Millions of households in England are about to see their water bills rise again. According to a report in The Guardian, the Competition and Markets Authority (CMA) has decided that five major water companies can add a further 3% to household bills. This is on top of the 24% already approved by Ofwat.
The additional £556 million in revenue, the CMA says, will fund “more resilient supply” and “reduce pollution”, as well as reflecting “increased financing costs”.
The question that must now be asked is simple: how can an industry that was privatised on the promise that the market would fund its investment still be reliant on billpayers to do so?
The broken promise of privatisation
The purpose of privatisation was clear. When England and Wales sold off their water companies in 1989, the claim was that freeing them from public ownership would unleash private capital. Markets, it was said, would provide the investment needed to modernise the network and protect the environment, while competition (though entirely notional in a regional monopoly) would drive efficiency. The public would gain from private dynamism.
More than three decades later, every element of that promise has failed. There is no competition. The infrastructure is crumbling. Rivers and seas are polluted. And instead of capital markets bearing the risk of investment, consumers are being forced to underwrite it through their bills.
The private owners - usually overseas these days - have extracted dividends and loaded debt onto their balance sheets, which the public ultimately guarantees. Now, having failed to invest, they have come back demanding more from the households they are meant to serve.
Even the CMA admits that much of the increase requested by these companies was “largely unjustified”. Despite this, it still allowed over half a billion pounds of extra charges to be imposed on households, supposedly to meet “increased financing costs”.
That phrase reveals the real issue. Those costs exist only because these companies are burdened with the debt that financed shareholder payouts rather than public infrastructure. Households are now paying the interest on the greed of private equity. In that case, water bills are no longer the price of supply: they are a transfer payment from the public to the financial system. The state is underwriting private profit through a regulated monopoly, without accountability, transparency, or delivery.
The case for change
There is, that case, a very clear argument for these companies to be taken back into public ownership. Their natural monopoly status, their essential social function, and their record of failure all point in that direction.
That said though, nationalisation alone would not solve the problem if it simply recreates the same model within the public sector of a debt-financed, centrally managed water supply industry disconnected from local accountability. What we need is a different conception of ownership and purpose.
Water must be recognised as a public good. Its management should not depend on returns to shareholders, but on maintaining ecological balance and social equity.
Local and regional public trusts could take control, operating on not-for-profit principles, reinvesting surpluses in maintenance and environmental protection.
Financing should come through the public balance sheet — not through inflated bills. A currency-issuing government can fund essential infrastructure directly, without the fiction that it must beg capital markets for permission to do so.
Regulators like Ofwat must cease to act as protectors of private profit and instead serve the public interest, ensuring that accountability flows throughout this system.
Reclaiming what was always ours
Privatisation was meant to harness the market for public purposes. What it has done is reverse the relationship. The public now works to fund the market. When households are forced to finance investment that capital markets were supposed to provide, privatisation has failed. But the answer is not to recreate the centralised bureaucracy of the past. It must be to create a new model of democratic public ownership that is accountable, transparent, and capable of putting people and planet before profit. That is how we reclaim what was always ours.
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Much to agree with.
The current LINO wheeze is to pass ownership of Thames to a Hongkong outfit (in the ultimate control of the Chinese politburo). The Uk finance sector is happy with the current set-up cos it generates fees as the pass-the-parcel (water assets) occurs. Water, elec, gas etc etc privatisation could never work & we see that day by day. The political class shrugs, owned by the finance sector. Water as a service to citizens? nope, water as a revenue generator for finance parasites.
Agree with much more local ownership, needs to happen asap.
We must remember that there was also the ‘green dowry of £1.5 billion which effectively gave the newly privatised water companies a clean slate back in 1989. Today’s news of price rises is the latest instalment in what is a massive neoliberal scandal for which both the Tories and Labour must share the blame. The widespread failure of privatisation (in its widest definition) – take the railways as another example or the PFI con – should become a new political battleground on which to fight neoliberalism. As the bills start popping through our letterboxes, the public may be more receptive to alternative policies.
This is one issue where Labour will lose votes at the next election.
In opposition, they were very clear that the water companies should not be allowed to pass on the cost to the public. Now in power, they are letting them do exactly that. And it will carry on with big, inflation busting increases for years to come. With Labour having no plan to address the issue of rising costs in everything we need, this is fertile ground for the likes of Reform. Of course, Reform is not going to do anything to help people either, but they will take advantage of it.
“Water must be recognised as a public good. Its management should not depend on returns to shareholders, but on maintaining ecological balance and social equity.”
