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Bloomberg
2 days ago
- Business
- Bloomberg
The UK's Great Water Experiment Has Failed
Investors buying a substantial stake in a UK bank must undergo an assessment of whether they have the reputation, integrity and financial soundness to be an owner. A similar process applies to acquirers of oil and gas producers. Even buyers of football clubs face a 'fit and proper' test of their suitability. No such requirement applies to the owners of water companies. This never made sense. Jon Cunliffe, former deputy governor of the Bank of England, seems to agree. A key recommendation of the Independent Water Commission that he chairs is to give a future combined industry regulator the power to block changes of ownership, set leverage levels and, in some circumstances, to give direction to the ultimate controller of the company. Such powers are 'necessary guardrails' in water, he said this week, presenting the conclusions of the commission's 464-page final report. For some critics, its proposed overhaul doesn't go far enough; all the same, the significance of the shift in regulatory philosophy shouldn't be underestimated.
Spectator
2 days ago
- Business
- Spectator
A new water regime must still reward private investors
The weekend's torrential Yorkshire rain amid a hosepipe ban offered a handy metaphor for the chaos that has befallen the privatised UK water industry. Sir Jon Cunliffe's Independent Water Commission report – aiming for a 'fundamental reset' to restore public confidence, clean our waterways and ensure future supply – is welcome for the clarity of its central conclusion: that unfit-for-purpose Ofwat and a jumble of other regulators should be replaced by a single body with more teeth and comprehensive oversight of the sector. So far, so good. Cunliffe – a veteran of the Treasury, the Bank of England and Brussels – can also be applauded for his bureaucratic cunning in tabling no fewer than 88 recommendations, in the hope that perhaps eight of them might actually be adopted. But one reform he was forbidden from contemplating was the renationalisation of water companies, whatever the alleged extent of their failures and dividend-gouging under foreign and private-equity ownership. And that means future investment in leak-free pipes and reservoirs, supply to new housing and elimination of sewage slicks remains dependent on the willingness of private investors to put capital at risk – a mechanism widely misunderstood by consumers and campaigners who believe all shareholder rewards from water supply are somehow exploitative and wrong. Cunliffe's report talks about creating a stable regime that reduces uncertainty and thereby attracts 'low risk, low return' long-term investors, rather than (though he doesn't quite put it this way) the fast-buck financiers who gamed Ofwat so effectively in an era when successive governments were far less concerned with infrastructure improvement than the voter optics of lower water bills. In the Commons, Environment Secretary Steve Reed gave grudging spin about 'fair' returns for shareholders who meet their obligations. I note his previous career in educational publishing and hope he has texts in praise of capitalism on his bookshelf, because having ruled out state ownership he must now embrace investors who will naturally be sceptical of Labour promises. At least Cunliffe has given him a blueprint. Man of secrets David Alliance, who has died aged 93, was a man of secrets. An Iranian immigrant trader who started buying up Lancashire cotton mills in the 1950s, he eventually controlled, in the Coats Viyella combine of the 1990s, most of what remained of the British textile industry. That he liked to hold his cards close to his chest made him a potent deal-maker but a difficult client for his ghostwriters, of whom for a year or so I was one – though my version of his memoirs remained unpublished, eventually to be overtaken by Ivan Fallon's A Bazaar Life (2015). 'You research it,' Alliance would say with a hint of irritation when I tried to probe him about his takeover battles or his clandestine role in rescuing Falasha Jews from persecution in Ethiopia. So inscrutable was he that in the end I missed the core objective of my commission, which was a book saying that treacherous boardroom colleagues had thwarted his efforts to sustain Coats Viyella as a global competitor against cheap foreign rivals, before forcing his 1999 resignation. I suspect neither a nine-digit fortune from his second business empire in mail-order, nor a Lib Dem peerage, nor his name on what is now the Alliance Manchester Business School, brought consolation to his rather lonely later life. He seemed to have few real friends and I was never one of them, but I salute him as a remarkable entrepreneur. Sinking flagship 'The knives are out for BP's Norwegian chairman Helge Lund,' I wrote in April. This followed the energy giant's shareholder-driven U-turn, refocusing on fossil fuels and dumping the commitment to renewables for which Lund and his former chief executive Bernard Looney were largely responsible. Sure enough, Lund's own plan to step down 'most likely during 2026' has been accelerated to this October. His successor, Albert Manifold, previously ran the Irish building materials group CRH whose product range, embracing concrete, aggregates and bitumen, demonstrates a relatively low level of ambition to approach net zero any time soon. Tellingly, its share price has more than doubled over the past three years while BP's has stayed exactly where it was. Underlying that difference is the fact that CRH also led the current fashion for seeking higher valuations elsewhere by shifting its primary listing to New York in 2023. As the activist BP shareholder Elliott Management shouts about a need for decisive leadership to counter chronic underperformance, watch whether this sinking flagship of the FTSE 100 follows CRH across the pond. In one dramatic move, I fear that would nullify most of Chancellor Rachel Reeves's recent initiatives to inject new life into London's capital market. Storm warning I set off for my summer sojourn in France with a nagging concern about relative values. The Financial Times reports that the global cryptocurrency market has reached $4 trillion (£3 trillion) and is likely to go higher as funds flood in following the passage of Donald Trump's pro-crypto legislation. The market capitalisation of Nvidia, the Californian AI microchip giant, has also passed $4 trillion and here too pundits say there's further to go. Both those markers easily surpass the combined market value of the FTSE 100 – the top one hundred London-listed companies – at £2.1 trillion, which itself reflects an all-time high for the index at 9000. Yet economies flatline, inflation ticks up, government debt soars and geopolitics are in perpetual turmoil. Something surely has to give, maybe next month, maybe in the more traditional crash month of October. Ah well, fine French lunches should keep me sanguine – and, I hope, beguile you when I write about them.
