Water: where we are

By Richard North - December 20, 2024

Recently, we had a brief look at local government and the Redcliffe-Maude report which spawned the Local Government Act 1972 – an exercise in gargantuanism, which reduced the number of councils outside London from 1,245 to 412, with corresponding increases in size of the new authorities.

From the same wellspring at roughly the same time, the Heath administration amalgamated 165 public statutory water-supply undertakings, the assets of which had been owned and managed by 64 local authorities and 101 joint water boards of groups of local authorities acting as separate legal entities.

These were shoehorned into ten regional water authorities (RWAs), which also took over main sewerage and sewage disposal from the 1,300 county boroughs and district councils which had previously been the owner and managers of the associated systems.

For the first time in history, there had been created a system of unified control over both the water supply and waste disposal, a development which was hailed by some as “trailblazing concept”, although there was a major downside. While these RWAs were still publicly owned, they were now divorced from local ownership and detached from any form of local democratic control.

Central government control which then applied was far from adequate or effective, with responsibilities split between the then Ministry of Agriculture and the Department of the Environment, with conflicting issues and complex arrangements for securing approvals for capital works.

This was then to change with privatisation, which was first proposed by Thatcher’s Conservative government in 1984 and again in 1986. At that time, though, the idea was extremely unpopular with this article written after the event, suggesting that every opinion poll on the issue showed a substantial majority of people against it.

The public opposition led to plans being shelved, to prevent the issue influencing the 1987 general election, although there was a brief, hardly noticed reference in the election manifesto which stated: “we will return to the public the Water Authorities, leaving certain functions to a new National Rivers Authority”. After winning the election, Thatcher and her team used this as authority to go ahead with full-blown privatisation, with the ten RWAs being sold off in 1989.

In any sense, the sale was a gigantic fraud. The combined assets of the water and sewage undertakings had largely been purchased and maintained by local authorities, paid for out of local taxation. They had effectively been nationalised with the creation of the RWAs, and now the Thatcher government was selling assets which it hadn’t paid for, back to the public which had already paid for them.

In so doing, the government created ten corporate monsters, loosely and ineffectively regulated by Ofwat, a body which itself had conflicting interests, on the one hand required to protect the interests of consumers, and on the other to secure the long-term resilience of water supply and wastewater systems, while ensuring that companies carried out their functions and were able to finance them.

At that time, there were still some residual controls over performance, with local authorities exercising their powers under the Public Health Acts and related legislation, in respect of drinking standards and pollution. I recall as a district environmental health officer chasing after the various screw-ups caused by the Yorkshire Water Authority. Cowboys they were then, and cowboys they are now as Yorkshire Water.

Those limited controls, however, were swept away with the 1995 Environment Act. This created the Environment Agency which took over most of the local authority powers. Another corporate monster was in the making, another regulator which was about as ineffective as Ofwat and again beyond any form of local democratic control.

Multiplying the effects of this collective disaster was the European Union which had created a series of laws aimed at improving water quality and pollution controls, thereby creating – in the interests of political harmonisation – many standards which were entirely inappropriate for the UK, and imposing ruinously expensive water quality standards, which in many instances were unrealistically and unnecessarily severe.

It was the need to implement EU standards which had been behind the rush to privatise, the government’s way of dumping the massive costs incurred on the private sector, thereby keeping them off the public sector books and reducing the politically sensitive PSBR.

The water companies, however, had other ideas. Through some highly dubious practices and extremely suspect ownership transfers, many of them were able to turn their enterprises into barely legal money laundering schemes, milking the guaranteed cash flow generated by the customer levies, and swingeing charges on commercial users, while engineering massive loans through convoluted mazes of subsidiary and holding companies, to avoid tax liabilities.

Although the water companies were sold in 1989 virtually debt-free, they have since collectively accumulated debts of over £60 billion, with the worst offender, Thames Water, racking up a £14.7 billion debt, incurring interest charges which swallow up 28 percent of its customer revenues.

In the interim, the water companies, since privatisation, claim to have invested around £180 billion in upgrading and maintaining the water and sewage systems, they have in the same period – in addition to some very dubious loan charges – paid shareholders an estimated £72.8 billion (adjusted for inflation).

The University of Greenwich, which made the estimate, calculates that, since the public sector can raise money far more cheaply than the private sector, it costs £2.1 billion per year more in England to finance dividends and interest than if the companies were in the public sector – roughly £93 per household.

On top of all this, the water company CEOs are notorious for their lavish “compensation” deals, The Times telling us that, collectively, they are awarded £20 million a year – small beer in the grander scheme of things, but insultingly excessive in view of their piss poor performance.

Thames Water, which even the dismal Environment Agency says “requires improvement” and which is expected to run out of cash next year, has paid it chief executive, Chris Weston, £195,000 for three months’ work, while the company is having to pay an £18 million penalty for breaking dividend rules, making payments which could not be justified.

All this is now coming to a head with Ofwat agreeing to allow water companies to drift up customer bills by an average of 36 percent over five years, well above the inflation rate that Rachel from accounts has managed to bequeath us.

This, ostensibly, is to enable the water companies to invest £104 billion in an attempt to alter the one performance parameter in which they have excelled – apart from corporate greed, although there is more competition in that sector. This is their uncanny ability to pollute every river in the country, with massive pollution episodes being reported almost weekly.

By now, I think it is safe to say that this particular experiment in privatisation has failed – dismally. But while there is some talk of renationalisation, that is hardly likely to improve things. A better answer might be to return the systems to their original owners, except that local government capabilities have been so degraded that that might simply compound the ongoing disaster.

No doubt all sorts of excuses and rationales will be offered to justify the increased charging rates, but once again the “little people” are having to carry the burden of political indifference and corporate greed, itself dosed with an almost staggering level of incompetence.

In a country where grumbling is matched only by passivity, it is perhaps time to take a more robust approach. For those fortunate enough not to need to borrow money – or those with credit records so wrecked that no-one will lend them money anyway – the obvious answer is a payment strike.

In that event, water companies usually resort to county court judgements (through the bulk processing centre) but, for those who are prepared to hold their nerve and are not troubled by the CCJs on their record, this mechanism is unenforceable.

Last time I had a dispute with Yorkshire Water, I held out for five years without paying, accumulating a healthy collection of CCJs. Actually, those didn’t do me any harm because lenders took the view that water companies issued so many CCJs that no-one took any notice of them.

The situation was eventually resolved when the company sent someone to my house to offer 50p in the pound as settlement, which was attractive enough to accept.

It is coming to the point where, in the face of a system which will steamroller you into the ground if you let it, the only defence is some form of direct action. This is having an effect with the thousands deciding not to pay the BBC license fee, and it seems to me that it is now the water companies’ turn.

This is, in fact, the only language these people understand.