I am not a socialist, but nobody should make money out of tap water.

‘In the beginning God created the heavens and the earth. Now the earth was formless and empty, darkness was over the surface of the deep, and the spirit of God was hovering over the waters. And God said “let there be light” and there was light’

Concerning the Book of Genesis, one of the most deeply-rooted cultural documents of our species, it is often thought that the first command of the abrahamic deity was to create light. This is not true. Before everything else, was water. Life on earth was borne of water. It sustains us, it cleanses us. It plays a pivotal role in ceremonies around the world both religious and secular. Light came a close second, but water was there before even that.

I should hasten to mention, at this point, that the thrust of this article concerns economic and social ethics, and not religious ones. I quote Genesis 1 for its cultural significance and not for its theological (or otherwise) robustness or accuracy. I quote it to demonstrate that water had value to us since before we were able to record our views and thoughts.

Fast forward to the 28th June 2023, when an article featured as The Times headline (a UK national newspaper) which read as thus:

“Water Bills to rise up to 40% to fix sewage pollution crisis”.

Before I delve into this article, here are some key points of context for the reader — in case they are not aware of the circumstances around this headline.

• Firstly, it is important to know that the British water industry is a privately run one. While this was the case at its conception (as private companies built the original waterworks) they were soon after considered a pubic health issue rather than a commodity, and therefore nationalised in the late 19th century. In the late 1980s, waterworks were privatised and the model by which the UK water infrastructure is run remains today.
• Secondly, there is, among the numerous other environmental challenges facing the UK and the rest of the world, a specific issue with sewage entering English rivers. This because the waterworks are not adequately equipped to deal with excessive rainfall and therefore discharge sewage into rivers. For clarity, this is raw sewage, not treated sewage, which is being discharged. This means that only 14% of England’s rivers are in “good ecological order”.
• Finally, the UK is suffering a cost of living crisis fueled by record inflation which in turn is caused by numerous factors — but that topic would require its own article. To quantify this cost of living crisis, the graph below (fig.1) illustrates the real terms increase in inflation during 2022 compared to previous years. This has been catastrophic for many households already, with some monthly mortgage repayments increasing by up to 60% according to the Office for National Statistics.

Fig. 1

So, with all this in mind, I shall explain why this headline has stood out to me, and how it provides me with a fantastic example of why the water industry needs to be nationalised forthwith.

British Privatisation: An Ideological Obsession

In 1884, a prominent politician named Joseph Chamberlain stated the following:

“It is difficult, if not impossible to combine the citizens’ rights and interests and the private enterprise’s interests, because the private enterprise aims at its natural and justified objective, the biggest possible profit.”

Put more simply, he was stating that private businesses cannot be expected to have the interests of the public at heart, because they exist soley to make money. His words were prophetic, and clearly they were considered to be worth something too as water was indeed nationalised under the governance of Regional Water Authoraties (RWAs). What happened a century later was very much at odds with the public interest. Throughout their existence, the RWAs were able to borrow money at favourable rates in order to fund and improve the infrastructure of the UK’s waterworks. By the 1980s, the RWAs were unable to meet the demands placed upon them but it was not really their fault. For starters, Thatcher’s conservative government had severely curtailed the ability of the RWA to borrow the money at favourable rates, while concurrently blaming them for a poor performance. Secondly, the EU introduced stricter legislation to ensure good water quality throughout the bloc. In fact, the UK was prosecuted in the European Court of Justice for failing to implement the 1976 Bathing Water Directive and the 1980 EU Drinking Water Quality Directive within the specifed time period. The government of the day used this pretext in order to privatise the UK waterworks. Tellingly, they waited until after winning the 1987 UK election, rather suggesting that they felt it would be an unpopular choice with voters.