South Wales Argus
3 days ago
- Politics
- South Wales Argus
Afonydd Cymru welcomes report into Welsh river pollution
The Independent Water Commission's review, led by Sir John Cunliffe, was recently released, addressing failures in the water sector across England and Wales and aiming to restore public trust. The report acknowledges the unique legislative and policy needs of Wales, as water management is a devolved issue. Afonydd Cymru, a representative body for Welsh rivers, has welcomed the report's recognition of these differences, as the recommendations will now be considered by the Welsh Government rather than Westminster. The report calls for more strategic direction from the Welsh Government across the whole water sector, not just the water industry. It points out that pollution from all sectors, especially agriculture in Wales, needs to be resolved to restore rivers. The report challenges favourable comparisons between Wales and England regarding the state of rivers, stating that claims of 43 per cent of Wales's water bodies being in 'Good Ecological Status' and 90 per cent in 'Good Chemical Status' may not be accurate. This discrepancy is attributed to less stringent assessments by Natural Resources Wales compared to the Environment Agency in England, according to Afonydd Cymru. The report recommends tighter regulation of sewage sludge spreading on farmland, a move welcomed by Afonydd Cymru. The sludge contains nutrients, toxic chemicals, and heavy metals, which can end up in rivers. This change aligns with calls for regulating the spreading of digestate in Wales. One major recommendation is the creation of a new economic regulator for water, a move already initiated by the Westminster Government with the announcement of Ofwat's abolition. In Wales, the Deputy First Minister has also stated that there will be a new economic regulator for water, although further details are yet to be announced. However, the report was criticised for its lack of a clear plan for cross-border rivers, recommending their management be split along borders. Afonydd Cymru argues that rivers like the Severn, Dee, and Wye would be better managed on a catchment basis. The Welsh Government has stated it will take time to consider the full 465 pages and 88 recommendations of the report, which marks the most significant review of water management in 35 years.
STV News
3 days ago
- Politics
- STV News
Environment minister claims Scottish water is dirtier than England's
The Scottish Government has demanded an apology after the UK environment minister said Scotland's water is dirtier than England's. Steve Reed said that 'pollution levels in Scotland are worse than they are in England'. Scotland's climate action secretary Gillian Martin said the claim was 'inaccurate and misleading'. According to the latest independent water commission report, Scotland has more waterways in 'good' ecological condition compared to England and Wales. Martin called for Reed to apologise for his comments made during an interview on Channel 4 News on Monday. In a letter to the environment secretary on Tuesday, she said: 'I cannot understand how you could make such an inaccurate comment when the very report that you were on the programme to discuss clearly states the opposite. 'I am therefore asking that you acknowledge that your comments were inaccurate, apologise publicly for them, and seek to correct them.' The row emerged after the final report from the Independent Water Commission found that 66% of Scotland's water bodies were of good ecological status, compared with 16.1% in England and 29.9% in Wales. While Martin said there is 'clearly more to do', 87% of Scotland's entire water environment is assessed by SEPA as having a high or good classification for water quality – up from 82% in 2014. 'Whilst we of course need to be careful how these figures are used, as they are not calculated on the same basis, it is clear that Scotland has a higher performance,' Martin said. When asked about public ownership of water during a Channel 4 News interview on Monday night, Reed said: 'In any case, it is not guaranteed to work… and we know that from looking north of the border where, in Scotland, they have a nationalised water company but pollution levels in Scotland are worse than they are in England.' The Independent Water Commission report was led by Sir Jon Cunliffe and was prohibited from looking at the possibility of nationalising water companies in England and Wales. Reed warned that nationalisation would cost £100bn and would slow down efforts to cut pollution. Martin accused Reed of seeking to 'undermine the idea of public ownership'. She said Scotland's comparatively high water performance is 'in part, due to water being a publicly owned asset, allowing for investment without shareholder returns or the pressure to make profits'. The UK Government has been contacted for comment. STV News is now on WhatsApp Get all the latest news from around the country Follow STV News
New Statesman
3 days ago
- Politics
- New Statesman
Why isn't Labour nationalising water?
