Stories about the water industry are prominent in the British media. The recent lead has been from the Environment Agency setting out a prominent danger England faces, a 5 billion litre public water shortage by 2055.
Various factors are set out as contributing, from climate change, population growth and concentration to industrial development, notably those thirsty call centres. And while the press focuses on individual users reducing consumption, the report also talks about the need to hold the water companies to account and reduce leakages by at least 17% in the next five years and by 50% by 2050.
In fact, the report says: ‘The EA expects 60% of this deficit to be addressed by water companies managing demand and dramatically reducing leaks. The remaining 40% would come from boosting supply, including the building of new reservoirs and water transfer schemes’.
The weeks before the story was about the perilous state of our biggest water company Thames Water. Thames covers London and the surrounding area and in May was fined £104 million while Yorkshire Water was fined £47 million and Northumbrian Water £17 million for sewage leaks, as the first batch of results from its biggest ever investigation into the industry by the regulator Ofwat.
Swimmers and others using rivers and beaches have been increasingly loud in their complaints over recent years, with protests in many different parts of England over the way that the industry is cavalier in dumping untreated waste through storm overflows at more and more frequent intervals, disrupting leisure activities while posing a risk to public health.
Thames was also fined a further £18.2 million for breaking rules on dividend payments while the regulator Ofwat claimed the fines would be paid ‘by the company and its investors and not by customers’.
A further six water companies have been banned from paying bonuses to senior bosses, under new rules that have just come into force on Friday. They have been told that they cannot issue bonuses for the financial year 2024/25, which concluded in April. These rules prevent bonuses being paid if a water company does not meet environmental or consumer standards, financial resilience requirements, or is convicted of a criminal offence.
These judgments by Ofwat are only a partial consolation for users who have seen bills raised in the region of 700 per cent since the 1990s – since bills for those without water meters are based on the rateable value of homes. This massive increase is pushing many to get water meters – and while that might be a good idea for small households without a need for large water use it can be dangerous for large groups and, more worryingly, those who need more than the average water use because of impairments or medical conditions.
In a context where fuel bills for electricity and gas have also risen over recent years, plunging millions into a cost of living crisis where the choice is between heating and easting, for some drinking (water) and washing are also part of that unacceptable mix.
The water industry in England and Wales was privatised in 1989 by Conservative Prime Minister Margaret Thatcher. This was part of a major programme during which 22 entities were given away from those that were seen as more easily fitting into the private sector like British Airways and British Telecoms to British Gas, for which there was a major campaign promoting shares. Water was one of the last to go, though it had been suggested early on, but a vigorous public campaign delayed the implementation of the idea for years.
Scotland remained in public ownership, as did the North of Ireland. Since 2001, Dŵr Cymru Welsh Water, the company which supplies drinking water and wastewater services to most of Wales and parts of western England, has operated as a single-purpose, not-for-profit company with no shareholders, “run solely for the benefit of customers”.
The original nationalisation of the industry had happened in the early twentieth century with public health being a strong motivating factor. It was placed under the responsibility of local government. This situation changed in 1974 under Ted Heath’s Conservative government which set up 10 Regional Water Authorities (RWAs).
The RWAs were hampered by chronic underfunding and a lack of investment from central government. Underinvestment in infrastructure combined with sustained water pollution by industry contributed to a continued decline of both river and tap water quality, precursors of many of the main issues faced today.
By 1980, investment in the water sector was just one-third of what it had been in 1970. Thatcher curtailed the RWAs’ ability to borrow money for capital projects and then blamed them for not building. When Thatcher privatised the water companies in the late 1980s, they were debt free but by 2024 they had a combined £60bn in debt. According to Ofwat, water companies have paid out £52bn in dividends (£78bn in today’s money) between 1990 and 2024.
The Australian bank Macquarie left Thames Water with an extra £2bn debt burden. The £2bn was borrowed by Thames Water in 2007 and 2010 but used for the benefit of the bank and its investors, which owned and controlled the UK’s biggest privatised water company. This was in apparent contravention of conditions laid down by the regulator when Macquarie bought Thames in 2006. They sold the company off again in 2017.
Today with these deepening crises, there is an increasing demand for renationalization from the public. Water is not the only essential good being polluted by the market. Part of the reason former Labour leader Jeremy Corbyn was so motivating especially of young people was his determined commitment to public ownership. Labour under its current leader Keir Starmer is on a different path.
Starmer was elected on 4 July 2024 promising change after decades of austerity under the Conservatives. While not many on the left believed that he would deliver much in government, few predicted how it would be. Within weeks he had refused to abolish the hated two child limit imposed by the Consevatives which means that women do not receive additional benefit if they have more than two children.
Last winter his chancellor Rachel Reeves removed a payment made to pensioners to cover increased fuel costs during that season even as prices were continuing to rise. Only a small proportion kept the payment – breaking with the key principle of the welfare state in Britain: universalism. Both practically and ideologically. Starmer has made clear he is more interested in cuddling up to business than to class politics.
Labour has recently been forced to about turn on the two child cap and the winter fuel payment as a result of major campaigning – and by unrest from some of their own MPs. They are still continuing with reactionary plans to significantly limit the benefits paid to disabled people, also the subject of many protests.
But the question of public ownership has not had as much focus, though in principle it is hugely popular. Recently, Labour partially took the steel plant in Scunthorpe into public ownership when they were unable to persuade their Chinese owners to continue production. Starmer and his cabinet made it clear that this was not the option they preferred.
Starmer’s queasiness was underlined by the fact that despite demands from the workforce they took a different approach to the Port Talbot steel works in Wales shut two months before by Indian owners Tata Steel at the cost of 2800 jobs. Its true Tata are planning to open an Arc furnace using recycled steel at some point, but plans are vague, and it is not sure how many people will be employed when it does happen.
And its not just steel. Britain’s National Heath Service is both its pride and joy – and falling apart. Its foundations have been undermined for decades partly by underfunding but even more importantly by the internal market. And Starmer and his Health Secretary Wes Streeting are deeply committed to continuing down that road.
So its not really a surprise that talking about the water industry – and Thames in partciular Secretary of State for Environment, Food and Rural Affairs Steve Reed claimed
“We are not looking at nationalisation because it would cost over £100 billion of public money that would have had to be taken away from other public services like the National Health Service to be given to the owners of the water companies.
In fact the idea that public ownership would cost a fortune has been challenged not only politically – by those of us who have long chanted ‘nationalisation without compensation’ but also by an extensive a compelling campaign by Common Wealth who point out that the government is merely repeating the arguments – and the mathematics – of the industry itself.
As they point out:
‘Under UK law, the Government may remove a licence from a water company either for poor performance, or if it is insolvent. It does this through “special administration” — a process where the government (not banks) chooses the administrator, and where secured creditors (i.e. banks and bondholders) must be paid “appropriate value” not market value for losing their claims.[17] The appropriate value’ solely has to be paid to secured creditors, not shareholders.’
It will be telling if this too is something where campaigners can force an about turn before thirst and disease get even worse.
References:
Keir Starmer just got schooled over nationalising water companies
https://www.bbc.co.uk/news/articles/c0qdev4vyl5o
https://en.wikipedia.org/wiki/Water_privatisation_in_England_and_Wales
https://www.dailymail.co.uk/news/article-13713445/Thames-Water-Ofwat-fines-sewage-spills.html
England faces 5 billion litre public water shortage by 2055 without urgent action – GOV.UK
How Macquarie bank left Thames Water with extra £2bn debt – BBC News