Not one single comment in this thread has answered the question "What is the benefit to the consumer from the water companies being privately run?" The general topic of privatisation has been addressed with "It used to take ages to get a phone.", which is ubiquitous an answer on this topic as "He made the trains run on time." from apologist for Mussolini, and equally makes me wonder whether it's the sole achievement of note. There's been nothing specific about the water companies though.
-
Our new ticketing site is now live! Using either this or the original site (both powered by TrainSplit) helps support the running of the forum with every ticket purchase! Find out more and ask any questions/give us feedback in this thread!
Nationalise the water companies
- Thread starter sprunt
- Start date
- Status
Not one single comment in this thread has answered the question "What is the benefit to the consumer from the water companies being privately run?" The general topic of privatisation has been addressed with "It used to take ages to get a phone.", which is ubiquitous an answer on this topic as "He made the trains run on time." from apologist for Mussolini, and equally makes me wonder whether it's the sole achievement of note. There's been nothing specific about the water companies though.
Sponsor Post - registered members do not see these adverts; click here to register, or click here to log in
R
RailUK Forums
Posting # 23 talks of Thames Water's profits "trundling off" to China, Abu Dhabi, Kuwait and Canada. How much profit would come of a total overseas investment of £2.57..
You appear to be confusing share purchases with investment in a company. You're aware that when you buy shares in a water company, the money you pay goes to the previous owner of the shares, and not the company, right?
Kite159
Veteran Member
Or the profits trundling off to those evil pension companies to boost pension pots for when people retire.
Xenophon PCDGS
Veteran Member
Not when a company issues new share blocks. I cannot see national wealth funds dealing with "odds and sods" of shares owned by private individuals.
Obviously, you (unlike certain website members who have known me since 2011) are unaware of my portfolio of stocks and shares both home and overseas that my fund managers have dealt with for many years and I have no need of your somewhat puerile advice on such matters.
Thames Water isn't publicly listed, so there are no "odds and sods" of shares owned by private individuals. The national wealth funds that currently own blocks of shares appear to have bought them from similar private funds, not from new share issues.
Is this supposed to impress me? I work for an asset management company, so I'm well aware that anyone can have a portfolio of stocks and shares, and doing so implies no specialist knowledge about how financial markets work. I certainly wasn't, and wouldn't attempt to offer you advice.
Now, getting back to the topic of the thread, can you offer me an example of how the private water companies provide a benefit to the consumer that they didn't when they were publicly owned? You've failed to answer this question so many times I'm almost inclined to think that there aren't any.
I have a pension, and I've no desire for my future financial security to be contingent on annual above inflation price rises forced onto a captive market.
Last edited:
They make investments in their infrastructure without having to rely on the whims of the government of the day as to whether they'll get that money or the politicians will decide schools and hospitals will win the votes as usual.
Okay, I'll buy that. I'm not convinced it's enough alone to justify the current situation, but I'll accept that the number of benefits is non-zero. I would say however that if the politicians decide to under-invest in the water network they're accountable to the electorate for it, but the private monopolies are accountable to nobody.
They're accountable currently to OFWAT, who in turn are presumably accountable to government. The NAO did a report on them a little while ago and seem to reckon it's working fairly well - https://www.nao.org.uk/wp-content/uploads/2014/07/The-economic-regulation-of-the-water-sector.pdf
In theory advantages of privatisation are....
The shareholders want profits so there is a motive to be efficient. Sure the government can set budgets etc, but in practice the only way public services become efficient is by imposing cuts (look at the widely varying efficiency of police forces, and the blindingly obvious stuff that some have done and others haven’t).
Investment is more aligned with business cases rather than the Treasury position and Cashflow for that moment.
If the set up is right (and this obviously works better for tendered stuff like train franchises rather than the long term water business) then the government can set targets and the private sector bids what they think it will cost. This makes it less likely that you get the farce of the NHS where the government sets targets but doesn’t give out enough money to achieve them.
Regulation with teeth, and real motivation not to balls up. If the NHS or Network Rail do something wrong then regulation is just the government fining itself and the taxpayer pays to fix things, if a private company does it then they can suffer significant damage (Group4’s failure over Olympic security nearly brought the whole group down) and the shareholders pay to fix things. This makes it less likely that a private company will offer to do something unsafe, rather than a public operator just doing what they are told.
The shareholders want profits so there is a motive to be efficient. Sure the government can set budgets etc, but in practice the only way public services become efficient is by imposing cuts (look at the widely varying efficiency of police forces, and the blindingly obvious stuff that some have done and others haven’t).
