Britain has never adequately recovered.
And what does the Labour government actually do, when faced with the failure of Ofwat and Privatisation? Take nationalisation off the table without proper review, and make this clear as its prime regulatory concern:
“the current regulatory landscape is not functioning as effectively as it should. Our system now too often holds back growth and inhibits private sector investment………………… Our regulatory approach has become too risk averse”. (British Government: ‘New approach to ensure regulators and regulation support growth’; https://www.gov.uk/government/publications/a-new-approach-to-ensure-regulators-and-regulation-support-growth/new-approach-to-ensure-regulators-and-regulation-support-growth-html).
Reconcile that proposition with the civil service soft-dopa from Cunliffe. The Government is selling the public snake-oil; again. If you do not wish to keep going round in the same endless spiral of failure the eletorate really need to stop voting for Labour or Conservative. And Scotland needs to stop prevaricating and take some hard decisions.
Thanks
“soft-soap”
If you are going to undertake a serious overhaul of the water industry, you do not construct the terms of the review to exclude the proper examination of how most of the world tackles the problem: nationalisation. You do not choose as Chairman, a Civil Servant (by profession reluctant to lead through radical change). Cunliffe’s presentation summary of his report made a great deal of nothing much.
We really have to understood how Britain does regulation. It designs regulation to fail. Every few years British Government has to extinguish altogether failed regulators; almost invariable for failing to regulate, and becoming the servant and gopher for the industry it regulates.
Department of Agriculture and Fisheries. Failed its regulatory role, notably criticised over the BSE outbreak in the 1980s, and ‘foot and mouth’ in 2001. It was finally dissolved in 2002.
Building Regulations (Grenfell). So inadequate had building regulation become that the Grenfell disaster led to a new Building Safety Regulator, the Building Safety Act, 2002, and Fire Safety Act, 2021. All too late, and not even fixing the problem. Around 140,000 leaseholders are estimated to be living in mid-rise fire-hazard risk apartments. Nobody has produced adequate compensation for the leaseholders for the failure; nor yet fixed the problem.
The Financial Services Authority. Failed regulator of the Banking and financial sectors; exposed 2007-8, the Financial Crash; from which the British economy has never adequately recovered. Replaced by the Financial Conduct authority.
The cost of these (and many other) abject regulatory failures in the UK, not least for the sake of economic growth in British economy (in which public infrastructure plays a key role), is almost incalculable. But Government still fails even to address the real problem. In the case of monopolies (water, rail, gas and electricity, and through Open Reach even the digital network) You cannot trust private capital to put the public interest before private profit, and return on as little capital as it can spend. The Government does not intend to change anything meaning ful with the Cunliffe Water Report. It is just tinkering, to assuage the anger of consumers. Cunliffe will have a short shelf life. Here is what the Government really intends to do: nothing that changes anything, or even less. Unleash the rentiers:
“…. the current regulatory landscape is not functioning as effectively as it should. Our system now too often holds back growth and inhibits private sector investment…… One of the clearest manifestations of this is the high associated administrative costs for businesses arising from activities such as filling out forms or from overly onerous and disproportionate reporting requirements. We cannot let this continue. Now is the time for reform: to ensure the UK regains its global competitive leadership. We need to go further and faster to secure and sustain growth, supporting the objectives of our new Industrial Strategy and the wider growth mission…………Regulation can be too complex and duplicative, stifling progress and innovation. Over the past few decades, an excess of poorly designed regulations has resulted in unnecessarily complex and burdensome requirements for businesses and investors. Even if all these regulations had been optimally designed, their sheer cumulative impact – and the associated increase in regulatory activity – has produced an additional layer of burden which adds to this complexity. Whilst each regulatory intervention has been rationalised in its own terms, the unintended consequences of the cumulative effects have not been properly analysed………..In addition to the rise in regulations, there has been an increase in the complexity of the landscape of regulators which implement and enforce regulation across various sectors of our economy…..…Our regulatory approach has become too risk averse. Incentives on politicians and regulators to avoid criticism when regulation fails to fully mitigate risks has encouraged excessive risk aversion in the system” (https://www.gov.uk/government/publications/a-new-approach-to-ensure-regulators-and-regulation-support-growth/new-approach-to-ensure-regulators-and-regulation-support-growth-html).
Not a word about regulatory failure. The cost in lives. The collapsing infrastructure that inhibits economic growth of low investment, monopoly capital. The injustices suffered by the public users.
Privatising public monopolies doesn’t work for anyone but the owners of the typically modest sums of private equity capital invested. These companies survive because they are monopolies, with eye-watering amounts of debt (but not investment in anything that does not produce high returns on equity). They have no interest in the economic growth impact to the wider British economy, of large-scale investment in water infrastructure. Only Government can do this; to understand this, we really need to understand the creation of a public water supply by public investment in long-term water infrastructure, in the laissez-faire 1850s. After cholera outbreaks, and an examination of inadequate private water supplies that served only their own narrow interests; even the Victorians chose a public funding model, that proved a decisive success; see Loch Katrine water supply to Glasgow, as a key case study. These companies are generally protected by foolish Governments run by people who do not understand what they are doing; on the principle that the monopolies are Too Big Too Fail. They aren’t. Government, in the worst water company cases would spend almost nothing compensating equity shareholders in a nationalisation, because in some cases the equity is virtually worthless.The Debt holders, however would require a major haircut (to the point of baldness); and as ever, Government wants to protect the banks from their irresponsibility. The water companies thrive on the inadequacy of Government. Water should be funded by Government bonds.
