The drip-drip process of a shift to greater state regulation and intervention may have to become a flood
When severe droughts hit England, dried up reservoirs sometimes reveal the remains of long-forgotten villages that were flooded to meet our growing demand for water.
Life in such remote places was hard but the sense of community was fiercely strong, and many were unhappy to be evicted when the water board got its way. I know because my family lived in one such village, Greenbooth in Lancashire, and often regale me with memories of carefree childhoods.
Despite the upheaval, there was a sense that it was all at least for the greater good, and the almost magical process of turning rainwater into drinking water was overseen by a local, publicly-owned corporation with democratic oversight. Now, as the country faces droughts of increasing frequency, those dried up reservoirs lay bare something else: the abject failure of Margaret Thatcher’s privatisation of England’s water services.
One of the most damning indictments on that ideological crusade is that not a single new reservoir has been built since 1992. Just as our energy bills have increased due to the failure to invest in gas storage, the lack of investment in water storage is now coming home to roost.
The bitter irony is that water privatisation was meant to deliver a new era of infrastructure funding as private firms raised cash from the market. Yet one jaw-dropping study found that all the £123bn of capital spending over the past 30 years has been financed by customers’ bills, while borrowing was used instead to fund nearly half that – £57bn – in shareholder dividends.
The figures get worse. From 2010 to 2020, the privatised companies paid out £13.4bn in dividends, while directors’ pay rocketed. The highest paid CEOs were at Severn Trent, with a salary package of £
Meanwhile, bills for customers – which have doubled over the past 15 years – are set to go up again, adding to the already dire cost of living crisis felt by many.
And what are people getting in return for their money? Well, leaky pipes mean that three billion litres of water is lost every single day, a staggering figure that puts into perspective the private firms’ hosepipe bans and their “laughable” advice like using a damp towel to cool off instead of taking a shower.
Another egregious failure has been the pumping of raw sewage into our rivers and coastal waters, which happened more than 400,000 times last year, with widespread illegal discharges from treatment plants.
The Commons Environmental Audit Committee found that only 14 per cent of English rivers are classed as healthy, with many suffering a “chemical cocktail” of sewage, agricultural waste, and plastic pollution.
Water companies stand accused by trade unions of failing to invest in skills, or in paying their workforce properly. Many engineers in their 50s are due for retirement.
It’s no wonder many of the whistleblowers on sewage breaches work in the industry. I’m told one water firm worker regularly refuses to let his grandchildren swim in the sea on days when he knows just how polluted the water is.
After much public outcry, the Government has legislated to impose a new duty on water companies to reduce the amount of untreated sewage they pump into rivers and seas. Yet the political stench of a failing privatised system grows stronger every day and state intervention is now needed more than ever.
Although regulators Ofwat and the Environment Agency claim they’ve had an impact and are getting tougher, many say they’ve been toothless. Oxford University’s energy expert Dieter Helm put it succinctly in 2020: “What we have seen is a complete regulatory failure to control the companies.” The Commons Environment Committee said in 2018 that Ofwat had allowed firms to put shareholders ahead of consumers.
It’s clear that Ofwat in particular needs much tougher powers in the short term, but ultimately this is a problem – failed private monopolies that were never going to produce the benefits of free market “competition” – that may require the more fundamental solution of public ownership.
One of the most surreal outcomes of the Thatcher privatisation was that England’s water services were over time transferred from the British public sector to foreign governments and state-run enterprises.
Six of the UK’s nine main water and sewage companies are owned by investment groups based offshore. China’s sovereign wealth fund China Investment Corporation owns nearly 10 per cent of Thames Water. Similar government-owned wealth funds in Singapore, Abu Dhabi and Kuwait all own chunks of English water firms.
What makes the failed English experiment all the more obvious is the contrast with Scotland, where water privatisation never happened. Analysis from the University of Greenwich found that Scottish Water has invested nearly 35 per cent more per household in infrastructure since 2002 than the privatised English equivalents. Moreover, its bills are 14 per cent lower and its boss earns a fraction of the fat-cat pay south of the border.
As for the cost of renationalisation, even that is cheaper than some claimed back in 2019 when Labour put forward its programme. Although one study – funded by the water industry – put that cost at £90bn, another by ratings agency Moody’s put the cost at £14.5bn. Given the scale of climate change we’re now facing, with water security as vital as energy security, the long-term benefits of public ownership look more attractive by the day.
The Government might have no choice but to intervene anyway. Martin Salter, the former Labour MP and founder of the Angling Trust, warned today that if the drought continued this winter, the emergency Cobra committee could next year be in charge of water rationing and standpipes in the streets.
As the two Tory leadership contenders jostle for Margaret Thatcher’s mantle this summer, it may be too much to hope that they will admit just how disastrous her water privatisation policy has been. But the drip-drip process of a shift to greater state regulation and intervention may have to become a flood.