Investment is more aligned with business cases rather than the Treasury position and Cashflow for that moment.
If the set up is right (and this obviously works better for tendered stuff like train franchises rather than the long term water business) then the government can set targets and the private sector bids what they think it will cost. This makes it less likely that you get the farce of the NHS where the government sets targets but doesn’t give out enough money to achieve them.
Regulation with teeth, and real motivation not to balls up. If the NHS or Network Rail do something wrong then regulation is just the government fining itself and the taxpayer pays to fix things, if a private company does it then they can suffer significant damage (Group4’s failure over Olympic security nearly brought the whole group down) and the shareholders pay to fix things. This makes it less likely that a private company will offer to do something unsafe, rather than a public operator just doing what they are told.
DerekC
Established Member
We have to remember, in the context of this question, that there was never a "British Water". Until 1973 there was a multiplicity of local companies, some private, many municipally owned. I checked with Wikipedia and in the 1970s there were 33 statutory privately owned companies, 64 owned by a local authority and 101 water boards owned jointly by a number of local authorities. There were also 1300 sewerage authorities, mostly owned by the local authority. I am old enough to remember this - in fact one of my first jobs was a survey for Ipswich Water Department - but not to comment much on the quality of service. I do recall that water was looked at as a local issue - if there was a problem you complained to your local council. No doubt some did something about it and some didn't!
They were consolidated in 1973 by the Heath government (Conservative) into ten Water Authorities, which lasted until 1989 when the Thatcher government privatised them.
This is the nearest the industry came to being nationalised. I was a water consumer for all this time and don't recall any problems at all despite several house moves. (We did have a big water leak on one moving day, but that was because a builder put a nail through a pipe!)
Can't really help there - as a consumer I don't see any benefit because I never had any problems with the "nationalised" system, I now get water from one of the remaining statutory water companies, and I am a shareholder in our local sewage plant! (it only serves five houses). However I personally doubt that water was a good thing to privatise from the point of view that it is critical national infrastructure - like the National Grid - and should be planned under the control of government.
Having said all that, we had a water leak a couple of years ago which the water company fixed promptly and at no charge - and even tried quite hard to make our front lawn look a bit decent afterwards!
Tetchytyke
Veteran Member
Other than the BT pension fund, Thames Water's shareholders are all big overseas investment funds.
Thames Water wasn't privatised to "odds and sods", it was privatised to big investment banks, mainly Macquarie of Australia. The national investment funds of China, Kuwait and Abu Dhabi bought the shares from them. None of that money was investment; as you well know, the profit from a share sale goes to the shareholder, not the company. That's why you buy and sell shares.
Northumbrian Water, up here in my neck of the woods, is owned outrightby a billionaire Chinese businessman who offshores the £600m/year profits to avoid tax. What benefit does that bring to any of us?
South West Water is owned by US hedge funds, Yorkshire Water is owned by the Singapore sovereign wealth fund, and so on and so on. Let's face it, water supply is a natural monopoly and private companies in a monopoly are A Very Bad Thing.
TrafficEng
Member
You've actually just made the case for more privatisation, not nationalisation. The failure of water privatisation is that the consumer wasn't given a choice of supplier. As others have noted, if you don't like the customer services of your energy or phone company you can switch to one that gives better service and/or cheaper prices.
Nationalisation (which never existed previously) would eliminate any possibility of competitive provision to domestic consumers.
The main one is that pre-privatisation the sewerage undertakers were dirty businesses pouring millions of gallons of raw sewage into streams, rivers and seas. The clean up required (and is still ongoing) needed massive capital investment.
The governments of Major, Blair and Brown were all unwilling to fund the kind of infrastructure investment needed through the use of government borrowing. So the privatisation of the water companies has meant consumers are getting to live in a cleaner environment without the whole capital cost of the clean up being charged to their bills up front.
Since the clean up was essential, we could consider an alternate scenario where the water industry remained publicly owned and we would now find ourselves paying vastly inflated bills to cover the cost of PFI-funded upgrades to the sewerage system. People really would have had something to moan about if that happened on a large scale - the Thames Tideway project is a real-life taste of what might have been.
Bletchleyite
Veteran Member
Or that, like most rail companies and emptying the bins, there should have been competition...at the point of tendering to carry out specific capital projects and ongling maintenance.
Water provision is a natural monopoly, just like the electricity grid itself. Competition in electricity supply is about two things - billing (which you could do for water, but the duplication would be wasteful) and on what is fed in (which just comes out of the sky).