Many thanks
Once again from Mr Warren’s quote, you can see the Government obsession with (private) investment – the money has to come from somewhere – but not us! Also, such ‘investment’ is not really investment, it is just an access payment, a down payment on revenue streams that suck money out of the services like water and straight back into the ‘investors’ pockets.
This country defiles the word ‘investment’ everyday from what I can see.
Mike Parr is right in saying that the government cannot learn – but the rich have, they have learnt to help themselves and the learning I think has turned into a real dependency culture whilst politicians wring their hands about the so-called dependency culture of those of us on benefits and whom need decent pensions.
Labour has holed itself below the waterline on this for sure.
Agreed
‘Scottish Water spends around £1.6bn across these areas each year…(Capital investment £180M, Operating Expenditure £470M, PFI Expenditure £185M, Interest £160M, Corp Tax £10M)
Interest: the finance costs on Scottish Water’s existing loans and additional borrowing that Scottish Water receives each year from the Scottish Government (less the interest on the loans repaid in the year)
Private Finance Initiative (PFI) expenditure: regular payments to third-party organisations providing wastewater assets and services on behalf of Scottish Water for a period under legacy contracts.
Taxation: corporation tax on any taxable profits that Scottish Water earns.
https://wics.scot/publications/scottish-water/performance/scottish-water-performance-report-2022-23
Steve Reed MP, and Labour secretary of state for environment, food and rural affairs, who is responsible for the water industry, has deflected from the mess he is failing to fix in England, by criticising Scottish Water sewage spills on C4 news tonight. He should remember he is chucking bricks from the vantage point of a glasshouse, but before I explore that Labour one-day strategy, let my provide some context.
Scottish Water is not perfect (on the measurement of spills), but it is publicly owned, and across its broad remit it is performing better than the English water companies, and invests in infrastructure (and receives less hostile consumer criticism, in spite of endemic Conservative-Labour cartel propaganda); and if that investment is below Scottish Water’s own target recently, that is partly because the publicly owned company has not increased prices to consumers at typical levels seen in England. For example, as far as I can find from the evidence I have managed to glean from a brief survey, the average increase in Scottish Water domestic bills is £44 per annum; and for Thame Water, £204 per annum (both cases for 2025-6; I would be interested to see more evidence for the facts, but that was what I can find so far).
Certainly in Scottish Water’s case, there seems to have been been a decision trade-off made between prices and investment, which its Regulator, The Water Industry Commission for Scotland (WICS) appears to explain in its 2023-24 Performance Report as follows: “Overall, we welcome that Scottish Water is performing in line with the requirements of the Final Determination in 2023-24 while recognising there is likely to be £500m of less investment than was assumed when charge caps were set. We welcome that Scottish Water has improved its performance on investment delivery to return within its target range for performance. However, we note some areas where Scottish Water is not meeting its own targets, including the delivery of a small number of projects due to be completed in previous regulatory periods, leakage and its new developer Customer Experience Measure. We will continue to monitor Scottish Water’s progress in these areas closely.
The Final Determination set a charge cap of CPI plus 12.6% over the six-year regulatory period, which equates to a cap of CPI plus 2% on average in each year of the regulatory period. By the end of the first three years of the regulatory period, Scottish Water had raised charges by CPI minus 4.4%. This is 10.5% below the assumed position from the Final Determination, largely because Scottish Water responded to the cost-of-living crisis during 2021 and 2022. As a result of the profiling of charges, we expect Scottish Water to have £500m of lower funding available for investment than was assumed in our Final Determination.
Scottish Water incurred £975m (excluding completion investment) on capital investment in 2023-24, around £25m higher than the amount assumed in the Final Determination. This means that Scottish Water has invested around £80m less than forecast in the Final Determination during the first half of the regulatory period (2021-22 to 2023-24)” (WICS Summary Review, 2023-24).
To the swaggering Steve Reed MP, I am happy to set out this challenge. Fight the next Holyrood Election on a ‘Privatise Scottish Water’ Labour ticket. Go on. Please. Tell the Scots what you are going to do for them with a Privatisation-Cunliffe Water Plan. Put your reputation for running the water industry precisely where you put your sound-bite for C4 News; but this time, a public that is about to vote on it.
Well suggested, John.
Any water regulator should be headed by Feargal Sharkey.
The regulator should have statutory powers.
It is worth watching Panorama’s ‘The Water Company’s Murky Business’.
The financial arrangements explain how they managed to get so much cash out. I doubt that any of the others are any different.
Why these wasn’t an uproar after this was shown on TV baffles me.
Richard, if you had this misfortune to catch ITV News (also shown on STV here in Scotland).
Steven Reed Secretary of State for Environment, Food and Rural Affairs
Arguing against re-nationalising English/Welsh water he stated:
“You’ve only got to look at Scottish Water where pollution is worse than in England/Wales.”
This LIAR should be booted out of Westminster!!!
I agree entirely
And Steven Reed telling us that the money to renationalise water would have to come from the NHS and Education budgets as it’s money “we just don’t have” – does he think we’re stupid?
Yes
Sorry to post again but just watched the Secretary of State in interview with Krishnan Guru-Murthy on Channel Four spouting the nonsense that it would cost £100 billion to nationalise the water industry. I despair.
So do I
There will be a blog in the morning
He’s a fool or a liar is my summary
You decide