It is difficult to measure the extent to which improvement in the water infrastrcture in the UK has been achieved. There has been heavy government bias towards privatisation and the previous system was specifically cut in mind of privatising it later. What can be said, is that privatisation is no panacea. Professor David Hall, a visiting professor at Greenwich University Public Services International Research Unit (PSIRU) was a non-political figure, and an expert in the subject, points out the following:

“Privatisation of water was deeply unpopular and remains so. In July 1989, as the private companies took over, a poll showed 79 per cent of people opposed. In 2017, after more than a quarter of a century’s experience, 83 per cent wanted water returned to public ownership.

But after 25 years, water prices had risen by 40 per cent above the general rate of inflation, and the amount of shareholder money in the companies has reduced in real terms.

Despite acquiring the companies debt-free, the owners have accumulated debt of more than £50 billion, effectively used to finance dividends of over £50 billion. The annual cost of these dividends and interest on the debt is £2.3 billion a year more expensive than it would be under public ownership.

The companies’ performance has been equally poor. Sewage flooding remains a major problem, with repeated problems and fines. Thames Water has been a repeat offender, but the new super sewer being constructed to deal with the problem is another economic problem. As Thames refused to finance it by itself, the super sewer is financed by government loans and by an extra charge on consumers even before it is finished.”

Greed, Mismanagement, and Ecocide

I will now briefly demonstrate how it is that the needs and concerns of the public are not being addressed; and with privately owned water companies, it is clear to see why this is the case. The public pressure regarding poor service from water companies has nowhere to go, as the companies are run by opaque private individuals. Furthermore, 70% of water companies are under foreign ownership. Privatisation was meant to unlock investment, however there has been no evidence of this. On the contrary:

• Despite a yearly and worsening round of water shortages and hosepipe bans, there is not sign of any action being taken to address these issues. On the contrary there have been no major investments into reservoires in England since the Kielder Water Dam was built in 1981. This was before privatisation, therefore no major investment into the UK’s water infrastrcture has been made since privatisation.
• The national water infrastructure leaks around 3bn litres of water (a fifth of the total national supply) a day.
• With respect to cost since 1989, two developments had manifested as of 2019. One of those things is that water bills, as paid by households, increased by 40% above inflation. The other of those things is that, over the same period, shareholders have been in receipt of dividends upwards of £13.5 billion. Applying the fact that 70% of water companies are under foreign ownership, that means that around £9.45billion has left the UK economy entirely and gone to foreign investors. Just let that sink in.

A splendidly wealthy cohort are profiteering and awarding themselves substantial bonuses based purely on the life-necessity of clean water. They are, furthermore, doing so while condemning England’s rivers to ecological ruin and failing to correct any of the problems within their areas of responsibility.

Their answer to this? Raise the bills of the taxpayer.

The crisis hits some more than others

I have already illustrated the severity of the cost of living crisis. Water companies now have the temerity to offload their costs onto the tax payer. One might feel this is necessary to allow proper investment into the UK’s water infrastructure. However, if the interests of the public were even slightly on their horizon, then they would have foregone their dividends and bonuses (you would think an annual salary of £750,000 for Sarah Bentley of Thames Water to be enough) long before increasing charges — especially now.

Conclusion

The water we drink belongs to all of us. This viewpoint needs, of course, to be tempered by the running costs and investments required to sustain clean available water. The way to consolidate this is through public ownership. Privatisation has been given a chance and it has failed to deliver at the first significant crisis. A policy which was snuck through the back door is clearly being run for profit and not in the public interest. The policy about which it was said would unlock hitherto unseen investment opportunities has provided opportunity overwhelmingly to very wealthy foreign interests.

So, the answer must be public ownership. Privatisation was never achieved in a purely democratic spirit, it has not offered any significant infrastructural investment, nor has it reduced costs for the tax payer. The argument that private ownership would improve quality of output through competitiveness is entirely wrong, as the water industry is not at all competitive. The only argument for privatisation, is for the purposes of further enriching the shareholders and managers of these companies, who are clearly as inept as they are unaccountable. Some policies and issues are thorny and rough-edged. This is clear as day, and far clearer than our rivers.