A study by the University of Greenwich found that about one third of money paid in water bills leaks away from real water services to pay debt interest and dividends to shareholders. Privatised companies have paid £50 Billion to shareholders, and have created debt of £47 Billion. In short, they have just borrowed money to pay dividends to their shareholders. This is the economics of the neoliberal madhouse.
Privatisation was driven by nothing but Thatcher ideology. Water is not a market; there is no competition, because customers cannot move from one company to another.
Meanwhile, water companies have sold off 35 of their reservoirs and built just two.
Ofwat in December 2024 have allowed water companies (WCs) to raise water bills by about 35% to pay for work involved in separating stormwater from sewage. About 2,500 storm outfalls will need to be upgraded in England and Wales. It is very clear indeed that it is absurd to expect that water and sewage bill payers could or should pay for all the necessary work listed which is needed to rationalise water management in the UK. Water Bills are designed to pay for the service of supplying clean water and taking away sewage, not rebuilding the infrastructure.
We are talking here about water management, a massive infrastructure operation on a par with President Franklin D. Roosevelt’s New Deal in 1933, when he created employment to meet the economic suffering caused by the Great Depression of 1929-39.
The money for reform must be raised by central government to address a crisis of water management that adversely impacts the health of both humans and our aquatic environment, a long crisis that has been created by years of neglect and complacency, to be compounded in coming decades by the effects of climate change. There is a clear need for Keynesian-style investment into this vital element of our national life.
Neo-liberal economists and politicians (be they Tory, LibDem, or Labour) will use their influence in legacy and social media to scream long and loud in protest at this suggestion, because to them, money is the only reality worth considering.
Neo-liberalism is the exceedingly questionable idea that self serving (largely) men, competing against each other for ever-increasing accumulations of monetary wealth, without any external restraint or regulation, will produce the best of all possible worlds. Ecological and human health to neo-liberals is a mere “externality” to their economics. They have no concept of investment in human health or in ecology, they only think of investment in strictly financial terms. They cannot understand that investment can change a “waste” into value, or that healthy rivers, streams and oceans have value also.
The neoliberal hysteria will be amplified by a campaign by manufacturers of artificial fertilisers against the use of sewage derived soil conditioners, as mentioned above.
This is a battle that we must be prepared to fight and win, because it is the opening battle of an ideological war between neo-liberalism and real, ecological economics of the coming century, an economics which is based on the relation between mankind and the environment that is our life-support system.
The money needed to reform the way water is managed in the UK can be raised by a combination of:
- terminating the experiment of privatisation
- a tax on the richest layers of British society
- a contribution from Quantitative Easing
- levies on surfacing materials that prevent rain from being absorbed where it falls
De-privatisation
Responsibility for water was taken from local government in 1974 and put under regional water authorities (RWAs). Investment in water services fell by 2/3rds between 1970 and 1980 because borrowing was forbidden under the Conservatives in power at the time. Margaret Thatcher privatised the RWAs in 1989, and then allowed the private companies to borrow, so investment in infrastructure increased after privatisation. The debt owed by the RWAs was cancelled in order to facilitate privatisation. Debt has increased from zero in 1989 to £60.6 billion by 2022, so that a proportion of water bills (19% in the case of Wessex Water) is diverted to paying interest on the corporations’ debt.
Privatisation means that the WCs must pay dividends annually to their shareholders. In 2022-3 the companies paid out £1.4 billion in dividends to shareholders, nearly 11% of the companies’ total revenues, or 22% of capital investment.
In other words, without privatisation, about 22% more money could have been applied to preventing sewage spillages into our environment over 35 years.
The public are overwhelmingly against water privatisation. A YouGov poll in 2022 showed that only 8% of people supported privatised water, whereas 63% wanted public ownership. Even of Conservative voters, 58% wanted public ownership, with only 12% supporting the privatised system. Sadly, the Conservative, LibDem and Labour parties lack the courage to start to unpick Thatcher’s toxic legacy, and only the Green Party is calling for de-privatisation of the WCs.
Privatisation need not come at a huge cost. The share value of failing companies can fall away to nothing, so the Government can easily take them over when this happens. Thames Water is near this point in 2024. A water bill strike could bring other companies to that point. The Common Wealth think tank calculates that Government could take over water companies at a cost that is near to zero.
