The Cunliffe Report is a joke. It protects water profiteers, screws over billpayers, and will do little to reduce pollution in our rivers and coastlines. The only solution is for water to be taken into public ownership – and run for the benefit of people and planet, not profit.
This has been a dire year for the privatised water companies. Some, like Thames Water, have teetered on the brink of collapse; they have hiked bills by an average of 27 per cent (about eight times the rate of inflation), and serious water pollution incidents increased by 60 per cent.
We’re paying more than ever to get more pollution than ever. But this isn’t a one-off bad year. Since water was privatised in 1989, the private companies have hiked prices above inflation, failed to invest, polluted our rivers and seas, and now want us to pay more to clear up their environmental and financial mess.
But the Government established the Cunliffe review while ruling out any systematic change. And here we are today with a laughable report recommending abolishing one quango (Ofwat), while establishing another regulator in its place. Even more ridiculously, this new regulator will take over the responsibility of water companies to monitor and report any sewage spills or pollution incidents – so the public will now pay costs once borne by water companies!
And if you were thinking that might feed through into savings on bills, alas, Sir John informs us that water bills will rise by another 30 per cent over the next few years.
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This is the story of privatisation: nationalise the losses, privatise the profits. You can apply it everywhere from energy (where we pay some of the highest prices in Europe) to the railways (where fares go up and reliability goes down).
Water is no different. In the 1980s, when Thatcher’s ideological privatisation crusade was in full swing, after lobbying from potential suitors the Government decided to keep the environmental management of rivers and waterways with the state, creating the Environment Agency.
Thatcher’s Chancellor Nigel Lawson wrote in his memoirs, “once it was clear the regulatory and environmental responsibilities would remain in the public sector, privatisation never looked seriously at risk”. In other words, the government agreed to nationalise the costs, and only privatise the profit-making parts of the water industry.
It is quite a remarkable feat of corporate mismanagement that these companies have still failed to deliver cheaper bills, reduce pollution, or increase investment. In the 35 years before privatisation almost 100 reservoirs were built; in the 35 years since privatisation, not one major English reservoir has been built – and in that same period private water companies have sold off 25 reservoirs without replacing one. No wonder there are now hosepipe bans in many areas.
In the first 17 years of privatisation, water bills increased by 39 per cent above the rate of inflation. A Greenwich University study covering that period found “operating costs have remained roughly constant in real terms: the increase in customers’ bills is almost entirely due to the various elements associated with the capital – capital charges, interest, and profits.”
In February, the Bank of England Monetary Policy Committee said, “Inflation is likely to rise to 3.7 per cent over the first half of this year. This is including because of increases in energy prices, and increases in some regulated prices such as water bills.”
The costs of privatisation are driving inflation and weakening our economy. When people are spending more as a proportion of their incomes on bills they have less to spend in the job-creating parts of the economy – shops, pubs and restaurants, and their supply chains.
Instead we are paying over the odds to subsidise the salaries of failing fat cats. Even Steve Reed’s attempts to limit executive bonuses have backfired (exactly as critics predicted they would) as water bosses have simply dispensed with bonuses and hiked their basic pay. With all the effectiveness of a chocolate teapot, the Environment Secretary limply now says “I don’t think it’s right for government to intervene in the salaries that private sector companies pay”.
No wonder the Undertones frontman turned water campaigner Feargal Sharkey has called for Reed to resign.
This larceny has been going on for 35 years. In 2007 Thames paid out more than £650 million in dividends, even though its profit was £241 million. How did it do that? It borrowed. And now says it must hike prices because of its debts! Again, it’s a case of nationalise the losses and privatise the profits.
Pretending that taking public ownership is prohibitively expensive is a lie. If water companies had not been allowed to keep hiking prices and had been forced to invest to prevent pollution (i.e. if they had been properly regulated), they would have gone bust.
The companies would have collapsed and the Government could have picked them up for nothing. The private sector has mugged us for long enough, and with Government connivance.
This new Labour government has let people down. It has slumped to just 22 per cent in the polls and has an approval rating of just 12 per cent.
It could all have been so different. Labour could have come into Government and said we are capping water bills (up by 26 per cent) energy bills (up by 18 per cent in the last year) and capping rent increases (rising in England by 8 per cent). “Sorry corporations and landlords, you’re going to pay. We’re on the side of people struggling to make ends meet – no more profiteering.”
Instead, people are feeling worse off, and let down.
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