The FT appears to have joined forces with the Guardian to bring down the privatised water industry because of untreated sewage polluting our rivers and coasts [i],[ii]. Basic journalistic principles of factual and balanced reporting are being sacrificed in favour of sensationalism, political bias and pandering to ill-informed public hysteria. Because shit sells; balance doesn’t.
The FT might argue that they have included the water industry’s point of view, but the headlines, emphases, structures and tone drown it out (pardon the pun).
Before I continue, I must disclose that Hubby works for one of the water companies. So I’m bound to defend him and them, right? Not uncritically, no. What I have done, however, is qualify and moderate my criticism from my previous standpoint, because I am now more aware of industry facts and figures, explanations and aspirations, with Hubby on hand to answer my questions, delve behind the numbers, and run around finding more information for me.
Such a valuable resource – everyone should be so lucky!
Here are just a few issues. There are others and I’m happy to discuss should they be raised.
Privatisation
The usual gambit from the industry’s detractors is that in 1989 privatised water companies were given a debt-free asset. Interesting application of the words “given” and “debt-free.” What actually happened was that the assets were bought by new shareholders for £7.6bn[iii]. Said assets were inadequate, sub-standard, unquantified-money-pits, in reality a huge debt.
True the shares rocketed in value from the offer price, but
that’s how it works. If shareholders don’t anticipate a satisfactory gain on a
risky investment then they won’t buy the shares. Had the water industry not
been denationalised, then there would have been even less investment than there
has been over the past 30 years, with consequent impacts on water quality,
pollution, waste and water bills.
Ten years after privatisation (2000), the benefits of the exercise
were evident. Total investment at £35bn was approximately double the average
level of expenditure in the 1980s[iv]. And
in 2019, total investment since privatisation stood at nearly £160bn[v].
Combined Sewer Overflows
Another favourite complaint against the industry is that more raw sewage gets into our rivers and coasts year-on-year because of the greed and incompetence of the water companies. Truth is, detection, data collection and reporting have improved thanks to private investment, and we are now more aware of the extent of the problem.
Obviously these overflows are still unacceptable, so why do
they happen? Here’s the skinny. During heavy rain, storm water run-off gets
into the sewage system, which can’t cope with the increased volume, and one of
two things has to happen – sewage seeps into rivers and coasts or backs-up into
people’s homes and businesses. Take your pick.
By definition, storm water dilutes the sewage so most
overflows are invisible and went unnoticed for decades, hence the need to
improve detection. The problem also seems worse today than it used to because:
·
Flushed wet wipes, a comparatively recent
invention, can be readily seen;
· There have been more heavy rain events in recent years;
· Highway companies have a statutory right to divert storm water run-off from the ever-expanding road network into the sewage system without seeking the permission of the water companies or even telling them;
· Excessive development and the paving over of gardens for driveways and patios adds to the problem.
What are the water companies doing about it? Investing more
as outlined above, resulting in two-thirds of beaches now being classed as
excellent compared with less than a third 25 years ago, and wildlife has
returned to rivers that had been biologically dead since the Industrial
Revolution.[vi]
Further, “Storm Overflows will see a further £1.1bn of
investment over the next 5 years. While a comparatively small contributor to
overall water quality, we [Water UK – industry membership organisation] agree
there is more to do beyond this investment, and industry is collaborating with
Government, regulators, and NGOs on a new long-term direction.”[vii]
Water losses
Water is piped under high pressure to homes and businesses through thousands of kilometres of underground pipes, the equivalent of 8.5 times around the equator. There is a difference between the volume of water added to the pipes at one end and what is billed for at the other end. The difference is put down to “leaks”, which also includes theft and inaccurate billing (not all properties are metered and there is a lot of estimation going on). According to the FTi, in 2019 about one-fifth of the treated water supply was lost in “leakage”. What they didn’t report was that the water companies have reduced leakage by one-third from the 1990s, i.e. by almost 1.5bn litres every day[viii].
Could more be done?
Yes. And the industry agrees[ix]: “Individual company five-year business plans [to 2025] … included some £50 billion on improved services and the most ambitious industry leakage reduction programme in 20 years – as well as cleaning up 8,000km of rivers and a real-term reduction in bills … Pollutant loads are down 70% since 1990s. Our goal is now to further drive down nutrient loading and support the move to increased recreational use of waterways through more freshwater designated bathing areas in rivers and lakes … Serious pollution incidents have reduced, with the most serious category falling by nearly two-thirds between 2001 and 2016. However, we recognise they are still too high and experience year-on-year variation.”
The main thrust of one of the FT articles was that, despite
investment increases for a while after privatisation, the water companies have “slashed”
their investment in recent years. Further down the article, when most people
would have stopped reading, they snuck in a response by Ofwat (the national
regulator in England and Wales) that there has actually been an increase in
operational expenditure – including on green infrastructure, sustainable
drainage, maintenance and staffing – which has increased from £3.9bn to £5.6bn
per annum since 1989i.
Because of the essential commodity that is water and the
political minefield that was nationalisation, the industry is subject to
complex economic regulation, a mixture of control of price increases,
environmental regulation, and control of drinking water quality. In other
words, price rises are limited, so investment also has to be limited.