It should, and I think we need to get away from the old water poll tax system of bills based on old rateable value of properties. It should be based on use, with extra help for those who have to use more water because they have no choice. Water meters are not necessarily an answer. The property that I live in, ex council, has a shared water pipe with the property above. I’ve been told it’s not possible to install one. Then there is the fact that as a tenant, you will probably need the permission of the landlord. Again, as a tenant, you don’t have the same options to change things when it comes to the home (of course, this is also true for anything “green” related to the home, like installing solar panels, etc. Tenants have no say).
Mar P
I had same issue, shared pipe. Water company gave me a discount because they could not install a meter. Short-term, should help you, as I think they are obliged to do this.
You are right to say that the only reason the finance costs are now so much higher is because of the debt taken out to pay the dividends to the owners of these firms. They certainly have not invested enough in the infrastructure to deal with a growing population, as can be seen by the very poor condition of the waterways that are in many instances just another waste water disposal process that these firms do not have to pay for.
You do state that privatisation has failed. While it most certainly has for those who have to consume the product, it has definitely worked for the owners of the entities involved. After all they have made an absolute fortune out of all this and are clearly privatising profits and socialising losses after capturing the regulators. A case study in how to extract excess profits.
Yet another of the long list of failed right wing projects which labour has neither the will or understanding to reverse.
Another example of the cowardly state and useless politicians who accept the ‘supremacy’ of private capital over state funding, despite all the evidence of the rampant greed and incompetence of the markets.
‘Fiscal rules, there’s no money, the bond markets!!!, maxed out credit card’. Same old crap.
Thank you for an article which directly gives valid direct criticism of water privatisation and a valid indirect criticism of the U. K. being financialisd and so socio-ecconomiclly destabilised.
£78 billion of dividends paid to shareholders in water companies since privatisation
£64 billion of debt taken on by water companies since privatisation
https://equalitytrust.org.uk/news/blog/thames-waters-collapse-is-a-warning-to-us-all/
“Customers are now paying almost 30p in the pound to service [water company] debts.”
“Despite an increase in demand for water, not a single new reservoir has been built since 1992.”
“The UK;s National Audit Office estimated that in the first 15 years since privatisation the average household bill for water and sewerage rose by 40% in real terms”.
https://takebackwater.uk/blog/how-did-our-water-get-so-bad
Water companies are supposed to be private sector like, say, a supermarket.
If a supermarket wants to expand, by building a new shop, it has to use it’s own money or borrow. It can’t put its prices up or people simply wouldn’t buy.
So a true private sector company first invests, then recoups it’s investment, and maybe makes a profit, by charging future customers for an improved service (.e.g provide a convenient new shop).
But water companies don’t do this. They charge current customers for improved service (maybe) for future customers. The customers they charge may not benefit (perhaps they have died!). And the customers who benefit (if they do) haven’t paid.
This is not how a private company works. This is a travesty that should be prevented, but isn’t, by the regulator. Water companies can only get away with this abuse because they are an under regulated monopoly. And still they go bust (because they asset strip).
Very good analysis
Political parties that agree with this post, and have a policy of public ownership of utilities will be considered for my vote.
If not, don’t bother. I have no intention of voting for sewage and higher bills.
As I recall privatisation was done in the name of “greater efficiency”, the argument being that the private sector is more efficient than the public so taxpayers money would not have to be used to prop up inefficient state owned enterprises and taxes could be lower. After 40 years or so we see how that has worked out. Public services are underfunded and it is politically impossible to put taxes up to deal with the problem. People do not feel better off as they have to pay higher bills for a deteriorating service. I think we can fairly well conclude that the disastrous experiment with our economy variously labelled Thatcherism or neo liberalism has not worked. Less easy is to plot a path out of the morass it has left us in.
I wonder if this could be Labour’s poll tax.
Sadly I’m afraid most people will just moan and pay it.
One of the things that seems to have disappeared over the past 40 years is collective action.
Of course we should re-nationalise – with a strict upper salary limit of, say, £250,00 for its managers and executives and anyone else connected with it, and no bonuses whatsoever. But is there no way we can force previous and existing water company owners, CEOs and shareholders to pay back the billions which should have been used over decades to upgrade the infrastructure, but which were instead systematically stolen from the bill-payers, allowing years of illegal sewage discharges?? And if that’s too hard, can we not insist that all future and renewed contracts for any and all aspects of our national infrastructure (not only water) now include mandatory watertight clauses preventing responsibility being evaded, in perpetuity, with unlimited penalties including prison and the sequestration of personal assets? “I don’t own it any longer, I sold it” doesn’t stop a common crook from going to prison for robbing a bank; why is this any different? (Don’t answer that; yes, I know why, and it just makes me more angry.)
