The Guardian’s view on water companies: nationalizing a flawed private system | Editorial

Ohen the water industry was in the hands of the state, it was claimed that it worked neither for its owner – the state – nor for the public. Since their privatization in 1989, the water companies have enriched investors and senior executives but have not invested enough in infrastructure. Shareholders received £72 billion in dividends. The money came from big debt, with companies borrowing £56billion, and big bills, with prices up 40%. The efficiency of the private sector has not provided better service, but it has allowed businesses to be operated for money.

The pressing business concern was to make money rather than seriously think about the challenge of the climate emergency. As a result, water companies will impose garden hose bans during record summer heat, even though up to a fifth of the water is lost to leaks. Two companies restricting water use – South East Water and Southern Water – have some of the worst environmental records. Thames Water, which will ban lawn watering for its 15million customers, was fined £20million in 2017 for dumping 1.4billion liters of raw sewage into rivers. Last year, it was discovered that the company had illegally dumped untreated sewage for 735 days.

These failures are encountered by water companies with bromides designed to create the illusion of problem solving. Companies get away with it because the bark of water guard dogs is worse than their bite. The Environment Agency has said the water company bosses responsible for the worst pollution should be jailed. There are no signs of a CEO facing criminal charges. In February, industry regulator Ofwat said privatized UK water companies should link executive pay to performance. This summer, Thames Water boss Sarah Bentley will receive a total of £700,000 as part of a £3million pay package, just weeks after her company’s terrible pollution record was officially recognized.

The most common noise heard in regulation circles these days is that of the stable door being closed long after the horses have run away. In June, Anglian Water, one of the UK’s largest companies, announced it would pay a £92million dividend to its owners. A month later, Ofwat proposed new powers to prevent dividend payments to shareholders.

The government has signaled that post-Brexit regulations are likely to be less, not more, onerous. Voters have every right to feel disappointed. There is a very good argument that the privatized companies overcharged the customers of the natural monopolies by duping the regulator and paying the shareholders with debt. Such outrageous behavior has been compounded, it seems, by a collective failure to make the investment that society needs.

Britain’s private utility model is broken. Services can clearly be managed by the state in a logical way. Railroads proved ill-suited to conventional capitalism. The government has already announced plans to nationalize key parts of the power grid to help meet climate targets. The Treasury was forced to foot the bill as gas suppliers collapsed. Global warming means water shortages and leaks will get worse. To prevent corporations from playing with the system and dodging their responsibilities will require some state ownership.

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