Shareholders could stump up extra cash of course, but the majority industry
shareholders are pension funds, and there’s only so much they are willing to
invest before reducing our pension payments – a brave pension executive who
would take THAT decision.
Conclusion
So there you have it: a transparent blog unashamedly from the water industry’s point of view, countering the inappropriate and opaque newspaper articles mainly from the we-must-sell-more-copies point of view.
I’m not saying that I agree with everything the industry
says or does; I’m saying they deserve a hearing that is fair and objective.
I’m waiting.
[i] England's water groups slashed investment in sewage network in recent decades, The Financial Times, 21/12/2021
[ii] Sewage spills highlight decades of under-investment at England’s water companies, The Financial Times, 29 / 12/2021
[iii] Wikipedia https://en.wikipedia.org/wiki/Water_privatisation_in_England_and_Wales accessed 02/01/2022
[iv] National Research Council (2002) Privatization of Water Services in the United States: An Assessment of Issues and Experience, Appendix A Privatization of Water Services in England and Wales p126, Washington, DC: The National Academies Press. Appendix A: Privatization of Water Services in England and Wales | Privatization of Water Services in the United States: An Assessment of Issues and Experience | The National Academies Press (nap.edu) accessed 02/01/2022
The usual gambit from the industry’s detractors is that in 1989 privatised water companies were given a debt-free asset. Interesting application of the words “given” and “debt-free.” What actually happened was that the assets were bought by new shareholders for £7.6bn[iii]. Said assets were inadequate, sub-standard, unquantified-money-pits, in reality a huge debt.
Another favourite complaint against the industry is that more raw sewage gets into our rivers and coasts year-on-year because of the greed and incompetence of the water companies. Truth is, detection, data collection and reporting have improved thanks to private investment, and we are now more aware of the extent of the problem.
· There have been more heavy rain events in recent years;
· Highway companies have a statutory right to divert storm water run-off from the ever-expanding road network into the sewage system without seeking the permission of the water companies or even telling them;
· Excessive development and the paving over of gardens for driveways and patios adds to the problem.
Water is piped under high pressure to homes and businesses through thousands of kilometres of underground pipes, the equivalent of 8.5 times around the equator. There is a difference between the volume of water added to the pipes at one end and what is billed for at the other end. The difference is put down to “leaks”, which also includes theft and inaccurate billing (not all properties are metered and there is a lot of estimation going on). According to the FTi, in 2019 about one-fifth of the treated water supply was lost in “leakage”. What they didn’t report was that the water companies have reduced leakage by one-third from the 1990s, i.e. by almost 1.5bn litres every day[viii].
Yes. And the industry agrees[ix]: “Individual company five-year business plans [to 2025] … included some £50 billion on improved services and the most ambitious industry leakage reduction programme in 20 years – as well as cleaning up 8,000km of rivers and a real-term reduction in bills … Pollutant loads are down 70% since 1990s. Our goal is now to further drive down nutrient loading and support the move to increased recreational use of waterways through more freshwater designated bathing areas in rivers and lakes … Serious pollution incidents have reduced, with the most serious category falling by nearly two-thirds between 2001 and 2016. However, we recognise they are still too high and experience year-on-year variation.”
So there you have it: a transparent blog unashamedly from the water industry’s point of view, countering the inappropriate and opaque newspaper articles mainly from the we-must-sell-more-copies point of view.
[i] England's water groups slashed investment in sewage network in recent decades, The Financial Times, 21/12/2021
[ii] Sewage spills highlight decades of under-investment at England’s water companies, The Financial Times, 29 / 12/2021
[iii] Wikipedia https://en.wikipedia.org/wiki/Water_privatisation_in_England_and_Wales accessed 02/01/2022
[iv] National Research Council (2002) Privatization of Water Services in the United States: An Assessment of Issues and Experience, Appendix A Privatization of Water Services in England and Wales p126, Washington, DC: The National Academies Press. Appendix A: Privatization of Water Services in England and Wales | Privatization of Water Services in the United States: An Assessment of Issues and Experience | The National Academies Press (nap.edu) accessed 02/01/2022
[v] Thirty
years on, what has water privatisation achieved? (2019) Water UK, https://www.water.org.uk/blog-post/thirty-years-on-what-has-water-privatisation-achieved/
accessed 02/01/2022
[vi] Ibid
[vii] Evidence submitted by Water UK to the Environmental Audit Committee Inquiry on Water Quality in Rivers (2021) Water UK https://www.water.org.uk/publication/water-uk-response-to-the-eac-inquiry-water-quality-in-rivers/ accessed 02/01/2022
[viii] Water UK (2020) https://www.discoverwater.co.uk/ accessed 02/01/2022
[ix] Ibid (Water UK, 2021)
[vi] Ibid
[vii] Evidence submitted by Water UK to the Environmental Audit Committee Inquiry on Water Quality in Rivers (2021) Water UK https://www.water.org.uk/publication/water-uk-response-to-the-eac-inquiry-water-quality-in-rivers/ accessed 02/01/2022
[viii] Water UK (2020) https://www.discoverwater.co.uk/ accessed 02/01/2022
[ix] Ibid (Water UK, 2021)
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