Headline: Sewage pollution. . . . are the water companies swindling us?
The Government and the water companies are taking us for fools, yet again!
At the end of 2024 Ofwat agreed to increase everyone’s bill every year, for the next 25 years, to provide the investment capital that the water companies need to enlarge their sewage works. Government and the companies say that overall it will cost £56 Billion (2022 prices), and every penny will be paid for by us via our water bills, and not by Government or the owners.
The figure does not include inflation, nor the fact that cost estimates of many infrastructure projects are often seriously under-priced and end up costing considerably more. So every year, for 25 years, our water bills are going to get a lot more expensive.
Some people believe there are alternatives to making us pay for this capital investment. So, what are they?
Nationalisation is not a solution, it’s an illusion.
The most talked about is some form of public ownership, such as nationalisation. Many are calling for this, including most environmental NGOs. However, will it happen?
No, it will not. That’s because the nation cannot afford to pay the owners what the companies are worth. Estimates of that figure vary, but they revolve around £100 Billion. Suggest that to the Chancellor or the Treasury and that they raise the sum from taxes or by borrowing, and they greet the idea with horror. Most MPs are the same, so Parliament refuses to go there.
Some people say that really the water companies aren’t worth that much, and some companies like Thames Water are nearly bankrupt. So, pay them considerably less. However that’s when the Treasury again gets anxious. Why?
The Treasury must curry the favour of foreign capital.
The reason is because the water companies are almost completely foreign owned, with inward investment of foreign capital now essential to the country. Maintaining foreign investment is sacrosanct, and the same foreign ownership dependency is true of much of the UK’s infrastructure, e.g. electricity producers, electricity and gas distribution networks, airports, Royal Mail, and so on.
So, if we say to these foreign owners that we are going to take over their companies with virtually no financial compensation, they’ll abandon the UK like rats from a sinking ship, leaving the economy to collapse in double quick time.
As a result, Government hates the idea of nationalising the water industry. So forget it. It’s a non-runner.
Meanwhile, the water companies, who are being told by us to clean up their act, have persuaded Government to make us pay for it!
Looking at water company owners in the eye.
So, is there another way forward? Yes, according to the environmental organisation, Marinet. “There is another solution” says Marinet director, Stephen Eades “but we refuse to see it, although it is staring us in the face.”
That solution, according to Marinet, is to make the owners of the water companies provide the investment capital. They do this either by putting their own money into the company, or by issuing new shares so that other people and organisations provide the capital that’s needed.
“Actually, it’s the obvious solution” says Eades. “Water companies are shareholder owned companies, and under this model of running companies the obligation to provide the investment capital the company needs falls upon the shareholders. This is how every limited company works. It is company law, pure and simple. This way, we make the owners provide the funds, not the public.”
Restoring the power of market forces.
Marinet argues that Government should compel every water company to relist on the London Stock Exchange to become, once again, publicly rather that privately owned companies . When this happens, Marinet argues, market forces will once more become the true judge of whether the companies are performing properly and, if they are not, the value of their shares will quickly shrink. Therefore market forces, not Government, compel the owners to get the companies back into sound order.
“At that point” says Eades “Government and a strengthened Regulator that is proposed in legislation later this year can go to the High Court and ask it to enforce the laws that forbid sewage pollution.”
There is no shortage of pollution laws, explains Marinet. They cite the Environment Act 2021 which states that the polluter (the owner) must pay for cleaning up pollution, and the 1991 Water Act and 2016 Environmental Permitting Regulations that state there is a legal obligation on all water companies to have adequate treatment capacity at all sewage works. When this happens, says Marinet, storm overflows of raw sewage will almost entirely cease.
“The law is really specific on this”, says Eades. “Government should get the High Court to enforce the law. The Court must say to the owners that they have got five years to supply and use the capital that’s needed to enlarge all of their sewage works and, most importantly, the Court must insist that the owners alone provide the capital.”
Imposing severe fines on the owners of the water companies.
“At that point, the Court also fines the owners the same amount of money that’s required to deliver this upgrade, but waives payment for the five years needed to make the upgrade. Then, after five years, the owners must return to the Court, and if the Regulator says they’ve failed to make the upgrade, the Court enforces payment of the fine and Government uses the fine to deliver the upgrade.”
This way, explains Marinet, the owners pay for the upgrade. And, because the companies are listed on the Stock Exchange, the market judges the owners’ performance and thus the value of their shares, not government. In other words, Markets control the industry, rather than the State.
“We’ve explained this” says Eades “to over one hundred scientists, politicians, academics, environmental NGOs and the water company CEOs. We’ve told them, here is the way we solve the industry’s financing and solve sewage pollution, and keep the financial burden away from the public and Government. It’s very simple, take capitalism at its word, and make the owners pay.”
So far, no one is listening. However, says Marinet, the message is clear. We should wake up and stop being treated like fools. Instead, we must use the High Court to compel the owners to face their legal obligations. If we do, and also persuade Government to go to the High Court, then things will be as they should be: the owners, and not us, will be paying for eradicating sewage pollution.
The question is, will we?