Cumulative capital investment by water companies in England and Wales since privatisation: £250bn.
The infrastructure they inherited was never designed for the things it's being asked to do today, and it has a life expectancy. It would literally cost trillions to upgrade the entire sewerage system.
This isn't apologia, it's just reality. The road network will also face the same fate since much of it was built >50 years ago and has a life expectancy of roughly 50 years. The country simply can't afford to replace it.
Then dump untreated sewerage in rivers and demand more money from bill payers, because they “can’t afford” to maintain the infrastructure.
In most industries a company so poorly managed would lose customers, go bankrupt, and be replaced by a better run company. But water companies? They have a monopoly, and everyone needs water to live.
My provider is Thames Water. They are losing money.
According to https://www.bbc.co.uk/news/articles/cgleg70r7rno
> When Thames was privatised in 1989, it had no debt. But over the years it borrowed heavily and its total debt - which includes all of its borrowings and liabilities - now stands at £22.8bn, according to latest financial results, external.
> Its debt pile increased sharply when Macquarie, an Australian infrastructure bank, owned Thames Water, with debts reaching more than £10bn by the time the company was sold in 2017.
According to https://www.bbc.co.uk/news/business-41152516
> Macquarie and its investors paid £5.1bn for Thames Water, of which £2.8bn was money Macquarie had borrowed [...] £2bn had subsequently been repaid. Not by Macquarie and its investors, who had originally borrowed the money, but from new borrowings raised by Thames Water through a Cayman Islands subsidiary.
> Martin Blaiklock said: "That letter was a red flag to me because it showed clearly that the debt which Macquarie funds had used to buy Thames Water had been transferred over to Thames Water." [...]
> the total returns made by the bank and its investors from Thames Water averaged between 15.5% and 19% a year. Mr Blaiklock has 40 years of experience in such matters and said these returns were "twice what one would normally expect"
According to https://news.sky.com/story/approval-for-higher-bills-and-loa...
> The company, which has been crumbling under a £16bn debt pile, was due to run out of money in about a month's time. It has now received court approval for another £3bn loan [...] the company's gearing ratio is 80% and its annual debt interest bill is around £900m (about a third of the revenue it gets from customer bills) [...]
> The water regulator has sanctioned bill increases of 35% by 2030.
> However, Thames wants more. It is seeking a 53% increase, which would take the average bill to £677 a year
This stuff's all pretty widely documented and reported, if your idea of fun is getting angry and depressed while also reading about business accounting.
Are they losing money because costs exceed revenue, or are they losing money because they are servicing massive loan interest on money they already distributed to shareholders?
In 2023 their interest payments were 28% of revenue. They also made the news for dumping particularly large volumes of sewage into rivers.
https://www.theguardian.com/money/2023/dec/18/water-firms-us...
British water companies are in lots of debt because they aren't really private. They're forced to spend huge sums to repair Victorian-era infrastructure whilst the government sets the prices they're allowed to charge. Decades of populist left or centre-left governments have kept the prices artificially low whilst requiring investment, resulting in a huge accumulation of debt.
This is exactly what would have also happened if the water companies were not privatized, so the fake "privatization" is a red herring. It's the expected outcome of price controls, not whether the utilities are owned by the state or not.
> Decades of populist left or centre-left governments have kept the prices artificially low whilst requiring investment, resulting in a huge accumulation of debt.
Bloody Tories, the whole problem isn't that they were in charge for 32 years from 1979-2024, it's the 13 years of Blair. They have been powerless to stop the spooky Left and fix the pipes before the water was privatised (or anything afterwards, because obviously it's still the Left)!
The post office in the United States is not privatized and yet has been able to set prices in a way that sustains the business for centuries. You can't simply assume that all public entities will ignore fiscal reality.
In fact you may run into the opposite problem: when a utility is public, their debts appear on the government balance sheet and legislators are responsible for them. When it's spun off as a quasi-private monopoly, the government can impose debt on the utility without appearing to increase the public debt.
This clearly isn't always true and when it does happen the public has the ability to require the transparency from their government to catch it happening quickly and the ability to hold the elected officials responsible for it accountable by voting them out and replacing them. Private corporations don't allow the level of transparency the public needs and aren't accountable to the public either.
Maybe the government could work out some deal that gives the public the right to put webcams in every meeting/board room of the private company, force their bookkeeping to be published to the internet, allow the public to request internal email and other communications, require independent audits/reports, and grant the public the ability to fire and replace any and all employees or executives at the private company who fail to do their jobs, but even then you'd still have the problem that private companies demand extra money on top of what is required to do the job just to line their own pockets. Why should we accept that?
The overwhelming majority of people would disagree that the Conservative Party can be described as "left". Since 1979, the Conservatives have been in power for all but 14 years.
