Our failing water firms are a damning reflection of Broken Britain

Independent

2 days ago

The latest report from the Environment Agency on the state of Britain's rivers is a veritable shower of euphemism and shame. 'Serious pollution incidents', the bland bureaucratic term preferred by the agency, are up by 60 per cent just in the last year.
We all know what that means: lumpy sewage in streams and on seashores that turns the stomach of anyone nearby, asphyxiates fish, and generally decimates the environment. 'Wastewater' leaking out while being carried uphill is apparently a particular problem, one 'impacting' swimmers.
Around 80 per cent of the most serious 'incidents' were down to three companies – Thames Water (33 spillages), Southern Water (15) and Yorkshire Water (13).
There is no suggestion that the situation is likely to improve; indeed, all the talk is of Thames Water, the largest company of its kind in the country, collapsing under the weight of its own debt rather than its scandalous record on pollution.
It's a damning reflection of 'Broken Britain'. Why has a supposedly civilised G7 economy grown so easily accustomed to such an appalling state of affairs? It may be true that de-industrialisation has cleaned up some of the larger rivers and estuaries in recent decades, but the water companies, the regulators and successive governments can hardly take credit for that.
What they are responsible for is what is in their control – maintaining a sewage system that does what it is expected of it in the modern world. It is one of the most basic services – and yet in parts of the UK, it feels little more than a hopeless aspiration.
This river of excrement has been rolling for years, and, while the details can be complex, the principal streams of blame that feed into the scandal can be easily identified. Incomprehensibly weak regulation is the strongest of the currents, either because Ofwat was never given sufficient powers or a wide enough remit, or because it was incompetent, or all three.
There has never been a shortage of official bodies nominally overseeing matters – the Environment Agency and various iterations of the Department for Environment, Food and Rural Affairs, as well as local authorities – but always a huge deficit of effective democratic control.
There is, of course, a fundamental contradiction at the heart of this particular privatised industry: the provision of clean running water and efficient sewage disposal may not align with the commercial imperatives of the companies denationalised in 1989 in England and Wales (Scotland and Northern Ireland were spared the experiment). Profit and public service can co-exist and even flourish – but not always, and not everywhere.
Even if the industry had been regulated better, the privatised model combined with zero competition and regulated tariffs was poorly prepared for the task of investing the vast sums needed to renew the crumbling Victorian infrastructure, let alone build the reservoirs and pipework required to cater for a population that was to expand by some 12 million in the ensuing decades. Some public services ought not to be expected, let alone forced, to turn a profit.
But from early on, the major weakness in the regulatory regime was becoming apparent – that while the need to monitor charges and water quality was recognised, there was no oversight of the financial health of the companies.
Once the shares had been acquired from the small shareholders in the initial public offerings and placed in the hands of private equity firms, the companies were free to load themselves with as much debt as they fancied – which paid for bumper dividends for the new shareholders. It left a vital public service hopelessly over-mortgaged.
The chance was taken for some lucrative asset stripping, even certain reservoirs were sold off, and the companies were left so enfeebled that if Ofwat tried to fine them, they could plausibly claim that they would go bust. They contrived to make themselves too big to fail. Or so they hoped.
On Monday, the government will publish a review of the industry by Sir Jon Cunliffe, the head of the Independent Water Commission, and its own proposals will follow. As we reported on Friday, the government is expected to scrap Ofwat. It must use the power of parliament to chart a new course for the industry.
Despite the pollution crisis, the Treasury cannot afford immediately to renationalise the most distressed of the operators, Thames Water, because of its enormous debts – more than £16bn.
It seems inevitable that Thames will fall into the special procedure that will ensure continuing water and sewage services to 15 million customers in southern England and London while the government takes control.
This is a far cheaper remedy for the taxpayer, but it does still mean that the considerable cost of cleaning up the rivers, keeping the taps on and the loos flushing will, to some extent, fall to the taxpayers as well as the bill payers. Either that, or we just get used to having the dirtiest rivers and beaches in Europe.