An inventive way of de-privatisation of WCs is by punishing spillages, not by imposing fines, but by acquiring company shares instead. Directors could see power slip out of their hands every time another spillage happens. There is a petition calling for this method here: https://weownit.org.uk/act-now/take-shares-not-fines
Privatised WCs are clearly failing, and re-nationalisation or WCs will signal the beginning of the end of the doctrine of neo-liberalism, which has to be cleared away before we can address the global cluster of major social and environmental problems that we face in our time.
Governments claim that privatisation would cost too much.
But new research from the University of Greenwich shows taking back English and Welsh water saves a minimum of £3 BILLION a year, no matter the level of shareholder compensation.
A tax on the rich
Households in the bottom decile (tenth) in the United Kingdom earned, on average, £18,706 per year in 2022/23, compared with the top decile which earned £185,358 pounds per year.
The richest 1% of British people hold more wealth than 70% of ordinary British people
Profs Wilkinson and Pickett have shown very clearly that such inequality of income and wealth creates a society that is less healthy, more unhappy, and more dysfunctional than a society that is more equal.
Therefore, the case for raising money from the rich for renovating our water infrastructure is very strong indeed.
The counter-argument that will be raised is that if we raise taxes in the UK, rich people will move abroad. However, rich people tend to hold assets like land and grand houses in the UK, and these assets cannot be moved. These assets can always be taxed, and money can be raised on them.
Additionally, Britain is a regrettably backwards and conservative country; other countries are more progressive, so there will be an international movement to tax the rich, leaving the rich with nowhere to go and nothing to do except pay their fair share of taxation.
Quantitative Easing
Most money is created by private banks in the process of granting a loan. When a person is granted a loan by a bank, two accounts are created, an asset in the books of the lender, and a liability in the account of the debtor. The debtor then, in subsequent years, pays back first the interest and finally the capital amount, at which point the asset and liability accounts cancel each other out, and the bank is left with a profit, which represents new money in the economy.
The State is allowed by the banks to create cash out of nothing, and may also create money by what is known as Quantitative Easing.
Viewing the problem of water management in the UK economy, we have the following:
- A pollution problem that requires a large amount of work
- Unemployed people who could do this work, preferably using Green Wage Subsidy
- Available tools and materials to do this work
- Available skills and knowledge to carry out this work
- A beneficial outcome in terms of healthy waters, increased biodiversity, biogas, soil conditioner, an upskilled workforce, and a more equal society
Therefore is is perfectly reasonable to create the money required to carry out this work by Quantitative Easing (QE).
The objection will be raised that QE can lead to hyper-inflation. This is true in some circumstances, where money is just injected into the economy unlinked to any productivity or project by governments in stressful circumstances such as civil war.
It is therefore clear that the money can and must be raised by central government to pay for renovation of our water management.
THE PROGRAMME
What are the practical tasks that need to be done? Like most big changes, it needs action at every level: Government, business, and householders.
Action by Government
- Keep to Labour’s manifesto promise: Labour will put failing water companies under special measures to clean up our water. We will give regulators new powers to block the payment of bonuses to executives who pollute our waterways and bring criminal charges against persistent law breakers. We will impose automatic and severe fines for wrongdoing and ensure independent monitoring of every outlet.
- Government will legislate on separating sewage from surface water in all new developments, with very few exceptions
- Government will initiate pilot trials on the processing of industrial waste, reviewing discharges from selected industrial sites, building up ways of neutralising acidic wastes with alkaline wastes, flocculating substances in solution, and so on. This will result in no more mixing of industrial and domestic sewers.
- All hard surface installation will have to pay a levy to create conduits to separate surface water from sewage proportionate to the amount of surface water that the hard surfaces will produce
- A timetable and plan will be laid out for achieving separation for surface water, sewage and industrial waste.
- Review the exact duties of the various bodies with control over water, and provide clear lines of communication and responsibility.
Revenue (i.e.our bills) is £600 million.year
Investment into separating drains is £12 million / year
So that is 2% of revenues.
Not a lot, considering 50% goes on debt and dividends