TrafficEng
Member
I was fortunate enough to enter the industry at a time where the public sector (in England) still had a role in the provision of sewerage services. The truth is the efficiency and quality of service was mixed, and largely reflected the interest and enthusiasm a particular local authority had for the work.
Subsequently the work was taken in-house by the privatised company, who consolidated the work previously done by a few dozen local authorities into teams based at a handful of locations.
Certainly fewer people were employed to do the same job as had previously been required - if that is an indicator of efficiency then the privatised company was more efficient than what had gone before.
The issue is that a new nationalised company wouldn't (and couldn't) replicate what existed before privatisation, not least because the skills and structure within local authorities have been hollowed out and there is no way they could resume the kind of role they had before. What we would have is largely the same companies we have now, just with civil servants running them.
TrafficEng
Member
In my view, the way forward is to split the water industry (including sewerage) between a network operator using either a Network Rail or National Grid model (depending on your individual taste for public ownership), with the customer facing side of the industry being in the form of private (or public) companies providing the metering/billing/customer service side.
The energy industry has largely adopted that model already, with customers signing up to one of the big-six, a private company, or a local authority-owned one depending on their personal choice (and which offers the best deal).
Intrinsic in that is the division between gas and electricity supplies has all but gone. Who, pre-privatisation, would have dreamt of buying their electricity from British Gas?
From a customer service perspective (and costs) there are potential efficiencies to be had from one customer dealing with one energy supplier. A logical extension to that is include your water billing with your electricity (and/or gas).
Tetchytyke
Veteran Member
The regional water boards- formed by merging various local authority water companies- were created before privatisation. These efficiencies- a positive thing-were established long before the Chinese billionaires and US hedge funds piled in to make a quick buck.
In many areas there a similar distinction, with water supply and sewerage with different companies. I experienced it in Herts and it was pointless having the supplier rebill for the sewerage.
Correct me if I'm wrong, but there isn't a national water infrastructure. Each area is largely independent. Up here my water comes from Kielder, comes through pipes to my house, and goes off to sewerage; all elements are owned by NWL. There's no scope for competition in the same way as gas/electric as there's no duopoly of supply. It's not like Dwr Cymru can feed water into the system up here to offer me a cheaper price.
The privatisation- as with the railways and, later, Royal Mail- was all about the Tories selling off the family silver for pennies in a fire sale so they could use the proceeds to fund tax cuts for the rich.
TrafficEng
Member
The 1973 Act transferred powers and obligations to regional water authorities, but at an operational level (for much of England) the local sewerage function remained with local authorities well into the 1990's - well after privatisation. Local sewerage interfaced with local authority public health duties, highway drainage, and watercourse management, so it made sense for the local council to continue managing local sewerage, albeit under an agency or management contract basis. The water authorities primarily dealt with trunk sewers and sewage treatment works.
Renationalisation of the water companies cannot replicate the pre-privatisation structure because it doesn't exist any more and cannot be readily recreated.
I'm not sure I understand your point. To me it makes perfect sense for Three Valleys (for example) to bill a customer for sewerage services provided by (say) Thames Water. It would be nonsense for Three Valleys and Thames Water to each send separate bills and collect separate payments. Not least when the sewerage charges are based on the metered volume of water supplied (increasingly the imposed method of charging)
Agreed. That is part of the problem, there is a failure to provide and/or utilise a national infrastructure to better manage water supply and the impact of water abstraction on the environment.
But equally the electricity distribution system is split between a national distribution grid and regional distribution with each regional area being largely independent (although ownership changes have reduced that independence)
Neither does Robin Hood Energy feed electricity into the grid in Nottingham for me to use here, yet they are able to offer me a cheaper price and better customer service, which is why I use them rather than EDF who would be my 'regional' supplier.
If the gas and electricty markets can work with a wide range of suppliers acting as the customer-facing company whilst a third-party looks after putting stuff into the pipes and cables, then the same model can work for water.
Well that's just a political view that I don't have a great deal of interest in. Other than perhaps to note that the chief architect of the Royal Mail privatisation was a LibDem.
Tetchytyke
Veteran Member
They purchase electricity from generation companies and sell it on. Same as most suppliers. But there is a competitive market in electricity generation as there is more than one generation company.
And given that small suppliers so frequently go bust, I'm not sure that model works all that well either.
There is no such diversity in water supply. I get my water from Kielder; whoever controls Kielder controls the price. So it makes no odds if Kielder sell water to a separate supplier or not, there can be little competition on price because there is no competition in supply. You see something similar with broadband suppliers who have to use Openreach.
Would it? That's what would happen if supply was further liberalized.
The political reason why something happened is usually more informative than the practicalities.
- Status