The FT carries a report this morning that notes that:
Water regulator Ofwat could be overhauled or even replaced under the most far-reaching review of the industry since it was privatised 35 years ago. A new commission will carry out a “root and branch” assessment that will consider all options for the regulation of the industry, environment secretary Steve Reed said, while also declaring that the “whole water sector has failed”.
That's the good news.
And then, as the newspaper notes:
However, it will stop short of considering whether the sector should be renationalised.
And at that point, you realise three things.
The first is that Labour will do everything that is necessary to ensure that we have the clean water that we need that is essential for our survival, except to provide the only structure for its delivery that has any chance of accessing the capital that is required to make this work.
As I noted well over a year ago in a report that I published on that sector at that time, official reports written in 2021 suggested that the sector required more than £250 billion of investment to deliver clean water, without taking net zero obligations into account. That sum is bound to have increased significantly since then. There is no way on earth that the private sector is going to deliver that. But nationalisation is not allowed. So, the shit will carry on, in other words.
Second, a 'not for profit' alternative will be permissible. This is absurd: how is it to pay the return on that capital investment without sending water bills through the roof? Does Labour have the slightest idea about anything to do with economics?
Third, I noticed that Guardian is leading the cheerleaders for privatisation this morning, with the ever more extreme Nils Pratley demanding that all water companies be returned to the stock exchange, where he claims they have performed best. I can only hope that he does not get Larry Elliott's job when he retires soon: that would mark the end of the neoliberal takeover of that paper.
The reality is that water is literally fundamental to life.
The reality is that no one but the UK and Chile has tried to make it into a market-delivered resource.
And the reality is that attempts to privatise it have failed utterly, as Steve Reed has admitted.
There is only one solution to this problem, though, and that has been taken off the table. Labour will not do nationalisation. That literally defines them as an existential threat to our well-being.
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Public utilities seek to minimise costs.
Private utilities seek to maximise profits (at the expense of everything else)
Neoliberalism puts profits before people.
Correct.
The government you just voted in does not want to help you.
That is the message.
So what is it there for?
Does it need to be spelled out?
I think Labour are lining up the possibility of significant civil unrest. Bills through the roof, higher taxes, the majority routinely ignored, ever-increasing inequality. They “won” on a split vote, gifted to them by Reform. That won’t happen next time round. The Westminster system has been bought by corporate interests and that spells spiralling misery for most. Those who might currently feel safe, may start to feel their toes being nibbled, and may discover that they aren’t as middle class as they thought the were, having only the money bug none of the actual power. If govt continues not to listen, how long before there is dissent.
Indeed, hence the haste to clear prison spaces for protestors. It must occur soon too that protestors can’t be jailed in volume without there being a functioning judicial system to put them through first so expect to see funding conjured from somewhere to pay for that.
There is of course a slight variation on the nationisation option that worked in the past. Regionalisation, where the water companies are run by a regional collective of local government officers.
For a start the managing directors would be paid Senior officer rates, (considerably lower than “market rates”!)
Of course any profit would help Local Authorities fund other activities and perhaps revitalise local support for the population.
I’m not sure that would work here, and would only saddle local government with the debts. Profits can’t be reinvested if there are none available – consider what Richard highlighted in his post, investment of at least £250 billion is required just to get the system to a minimum acceptable standard. Assuming 25 million households (probably an overestimate, but makes the sums easier), even if the investment is planned for over a 10 year period, water bills required to raise those sums alone (not covering operating costs et al) would mean water bills of, on average £1000 per household per year! That would mean an additional 17% increase on my bill, on top of the recent increase by 43% we were hammered with in September…
I think you understate the increase in prices but I otherwise agree.
I did say that increase was just to cover the investment required to upgrade the system and excluded operating costs 🙂
Might the nationalisation of one or two water companies provide a competition of type which seems to be lacking from what seems to be, in practice, a water company cartel?
No
There is no role for competition in this supply
Richard
“There is no role for competition in this supply”
Thank you for that comment.
I couldn’t agree more.
A privatisation too far. Gas was an error. Electricity a strategic blunder. Water was critically wrong.
