By Joe Langabeer
Public water supplies are not only expensive and prone to frequent interruptions through leaks and bursts, they are now also causing significant health issues. According to The Observer, Thames Water sent a water sample for laboratory testing after numerous reports of people falling ill with severe diarrhoea and vomiting in South-East London.
This incident follows the incidence of disease-causing parasites in household supplies in Devon, where South West Water attributed the issue to a ‘damaged valve’. It left thousands of people without safe drinking water. These events are the latest in a series of concerning revelations of private water companies neglecting the pollution and contamination of our water supplies. It is not enough that they are tipping raw sewage into rivers, streams and lakes, they are also no longer even reliable when it comes to supplying fresh water.
The health risks posed by these privatised companies should not to be taken lightly, and it is clear that the current lack of ‘supervision’ by Ofwat, the government regulator, over water companies is a significant problem The only remaining solution is to re-nationalise them.
In 1989, Margaret Thatcher and the Tories privatised England and Wales’s ten publicly-owned water and sewage industries, generating £7.6 billion in sales. Thatcher claimed it would lead to a ‘new era of investment’, improving water quality and reducing water bills.
Although Thatcher wrote off all the debts of the water companies before they were privatised – so they were entirely debt-free, recent reports in the Guardian (2023) reveal that England’s nine central water and sewage companies have now amassed £54 billion in debt. This debt which has been taken on has not been used for investment in infrastructure and services but wholly for shareholder benefit.
Privatisation has not brought in a ‘new age of investment’, but only a means of diverting money from bills to shareholders. According to David Hall, a researcher at Greenwich University, the competition and markets authority found that most investment in water services comes from the inflated bills paid by customers, with approximately 20% of bill payments being used for dividends and interest payments. Between 1989 and 2022, the nine large water companies paid their shareholders a mammoth £66 bn in dividends.
A comparison of Scotland’s public water system to the private system in England and Wales, shows that on average Scottish households pay 7% less for their water. The typical water bill in England and Wales is £419, while in Scotland it is £391.
Although the difference in bills is not substantial, Scotland invests 7% more in its water infrastructure, with the highest reduction of pipe leakage of all water companies in the UK between 2004-2020, according to a report by Water UK. This disparity in investment and the burden on consumers’ wallets is a clear indication of the hugely negative impact of the privatisation of water companies.
Thames Water asking for a public bail-out
Thames Water has recently been in the news due to its huge debt and the possibility of the company facing administration. It is the UK’s biggest water provider by the number of customers and the areas it covers, so it is a good case study to assess the supposed ‘benefits’ of privatisation.
The company has a complex business structure (see diagram) with seven company layers beneath the parent holding company, Kimble Water Holdings. As in all similar cases, this completely unnecessary complexity is a means of minimising or dodging taxes, or mitigating the impact of regulation.
The holding company of Thames Water has accumulated £18.3 billion in debt and is in such a parlous state that it is seeking a £750 million cash injection from shareholders to continue operating. It is an injection of cash that doesn’t seem to be forthcoming. As long as there are easy profits to be made, shareholders will join the party, but when the company suddenly looks like a dodgy bet, they’re not prepared to invest.
What makes the Thames Water (and other water company) debts more expensive at the moment is the rise in interest rates, meaning a far bigger proportion of their income has to go in interest payments. For example, an estimated £190 million loan was due for payment from Kimble, by the end of April.
Thames Water itself claims that it has enough cash to operate for another 15 months even if Kimble goes into administration, but its main efforts for survival have been based on the suggestion that water bills be allowed to rise enormously. So faced with a company going downhill fast, investors are walking away and they will only invest if customer bills can by hiked up massively and if sanctions for sewage dumping are reduced.
It may be that the ‘tame’ Ofwat, may allow a big rise and it has been suggested that they will also accommodate the company by ‘going easy’ on sanctions over sewage dumping – a disgraceful idea, if it is true. According to the Financial Times, Thames Water pumped 14 bn litres of untreated sewage into rivers in 2023.
