We Want Thames Water Back Debt-Free
by Bob Ansell
The story of Thames Water is the story of privatisation failure generally and water privatisation, in particular.
According to the Financial Times, since 1989, water companies in England and Wales have paid out £72bn to shareholders. To put this into perspective, that represents nearly £2000 for every adult in England and Wales. To achieve this financial generosity, the water companies have borrowed a colossal £53bn. When privatised, they were sold off with no debt. We paid around £1.9 billion through taxation to make the new owners debt-free.
One of Margaret Thatcher’s arguments at the time of privatisation was that private companies would be able to borrow for investment. But, according to the National Audit Office, the newly privatised Thames Water plc and its subsequent owners have instead increased charges by around 40% in real terms up to 2015, with much of the increase taking place between 1990 and 1995.
There is a great deal of evidence to show that throughout its post-privatisation history, Thames Water's infrastructure has been severely compromised because of the relentless pursuit of short-term financial gains. For over 30 years our precious water resource has been handed round like a financial plaything from one foreign private investment bank to another.
This is particularly the case from 2006 when Thames Water was acquired by the Australian investment bank, Macquarie. They simply prioritised boosting profits at the expense of investing in essential infrastructure upgrades. As a result, the utility's network has deteriorated significantly, leading to frequent water mains bursts, leakages, and disruptions in supply that adversely affect the public and the environment. In addition, Macquarie used some of its pension fund to pay dividends to shareholders. This has led to an increased personal risk to those currently working for Thames Water.
Thames Water may be the most obvious failure that is in the news, but the entire water industry is in trouble. So, what do we do about the problem? In England and Wales 70% of our water is owned and controlled by foreign companies at our expense. It is interesting to note that Scotland did not join the privatisation frenzy. And, since 1989, investment in water infrastructure in Scotland is 35% higher than in England, while bills have risen 10% less.
Across most of the world we stand out and almost alone for allowing private investment banks to dictate the investment in our water infrastructure and control our natural water resources. For obvious reasons almost no other country allows this. We must take control of our water in a manner which does not follow the usual privatisation story of private profit leading to public bail-out and liability. We have already paid for our water industry. Now we want it back, debt-free.
We Must Regain ownership of Our Water Industry
It is often difficult to generate debate about the ownership of our water industry. But such a debate is essential if we are to rebuild Britain successfully.
Water is a pre-requisite for every industry and, indeed, for life itself. Why then, we might ask, are water companies in private hands?
Thirty-three years ago, we owned the water delivered to our taps and the sewerage infrastructure that removed waste. Then, Margaret Thatcher sold the entire industry at a loss to the public. She removed all their debts and sold each company for less than it was worth.
The water industry before privatisation was certainly weak and in desperate need of investment. Water quality was variable, and our beaches suffered from polluted outflow. But the industry’s problems were related to years of underfunding in infrastructure, not to it being in public hands. The government chose not to invest in order to create the environment for privatisation.
Privatisation has largely enriched private shareholders who have done little to invest in this vital public service. Since privatisation water companies have accumulated over £45bn of debt that is ultimately the responsibility of billpayers or governments. And, according to the Competition Markets Authority (CMA) 20% of our bills now go to servicing that debt.
Ofwat itself has raised concerns about the level of debt and the demands of financing it but has done nothing to prevent water companies doing pretty much as they please.
We are almost alone in the world in relying, as an entire country, on the private sector to provide clean, safe water. What is worse is that 70% of the water industry in owned by foreign capital, including shadow companies in offshore tax havens and private equity groups. It is seen by them as a safe investment with great returns and little or no risk.
One problem we have is that because water has been flowing and sewerage being removed, we have not collectively recognised the urgency of securing our water industry. We now need an urgent debate to identify the best way to turn this around and regain ownership of our water? We need to ensure that everything we invest in our infrastructure pays for improvements and not for profits and dividends.
A Windfall Profits Tax Is No Answer to Britain's Energy Crisis
by Bob Ansell
Britain is in the midst of an energy crisis, and the government and the labour party are playing the same game looking for a solution to satisfy the electorate: namely tax the oil and gas industry with a windfall tax.
This approach does not even tackle the question of why we are paying so-called world prices for energy when so much of it is generated in our own waters or by nuclear power plants based in Britain. Why has the cost of electricity generated by wind power doubled, for example?
We would argue that the whole premise of a windfall tax is wrong. It supports the decades of profit-making hitherto and underscores the general lack of control we have over the whole, fragmented industry. An independent Britain needs ownership and control, not only of its oil and gas industry but of its entire energy generation infrastructure.