No the water needs to be in one like in wales,Scotland and NI. England needs a single water supplier with regional areas and get the water quangos and regulators into one and the new post Brexit refulator takes parts of regulation to monitor sewage discharges. I domt get why the EA has no teeth. Private water sales are the same as public just remove the shares from the public they are held private for the company to put dividends into an account then all the money goes into water..Had that been done by Thatcher,much more money would’ve been in and the EU didn’t pay water companies to upgrade…
Those countries do not have water systems fit for purpose: they are also massively under-capitalised
Richard,
Not wanting to nit-pick, but it appears that you are here using the words capital & (under)capitalised as referring solely to money
In the light of your previous post today, shouldn’t we be trying to change the language by referring to funding and (under)funded?
Yes, maybe
But actually, I was also really talking about capital – no one else but the government can fiund the actual reosurces the water industry needs
In Scotland the problem is the private sector involvement in the commercial supply of water; everything toughed by Westminster distorts and pollutes what it touches. In so many cases Scotland would do things differently, and trade-off private and public sector interests in a more balanced an equitable way for the common good, if it was not for the central problem of Westminster, and the chaotic and dysfunctional non-methodology for the production of anything usable for the common good, rather than private interest, except – candidly – the exploitation of private greed.
Whatever the criticism one may make of the US; in the US they are far less tolerant (domestically at least) of private monopoly, than we are in the UK. Anti-trust legislation in the US can and sometimes does, have teeth. We are not merely tolerant of private monopoly in Britain, but ensure our regulators are toothless; both Conservative and Labour Party endeavour to enable private monopoly and further its intrusion into public life. It is so convenient to the operation of both government and business (the British way); monopolists are good for Parties to work with, because they will back Parties that back them; the only problem ever arises, when the public begins to notice how bad the service; how disgusting the rivers, how vile the stench, how high the unaffordable price they pay for energy. Nevertheless, Conservative and Labour are bought and sold on the only free market that actually works in Britain; the market that buys and sell British political parties, at a ‘knock-down’ price – at your expense.
@ Collette Post
“….I don’t get why the EA has no teeth.”
Because it was designed to give only gummy-nips in response to abuse and incompetence. It was never intended to regulate the ‘free marketeers’.
An effective regulator would force nationalisation in a matter of weeks (Okay, maybe it would take months, but not very long). The water companies are bust. Worthless in an honest marketplace because they do not function as they should to provide a public service.
If £250bn needs to be spent, then that money has to come from customers or taxpayers – what is the return on that money to justify the expenditure. And what else could that money be spent on which would provide a better return?
Where is the taxpayer getting this £250bn from?
Have you tried living without water?
When you’ve proved you don’t need to do so, try learning something about economics next.
“If £250bn needs to be spent, then that money has to come from customers or taxpayers”
Nope, the money could come from government by simply instructing the Bank of England to make the payment.
It would be a good investment as we would end up with a valuable asset (water infrastructure).
Correct
@ “Nessie”. No real name?
“…what is the return on that money to justify the expenditure.”
You are not for real or a complete idiot. Possibly both.
The ‘return’ is the ability for life to continue. You can’t drink money. You can’t even wash your hands in it.
(How much of THIS crap do you have to delete every day, Richard?)
To the last, a lot
I let some through to show how crass these people are
“What is the return on that money to justify the expenditure”
I don’t know whether I should laugh or cry. What bizarre world do these people inhabit? A world where one bathes in a tub of £50 notes, while sipping on a cool glass of one pound coins?
“A new commission will carry out a “pantomime” assessment that will consider all options for the regulation of the industry – apart from re-nationalisation”.
Some readers of this blog will have read “Late Soviet Britain” by Abby Innes. She demolishes in detail the case for monpolies being anything other than state-owned.
Perhaps Pratley did not read this book, or if he did, he had his cognitive dissonance sub-routine running at full speed. Those working in the world’s oldest profession have more ethics & more brains than Prately – but echoing a previous comment: we are in Chomsky-Andrew Marr land (= safe pair of hands). Thus are Uk serfs and peasants groomed.
Nils’s surname name adequately describes how he lives his life – obviously Mike!
‘Late Soviet Britain’ is heavy on detail – the detail of reality – ‘reality’ being the ‘in word’ this week I think on this blog.