As mentioned elsewhere in the comments, the planning system is also a huge obstacle to infrastructure investment, with numerous important projects being blocked due to spurious environmental concerns.
https://assets.publishing.service.gov.uk/media/687dfcc4312ee...
The economy always goes through these cycles - people find a way to scam/‘extract economic value’ from something no one is worried about at the time. They weren’t worried at the time, because it was well run and ‘what is the worst that can happen’.
Over time, what was working well gets blown up as part of the resource extraction, leading to the thing being a giant expensive scandal now.
The issue starts getting resolved - in the case of a public service often by necessary price increases because of stuff that wore out/deferred maintenance/disasters caused by the prior situation. If it’s a private company, bankruptcy.
Eventually, even the dumbest of the population realizes the prior attitude was wrong and they got scammed. The thing starts maybe not being terrible for awhile.
Scammers move onto another part of the economy as people are looking for them now.
After a generation or so, people forget. Lather, rinse, repeat.
Very little in our world was designed to do what we need it do 50 years later. It's unlikely that anyone will even know what our needs 50 years from today will be. This is why the expectation is that systems we build will be constantly maintained, upgraded, modified, expanded, and redesigned as needed and with the next several decades in mind (to the best of our ability).
It's what we've always done with all infrastructure and even our cities themselves. Neglecting things like sewer systems until they are overwhelmed, failing, and prohibitively expensive to fix isn't inevitable. It's just bad governance. It doesn't matter if it's private companies or governments, neglecting infrastructure so that a few people can line their own pockets until the situation becomes critical should be criminal, but at the very least nobody should accept them throwing their hands up and saying it's just too expensive to fix now.
"Perhaps a better plan would be to replaces cranes with horses and ropes such that we can once again afford windows" was my first thought when I read that in my turn of the century starter apartment with giant windows in every room.
Like, GDP and productivity has tripled since that apartment was last renovated, let alone constructed. The idea that we can't afford a 20th century living standard anymore is nothing but absurdist propaganda.
No - just bring back window taxes
And that's not to mention rooms like kitchens and bathrooms. Older houses invariably have windows for kitchens too since you need to open the windows to let out the fumes from gas cooking. And they would have windows in the bathroom to let out moisture. These days newer houses are already designed not to have windows in either kitchens or bathrooms.
I am not British, but this is confusing. Was private capital forced to take on the burden of privatizing the water system? Or did private investors err in their economic analysis? (Or did those investors just assume the problems would happen long after they personally had gotten paid?)
The water system is like the electricity system. It's perfectly possible to have inflows and outflows be fully private, as long as the government keeps its hands off the pricing. The network itself can also be run privately, as both supplier and buyers want supplies to flow. The trick is to ensure there are numerous different companies with the expertise to maintain pipework and then allow local communities to quickly change to different contractors.
You need a counterbalance to efficient resource use, usually competition ensures they don't skimp, that doesn't work with natural monopolies.
It seems like the voters actively encouraged this kind of behavior.
Eventually people figure it out (maybe) and go all fire and pitchforks - but that sounds like a problem for ‘future me’ eh?
And if you’re good at structuring everything, maybe they’ll never even have anyone concrete to blame but themselves! (Classic referendum/politician behavior there)
Focusing on Thames Water's particular example, if we assume malice as the cause, what would be the potential consequences? While the government could impose fines, the possibility of non-payment exists and what would happen in that case? Instead of debt collectors taking action, like ripping pipes from the ground or causing pension fund collapse, the government would act as a last resort investor, potentially providing further funding for a few additional years before the situation likely repeats.
It might be a rounding error vs the scale of investment needed for water, but that investment is needed regardless of public or private ownership.
It's not a rounding error in terms of gov investment elsewhere — imagine an extra £85bn invested in, say, social housing? Even as a single one-off
https://www.water.org.uk/about-us/our-board
We must look at the reality more critically.
We already know that the investment is open to profit extraction, the companies doing the work are owned by the same investors and there's low oversight, they have occasionally been caught using inflated prices. We don't know the extent though as OFWAT has been criticized for only really catching the really obvious ones.
All that investment is our own money, it's now apparent they've not taken on debt to pay for that investment. They claim they have, but it's now turned out that they've taken on that debt simply to pay for dividends to shareholders. Debt is around £60 billion, while share holder dividends over the years are about £80 billion (this figure varies depending on who you believe, but it's always higher than the debt). And that's without accounting for the inflated cost of "investment".
And that debt is now apparently tax-payer guaranteed because it's all to people who are too big to fail.
So they've basically made off with £20 billion in 35 years, plus however untold billions in profits from related companies in "investment", and we've got a water crisis developing, constant sewage discharge into rivers, etc.
Now divide that by C-suite wages + monies paid as profits.
Well the estimated industry profits of ~£20B pa over the last 30+ years would have got us some way to replacing the worst of the sewage system. Instead that money went to yachts and pushing up rental costs, or whatever.