Hence, we will not entertain those voices in government arguing that we must not upset energy companies because it will deter them from investing. This view suggests that our future depends not on our own efforts and talent but on being generous to large corporations with little interest in Britain’s wellbeing.
Interestingly, this politically short-sighted approach to our energy crisis is taking place alongside the publication of a recent government policy paper entitled, ‘British Energy Security Strategy’. This document has a lot we would support. But, even in the foreword, by Boris Johnson himself, there is an admission of the current failed position.
Johnson says, ’For most of the industrial age, the UK was what we now call “energy independent”. …
… Yet as the years passed, we drifted into dependence on foreign sources. Sometimes this was through deliberate planning; more often it was the by-product of policy fudges, decision-dodging and short-term thinking.’
The ‘deliberate planning’ that created the dependence on ‘foreign sources’ that Johnson refers to is of course epitomised by the wholesale privatisation of our infrastructure by his predecessor, Margaret Thatcher, in the 1980s. Following privatisation, much of our energy capacity and infrastructure has wound up being owned and controlled by Johnson's 'foreign sources'.
Inside the British Energy Security Strategy document there is a great deal that Rebuild Britain would support. The report is a policy statement by the Government and argues, for example, for significant investment in renewable energy, for investment in energy storage technologies and for a focus on sustainability.
However, arguably the cheapest and quickest route to independence, the growth of onshore wind power has been left out of the policy. In addition, the focus on nuclear energy leaves many questions unanswered, most notably how do we create Britain’s capacity to design, build and maintain them? Successive governments have promised to expand our nuclear industry. All such promises have been abject failures, with massive underinvestment in the skills and training required to build and sustain the industry.
The current policy is to develop what are called small modular reactors. The argument runs that these can be constructed rapidly with standardised parts largely built offsite. However, the CEO of the key player in this scenario, Rolls Royce, is not planning to have any built for a decade. This is not a solution for Britain’s independence or a solution to the current energy crisis.
At the very least our job, in the short term is hold the government to account. This policy document is a start but with many caveats. At the very least we must ensure that contracts are awarded to British firms training and employing workers in Britain. In addition, we need to push for additional education and training so that we have the skills to design, build and maintain all aspects of our energy the infrastructure.
But, our job in the longer term, is to regain our independence by making all energy infrastructure state owned.
Rebuild Britain's Railways
by Bob Ansell
A self-reliant Britain will depend upon a modern, well-structured and efficient public railway.
But the future looks vague and uncertain at best after the delayed publication of the Williams Rail Review - the government’s independent root and branch review of Britain’s railway. The government has wasted two years since its initial consultation period closed, and then come up short on protecting our infrastructure.
The main conclusions of the Review are mixed. There will be a rebranding of course but the main substance of the report shows that the government is not committed to the main recommendations from those consulted. For example, ASLEF, Britain’s trade union for train drivers, put forward six key recommendations, all of which would contribute to rebuilding Britain’s railway network. ASLEF called for:
• A railway that is vertically integrated and in the public sector
• A responsive attitude to investment that is informed by local knowledge and decision-making
• Clear and reasonable ticketing options for passengers
• A railway that is part of securing healthy, connected communities with economic and social opportunities for everyone
• A safe and efficient, accessible railway
• A programme of infrastructure investment laid out that will benefit the whole of the country
To most people ASLEF has put forward sensible and even modest recommendations, and the public should ask why they have not been implemented in full.
But these recomendations have been largely ignored by the The Williams Review. While it does argue for some restructuring of the management of the railways and for more control of private contracts, in reality the proposals simply want to tinker round the edges.
Despite recognising the abject failure of the privatisation carried out by John Major’s government in 1994, the Review has failed to seize the opportunity to regain full public ownership and control for our vital infrastructure.
Williams Review Weak and Vague
The Review is weak and vague on key issues. The position of the Rail and Maritime Union (RMT) is clear on these failures. It says that;
“The Government talk about ending a generation of fragmentation but then leave the same private companies in place under this arrangement to extract management fees that could be invested in building a truly integrated national rail network. The taxpayer carries all the risk while the train companies carry out bags of cash.
“If the Government were serious about recognising the impact of failed rail policy down nearly three decades, they would cut out the middleman, strip away the dead weight of the private companies and work with their staff on building a transport system fit for the future, where investment in the workforce and infrastructure comes first.”
Rebuilding Britain means putting a stop to the private sector plundering of our railways, taking profits when they can and unloading the risks and losses on to the public when things look bad.