Many campaigners, including the Consumer Council for Water (CCW), are warning that average households are already struggling to afford water bills. The chief executive of CCW, Mike Keil, said,
“Thames Water customers understand that investment is needed, but they should not have to pay for Thames Water’s past failures. They’ve already paid a high price through the company’s poor complaints record and service levels.”
Projects that have been carried forward, like the “Tideway Tunnel“, have faced consistent delays and even this was funded by an additional charge on customer bills. The final cost for this, borne by households, is expected to be £540 million by March 2025 when it becomes operational.
While this project represents a useful investment, it is disgraceful that Thames Water is making customers cover the costs, especially considering that they did not fund a 2010 EU directive to reduce sewage outflows and instead allocated these funds to a new company that Thames Water does not even own, now called Tideway. The main reason Thames Water rejected the EU proposal was the advice of its shareholders, who claimed the debt for the initiative was too high. Oh, the irony!
Untreated sewage and foreign companies
Ofwat, has ‘prioritised’ the reduction of sewage, and with public opinion aware of the frequency and scale of untreated sewage entering rivers and the seas, they can hardly do anything else. But the situation with Thames Water is a perfect example of water companies consistently prioritising profits over investment to tackle leaks and untreated sewage going into our rivers.
They have contributed to the crisis by diverting sewage into rivers instead of treating it properly, a practice known as “flow-trimming”. This allows the companies to claim they are responsibly managing the sewage crisis by reporting lower amounts of sewage entering the treatment works.
In a very good article in the Guardian, George Monbiot pointed out that flow-trimming, a practice whereby sewage is diverted into rivers instead of being treated, is the reason why our rivers are in such a dire state. Currently, there are no English rivers considered to be in “good overall status”. Private water companies, through poor financial investment in infrastructure, have allowed this to become a sewage crisis.
They burden themselves with debt, paying it out to shareholders and ultimately passing on unsustainable costs to consumers and their own companies. So, who benefits from this money? An analysis conducted by the Guardian in 2022 revealed that 72% of the profits from the water industry in England went to foreign shareholders.
China, Qatar, and Abu Dhabi investment authorities, as well as the powerful US financial institution Blackrock and individual business tycoons in Hong Kong, have all profited from our water. It’s evident that Thatcher’s vision of a ‘new age of investment’ was successful. However, UK water users don’t benefit from this investment – nor do they get a fair return on the money they pour into the company in water charges.
Polluted water leads to infection
Another example of a water company scandal is South West Water, which is owned by the company Pennon. In 2023, the company received a fine for sewage pollution. Less than a week after the fine, thousands of households and businesses were advised to boil tap water before drinking it.
The UK Health Security Agency confirmed 46 cases of an infection called cryptosporidium in South Devon in 2024. It’s an infection passed through human and animal waste that can spread through lakes and swimming pools. The infection was found to be present in the tap water, significantly impacting businesses in South Devon as tourists avoided the area due to the outbreak. South West Water stated that they were making progress in addressing the situation, but the incident was disruptive.
Meanwhile, South West Water’s parent company paid a £127 million dividend to shareholders and offered only £3.5 million in compensation to affected customers, which equated to £215 per household. Despite paying dividends to shareholders, South West Water asked for a 33% increase in bills, raising the annual amount to a staggering £644. Ofwat was expected to release a draft decision on the company’s requests, but this was delayed due to the general election.
The water companies have failed us. They prioritise their shareholders over consumers, pollute the planet, and neglect infrastructure, leading to water contamination. The solution is clear: nationalise our water. Take it from the shareholders and return it to the public. Access to clean water is a fundamental right, not a privilege.
At the beginning of this general election, I canvassed for my local Labour party and found that most people are clamouring for water utilities to be publicly owned. A 2023 YouGov poll showed that 69% of the public supports nationalising water companies, with only 8% opposing it. Recent cases involving Thames and South West Water will likely increase support for public ownership.
It’s evident that the current privatised system is not effective. With the impending Ofwat decision, Labour could easily gain support by committing to public ownership of water companies. Labour should have included this in their manifesto and should return control of water to consumers, not shareholders.