Photo byYesterday morning (21 July), in Kingfisher Wharf in Fulham, Steve Reed announced the start of the 'water revolution'. Following the findings of the Independent Water Commission, led by Sir Jon Cunliffe, the Environment Secretary outlined what is now being dubbed the 'Reed Reforms'. The water regulator Ofwat will be abolished and a new consolidated body will be set up in its stead, intended to 'prevent the abuses of the past'. Speaking in Parliament later that day, Reed confirmed the Government would take up five other recommendations included in Cunliffe's review. These include: a new statutory ombudsman to help customers resolve complaints, an end to companies monitoring their own pollution, and region-specific operations within the new regulator. This is all part of Reed's plan to cut sewage pollution by 50 per cent by 2030. However, full nationalisation of the water industry is off the table. This is partly because the possibility of nationalisation was not part of the remit given to Cunliffe for his review. His 88 recommendations instead covered how the British water system is regulated, how to manage competing demands on water, and how to maintain the resilience of critical infrastructure. But the response to the review's findings from outraged sewage campaigners suggests that perhaps nationalisation should also have been included in the scope of Cunliffe's report. The symbolism of the waterfront location chosen by Reed was somewhat lost on the assembled journalists: the studio's blinds were closed, effectively blocking the Thames from view. But Reed remained buoyant as he stepped up to the lectern to answer journalists' questions afterwards. Insiders at the Department for Environment, Food and Rural Affairs recently told me that water has monopolised the work of the department, ranking consistently highly among voters. In the huddle following his speech Reed ruled out nationalisation. 'The reason that nationalisation wasn't included is because, first of all, it would cost £100bn, according to figures produced by my department,' he said. 'That money would have to be taken away from the NHS and from schools, to be given to the people who have polluted our rivers.' This justification makes sense. The country currently finds itself in a tricky financial position; Rachel Reeves's welfare cuts have been defeated and she will likely be forced to raise taxes in the autumn. Making big political spending commitments is unlikely to be at the top of the Government's agenda. But regardless of cost, nationalisation remains popular with voters. A poll from last year showed that 82 per cent of the public said they thought water should be brought back into public ownership. The UK is a European outlier in its privatised status quo, and water is an emotive issue. Ruling the measure out leaves Labour exposed on left – but increasingly on the right, and it is already being challenged on the issue by Nigel Farage and Reform. Farage said on Sunday that his party would nationalise 50 per cent of the water industry (although when asked where he would find the money from, the MP for Clacton couldn't answer). Reed's response to Farage was to point out this £50bn unfunded commitment would come alongside an additional £80bn worth of unfunded commitments Reform has already made. 'That's more than double the amount that Liz Truss committed when she crashed the economy,' Reed said. 'It looks like Nigel Farage is offering us a rerun of Liz Truss.' Still, voters may be more likely to believe intention over detail – the stridency of Farage and his deputy Richard Tice on public ownership sets them clearly apart from Labour. Subscribe to The New Statesman today from only £8.99 per month Subscribe These reforms have been received sceptically by the robust camp of anti-sewage campaigners. Feargal Sharkey, the former lead singer of the Undertones and the most best-known of the group called on Reed to resign. Sharkey, who campaigned alongside Labour MPs in the run up to the general election told LBC, 'He's made it worse!' (When asked if he would heed Sharkey's call, Reed said: 'Fergal has been campaigning for cleaner rivers, and I'm cleaning up the rivers.') Others have expressed regret at the government's rejection of nationalisation. Matt Staniek, who leads the Save Windermere campaign said the fact the Cunliffe review did not include nationalisation meant it was 'not a root and branch review'. Save Windermere is currently calling on the Government to make it unlawful to release any kind of sewage (treated or untreated) into the Lake. He was unimpressed by the Reed reforms and pointed out that tinkering with the regulator would not fix the fundamental problem with the UK's water system: privatisation. It is accepted that the UK's water infrastructure has fallen into such disrepair because the money which should have gone back into improving the system has instead gone to shareholders in dividends. This, coupled with the Conservatives' preventing water companies from raising consumer bills fast enough, has created a vicious cycle (ending with the 30 per cent increase to bills customers saw at the end of April). 'If you remove the profit motive, remove shareholders and owners, you are left with 100 per cent of a customer's bill being able to go back into fixing the water system,' Staniek said. Cunliffe's review included the admission that water bills will still need to rise in the short-term to patch up the UK's leaky system. But in the middle of a cost-of-living crisis in which voters have been sold the idea that this Labour government was elected to cut their bills, such a reality is politically dangerous for the government. Staniek said that when it comes to water, the rise in bills is not necessarily the issue: it is what they will go towards which will make an electoral difference. 'People have been paying for a service that has never been fully provided,' Staniek said. 'Why is it fair that the customer has to pick up the bill?' Reed is walking a fine line here; between keeping disgruntled voters onside by cleaning up Britain's rivers, and doing so within an ongoing political and fiscal framework which prevents radical changes being brought from the Labour benches. But people are already furious about this affront to nature and politics, one which unites voters of all persuasions. If, by 2029 Britain's rivers remain polluted, they will take their support elsewhere. [Further reading: Will Labour's water 'revolution' work?] Related
