“Earth provides enough to satisfy every man's needs, but not every man's greed.”
― Mahatma Gandhi
Yesterday I highlighted the national scandal that encompasses the debt ridden, privately owned, companies that own and run Britain's water utilities.
2023 saw 10,000 hours per day of untreated raw sewage being pumped into our waterways and onto our beaches because not enough money has been invested in modernizing the largely Victorian system. Instead, these companies, many of them foreign owned, chose to pay out billions to their shareholders rather than protect the environment they are responsible for.
Today the news broke that Thames Water, Britain’s largest water utility, may go bankrupt because it of its burden of debt. In many ways the history and behaviour of Thames Water epitomises the problem with UK water companies as a whole.
Just over thirty years ago Thames water was a debt-free public utility. Mrs Thatcher, firm in her belief that private enterprise was infinitely more efficient than publicly run companies, sold shares in our water utilities to the public at large. Shares in the newly created private companies initially sold at bargain basement prices.
Selling water utility shares at well below their market value was a deliberate policy. It was part of Thatcher's strategy to create a "shareholding democracy". Unfortunately, it went disastrously wrong as “few small shareholders could resist the temptation to cash out their large profits.” (Guardian: 16/08/22)
Having undersold shares in water companies to the tune of £6bn in today’s money, the small investors resold their holdings to “private equity, institutional investors and large infrastructure firms from abroad." (ibid)
The certainty of good returns and a weak regulatory system practically guaranteed that privately owned water companies were a cash cow, and this has proved to be the case.
“…regulators have allowed returns that have been high or higher than average risky private companies, yet investors have been exposed to no more risk than government bonds. As the Financial Times puts it, 30 years on, “water privatisation looks like little more than an organised rip-off.” (Ibid)
Taking Thames Water as an example of this "organised rip-off" we find that in 2006 the German utility firm RWE, that owned Thames at the time, sold it to the Australian infrastructure asset management firm Macquarie for £4.8bn
Macquarie had a business model of borrowing against its assets (our water network)) to increase dividend payments to its shareholders. By 2017 when Macquarie sold its final shareholding, it had racked up a debt of £10bn.
In short, the blind adherence to free-market economic philosophy, (when was a water monopoly ever a free market?), the selling of essential infrastructure utilities to foreign entities, the creation of a weak regulator and the turning of a blind eye by successive governments to the year-on-year increasing debt within water companies, was bound to end in disaster.
Unfortunately, just as the public had to bail out the bankers and financiers when their greed brought down the economy, so we will be expected to pay for the greed of foreign investors in our waterways.