Neo liberal dogma is light on detail and big on the lack of any consequences. That is why it is so attractive and why also it is dragging down the standards of public discourse about our future – or lack of future.
@ Mike Parr
“… Chomsky-Andrew Marr land ”
Sadly the (probably vast) majority of the population of this “Septic” Isle have no idea what that means.
Google will help though
“…Google will help though..”
Only if you ask.
I did have a look at Google, out of curiosity and wonder at Noam Chomsky being headlined as ‘infamous’ ? FFS!
A “far reaching review” that does not consider nationalisation is not “far reaching”.
Generally, I like Nils Pratley his market commentary is usually good – indeed, I like the first two thirds of this column. I would even agree with his worries about how nationalisation would work. Where I diverge is on his hope that a stock exchange listing would solve problems; that seems a real leap of neo-liberal faith. I would prefer to get a public ownership structure that works….. AND a route that gets there without excessive reward to existing owners and lenders.
@ Clive Parry
‘…A “far reaching review” that does not consider nationalisation is not “far reaching”. ‘
It’s not actually a review at all is it? It’s another ‘consultation process’. Conclusion foregone.
Barely even reaches the status of shifting deck-chairs on the Titanic.
In the same class as a consultation of the siting of the Nirex nuclear waste disposal facility which would discuss everything except the geology which it relied on to be effective. I’d class it as jobs for the boys and not serious in its intent.
About what I now expect from this government.
Why is it that Labour politicians can’t see the absolute failure of the privatisation of our public utilities?
Also why the belief that if you “invest” in a Company that you have to have a return on that investment? Shareholding is a gamble and you could lose your investment. People bought shares in public services because they believed that any business with a captive customer base would be guaranteed good returns.
I think one of the main reasons is that many cannot now remember our nationalised utilities and are also brainwashed with the mantra “private good, public bad”.
Because they have been bought – it is as simple as that – they have been bought to follow a very different path.
So predictable Labour excludes public ownership – utterly undermining its claim to examine ‘what works’ – and reject ideological obsessions.
If the commission had been given the brief to explore costs and benefits of different options – and to recommend what would work best, it would have given the impression that Labour has the confidence to look facts, research, analysis in the face, facts and analysis in the face.
To rule out that a natural monopoly could be publicly owned as in many other countries – seems not only stupid but frit.
Agreed
We often wonder why Labour politicians don’t notice how disastrous privatisation has been. Why they don’t jump on a “re nationalisation” bandwagon.
One-of many- reasons may be the history a few share of rising up through Local Government positions.(I know that Labour MPs come increasingly from jobs as Party researchers or advisors with need to display fealty to Party bosses. But SOME work their way up.) But,regardless of what you want to achieve when elected ,you soon learn that “there,s no money” and that only the next Council above makes the real decisions.
Elected to a Town Council, they soon learn that the District Council has all the power. Making it up to the District Council ,they find that only the County Council has the power and resources needed.
Only to find that they need to join the Westminster Parliament to do anything. But, by then, it has become ingrained that you never have the power to do much. That power is always somewhere else. Someone else knows the answers so it’s best to just follow the leader. (Whose ideas are stunningly naff and unimaginative. But, after years of never thinking anything new, the MP fits right in !)
“….. official reports written in 2021 suggested that the sector required more than £250 billion of investment to deliver clean water, without taking net zero obligations into account. That sum is bound to have increased significantly since then. There is no way on earth that the private sector is going to deliver that”.
This is the core of the issue. The private sector cannot undertake risk investment on that scale, or adapt to the required timescale for returns. The only way for it to be carried out by the private sector is by granting it both the capital and permission to make rip-off excess profits at the public expense, combined with non-existEnt regulation (except to guarantee and underwrite the excess profits). The same applies in energy. Hinkley Point nuclear power station will cost around £45Bn, last public estimate – January, 2024 (for one power station in a technology nobody knows how to close down, clean up or pay for the cost over unknown timescales). Major monopolies require public money guaranteeing overgenerous private profit, or they do not happen. Modern politics requires the public to subsidise the private sector to make a profit, and trust the privates sector to build the infrastructure. The result is the public overpays, and in some cases doesn’t even receive the infrastructure to do the required task.