Agree with all the comments.
By rights, this should be the last straw.
But a daily dose of who we should be pissed off at instead is given to us to get us to think about something else.
But really, the reality is that our politicians are not there for us, they are there to serve capital and do this service in broad daylight. Your ‘democracy’ is a sham. You are expected to shut up and keeping paying up.
Democracy is over – right now. Do you understand?
On a similar theme, Gordon MacIntyre-Kemp of Believe in Scotland has made the cost to the consumer of electricity in Scotland a major cause. He points out that Scots pay on average 27p. per KwH. He notes that in Norway (like Scotland, energy rich) the current price is 10p and there are plans to reduce that to 3p. (three pence) per KwH in the near future to help with the cost of living. The difference of course is that energy in Norway is Government controlled rather than in the UK, which has privatised energy generation and as Richard has pointed out, the price we pay is based on the cost to produce of the highest supplier, currently gas.
We could easily do the same except fo the bizarre contracts our govermment has written, as Mike Parr has often explained.
Privatisation of many public services has failed the public. It’s a different story for those who own shares.
We have the highest electricity prices in the world: FAIL
We have the highest gas prices in Europe: FAIL
We have the highest rail fares in Europe: FAIL.
The privatisation of public services has been such a failure that it is FORCED upon the public.
In many countries, democratically elected governments have had to be overthrown in order to force privatisation.
Read: The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein
https://amzn.eu/d/cqpFmZp
It is getting more and more difficult not to agree with PSR – that our democracy – is little more than a charade – barely disguising the utter corruption which has infected our political system – with all the main parties being little more than gangland factions with competing big money donors – donors who expect to benefit when their investments pay off. (US private healthcare, big pharma, fossil fuel, City slickers etc.)
And I am still a member of the Labour Party.
Richard – what would be the best way to take the water companies back into public ownership? Could we make sure that none of bill-payers’ money goes to service debts? Could we impose targets to clean up rivers and make drinking water safe regardless of what the companies say they need to charge consumers?
And if they couldn’t fulfil those targets or service their debts could they go bankrupt and be taken public for minimal cost?
Let me see what I can do
Many years ago I obtained a Masters in environmental law. Subsequently a small, but not inconsequential, part of my practice involved both civil and criminal environmental litigation. One feature of the law was that it could be very effective when it came to prosecuting offenders for water pollution and unlawful waste deposits. Those laws still remain in force BUT in the last 20 years or so the politicians at Westminster have emasculated the Environment Agency to the point that even if they had the will to enforce they simply do not have the resources in terms of investigatory manpower and financial resources. Every now and then, in order to counter rising public dissatisfaction e.g. over river pollution, politicians announce that they will introduce new and stronger powers but it’s just mere window dressing because, absent the necessary resources, these so- called new powers will just remain on the statute book, unenforced and gathering dust. For far too long the politicians have been gaslighting the public that they are supposed to serve. The fact that many of today’s environmental laws were inspired by EU legislation has also contributed to this assault on our environmental laws. Some years ago George Monbiot campaigned not for new environmental laws but simply for the enforcement of existing laws. His campaign was ignored. The harsh reality is that there is no place for environmental laws in the neoliberal world.
Agreed
The appearance of compliance with the requirements of society when in practice there is none. Like offshore.
The CEO gets a bonus if the share price goes up and the consequence of this, his aim is to increase the share price. The CEO’s aim is to keep buying shares, all expenditure is is diverted to buy up shares and when the CEO runs out of money he borrows money. When he can not borrow any more the government puts up the water rates.
Needless to say no leaks are repaired as this would reduce the money available to buy up shares.
Somebody suggested clawing the private profits and advisor fees back. A sentiment I suspect nearly everyone here would agree with. It would be difficult, of course. One challenge is that shares have passed through many hands and the cash has been laundered and/or spent, and very difficult to pin down.
An alternative, almost as satisfying? Draw up a league table of institutions and firms that have profited from privatisation, and from the top down, ban those from future Government contracts or prescribed infrastructure ownership. I expect trade treaties our Govermment and before that the EU eagerly signed up to would make that legally challenging, but sod it, go for it. I love the idea of The Royal Bank of Goldmans or Price Marwick Deloitte arguing over the numbers. “We did not earn £500m…… it was only £400m”.