When Margaret Thatcher sold off the water industry in 1989, the government wrote off all debts. But according to the analysis by David Hall and Karol Yearwood of the public services international research unit of Greenwich University, the nine privatised companies in England have amassed debts of £48bn over the past three decades – almost as much as the sum paid out to shareholders. The debt cost them £1.3bn in interest last year. In the past 10 years, the companies have paid out £17bn in dividends and directors’ pay has soared. The earnings of the nine water companies’ highest-paid directors rose by 8.8% last year, to a total of £12.9m. The highest paid CEOs were at Severn Trent, with a salary package of £2.4m, and United Utilities, a salary package of £2.3m. In comparison, the highest paid director of publicly owned Scottish Water earned £366,000. Scottish Water, which is publicly owned, has invested nearly 35% more per household in infrastructure since 2002 than the privatised English water companies, according to the analysis. It charges users 14% less and does not pay dividends.
Dieter Helm, a professor of economic policy at Oxford University, said water companies could not be blamed for exploiting the system.
“The water companies behaved exactly how we believe a commercial company does behave,” he said. “The question is, do we expect capitalists to behave like capitalists? What we have seen is a complete regulatory failure to control the companies.”
Dieter Helm, a professor of economic policy at Oxford University, said water companies could not be blamed for exploiting the system.
“The water companies behaved exactly how we believe a commercial company does behave,” he said. “The question is, do we expect capitalists to behave like capitalists? What we have seen is a complete regulatory failure to control the companies.”
English water companies have handed more than £2bn a year on average to shareholders since they were privatised three decades ago, according to analysis for the Guardian.
The payouts in dividends to shareholders of parent companies between 1991 and 2019 amount to £57bn – nearly half the sum they spent on maintaining and improving the country’s pipes and treatment plants in that period. Hall concludes the companies have borrowed to pay dividends, rather than to invest in infrastructure projects. The £123bn of capital expenditure spent by the companies has all been financed by customer bills, the analysis states.
“A large amount of debt has been borrowed. But since the revenue from user charges covered capital expenditure, this debt has been used to finance dividends rather than capital expenditure,” Hall said.
Critics say while continuing to pay huge dividends they have failed to carry out significant national infrastructure works to improve the water and sewerage system. Rather than improving, it had deteriorated, with more serious pollution incidents that damaged wildlife, the local environment and in the worst cases public health.
Water companies in England discharged raw sewage into rivers on more than 200,000 occasions last year. The analysis reveals untreated human waste was released into streams and rivers for more than 1.5m hours in 2019. The scale of the sewage releases in 2019 reveals what one industry insider said was the frequent and routine nature of discharging untreated effluent from storm overflows. According to this insider, the discharges released “a horrible septic mix of nasties into the rivers”. He said the industry had for years ignored warnings about the growing scale of spills from combined sewer overflows (CSOs) – storm pipes that allow rainwater, untreated sewage and runoff to discharge into waterways. A recent study revealed the quantity of E coli coming out of CSOs was between 1,000 and 10,000 times higher than that coming from treated sewage from wastewater treatment plants.
The Environment Agency issues permits to allow water companies to release untreated human waste, which includes excrement, condoms and toilet paper, from CSOs after extreme weather events, such as torrential rain, to stop water backing up and flooding homes. More than 60 discharges a year from a storm overflow should trigger an investigation by the agency but the data reveals some storm overflows have released discharges hundreds of times. The Environment Agency relies on water companies to self-monitor their CSOs. The campaign group Windrush against Sewage Pollution said the system was little more than a “licence to pollute”.
Campaigner Ashley Smith said: “The industry has been given a way to prop up failed infrastructure and it has exploited this enthusiastically. The inability of the Environment Agency to prosecute or even drive improvement has led us to where we are today – in a complete shambles with pollution rife and unchecked.”
Dr Andrew Singer, a senior scientist at the UK Centre for Ecology and Hydrology, said the pollution impact of CSO discharge was a risk to ecological and human health.
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