The Broughton and Blackley MP on why privatisation was a mistake

Privatising England’s water and sewage industry was always a bad idea. The Conservative Government more than 3 decades ago, listed the benefits of privatisation as lower household bills and improved water quality, delivered by increased investment.  

Privatisation was a mistake which has increased pollution, cost taxpayers, rewarded overpaid bosses and enriched foreign governments and hedge funds based in tax havens

The Labour Party and the local authorities whose ratepayers had paid for and created the water industry, were unconvinced. 

Manchester and Birmingham led a two-pronged campaign: against the privatisation because the prospectus was beyond credibility and compensation for local taxpayers if the Government persisted. The Government persisted and in spite of challenging the Government in court, because of a legal quirk, ratepayers did not get their money back. On the other hand, and extraordinarily, the water industry was handed over to the new private investors, debt free. Not only had local taxpayers been cheated, but national taxpayers had been ripped off as well, picking up the debt at today’s prices of an estimated £5 billion. 

I don’t think even the Government was surprised when the new owners did not create a more efficient and effective business. 

They took the easy option and invested less and loaded their new “debt free” asset with £60.3 billion worth of debt. Water bills, rather than reducing, increased by 40% in real terms. Productivity underperformed the almost static national figures. Our seas, rivers and waterways, have become more polluted. To give just one example, a Judge called Thames Water disgraceful for illegally dumping the equivalent of 1700 Olympic sized swimming pools full of sewage into the Thames, but only fined them £20.3 million.  

2024 05 07 Haweswater Graham Stringer Water Piece
Haweswater: a reservoir for Manchester built by and paid for by Manchester Image: Confidentials

The public haven’t benefited from privatisation, so who has? The nine chief executives have been paid £25 million since the last election. A reward for failing their customers and enriching the risk-free investors. 75% of these investors are foreign and many are based in tax havens. Expert financial analysts have tried to work out the detailed ownerships but have found the opaque structures have defeated them. It has however been possible to ascertain that the largest investors are from the USA, Australia, and Canada, but also there are significant investments from Asia including from China and Abu Dhabi. 

I have no doubt that these difficult if not impossible to understand corporate structures are there to stop democratic accountability as the owners go about their core business of extracting revenue, not providing a sewage and water business. 

The regulation of the water industry at privatisation was weak and was meant to be weak. Not only has the regulation been poor but so has the regulator.  

2024 05 07 Haweswater Inlet Building
The Heaton Park Water Inlet Valve House and sculptural reliefs by Mitzi Cunliffe. Manchester Corporation's civic pride from 1955. The only post-1945 building listed purely for its sculpture Image: Confidentials

We are now coming to a point where Thames Water is finding it difficult to meet even its modest regulatory investment requirements, pay its debt and continue to pay its dividends. It would like to increase its charges from £433 to £627 for household bills and pay £2 billion in dividends to shareholders. If it is not allowed to do this, bankruptcy stares it in the face. The Government appears reluctant to allow a straightforward insolvency. 

Siren voices from the Treasury and the UK Debt Management Office are advising that the Government should take on the Thames Water’s debt of £15.4 billion. They fear that the financial uncertainty associated with Thames Water could damage international confidence in the UK. This would be a ridiculously expensive way of effectively nationalising this failed business.

Privatisation was a mistake which has increased pollution, cost taxpayers, rewarded overpaid bosses and enriched foreign governments and hedge funds based in tax havens. It would be adding insult to injury if any help whatsoever was given to these arrogant bosses and parasitic capitalists. Bankruptcy is the cure for incompetent and predatory business.  

We have travelled in a short period of time from a locally owned and transparent industry whose purpose was to provide domestic and industrial water supplies and sewage services, to one whose main purpose was to supply easy money to hedge funds and foreign governments. The Government should ensure water and sewage services continue and return to the more rational system we used to enjoy.

The top image shows the mucky River Medlock in the city centre, often the recipient of treated sewage during wet weather.

Graham Stringer is an occasional columnist for Manchester Confidential. He is the Labour Member of Parliament for Blackley and Broughton with a majority of 14,402 after the 2019 General Election. He was elected to Parliament in 1997. Until 1999 he was on the Environment, Transport and Regional Affairs select committee, then was a Labour Government whip and subsequently a member of the Transport Select Committee in the last years of Labour Government. Prior to parliament he was the Leader of Manchester City Council from 1984-1996. He is credited for being a principal agent in the return of city confidence and Manchester's regeneration.

Graham Stringer
Graham Stringer Image: House of Commons

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