From privatisation to profits: Pressure on ‘rip off’ water industry unlikely to go away any time soon
The revelation that ministers are considering bringing Thames Water into temporary public ownership has reopened the fierce debate over the privatisation of the country’s water industry.
The sudden resignation of the company’s chief executive and Sky’s exclusive report into government contingency plans for the firm’s potential collapse comes amid growing calls for change following a string of controversies and scandals to hit the sector in recent years.
‘Vast improvement’
The current system of private monopolies dates back to 1989 when Conservative prime minister Margaret Thatcher sold off the publicly-owned water and sewage industry in England and Wales for £7.6bn.
She vowed it would lead to a new era of investment, improve water quality and help bring down bills. Her government also wrote off all debts and established Ofwat to regulate the industry.
Supporters argue that the water industry is now significantly better, while also acknowledging improvements are still needed.
Water UK, the industry body which represents firms, said on the 30th anniversary of privatisation in 2019 that the situation had “vastly improved” with a fall in supply problems, pollution, and leaks thanks to nearly £160bn worth of investment over the decades.
It also claimed that “average bills today are broadly the same as 20 years ago, once inflation is taken into account”.
However this is disputed.
‘The most egregious rip off’
Opponents say privatisation has led to soaring bills, poor performance and years of under-investment, and claim that the pay of executives and shareholders has been prioritised at the expense of long-suffering customers.
They also point to a National Audit Office study in 2015 which found that average household bills had risen 40% above inflation since 1989.
Water firms have also accrued £54bn in debt since privatisation – but paid out dividends to shareholders of £66bn, according to an analysis by The Guardian newspaper last year, with 20% of bills going towards servicing debt or paying out dividends on average.
Those calling for renationalisation include Labour’s former shadow chancellor John McDonnell, who responded to Sky’s latest report on Thames Water by describing it on Twitter as “the most egregious rip off” of all the firms.
Regulator row
Meanwhile regulator Ofwat has also been accused of lacking the necessary teeth to take on water companies.
Critics include the Liberal Democrats, who have called for the body to be abolished and “replaced with a tough new independent regulator with real powers”.
The government has vowed to increase penalties, with Environment Secretary Therese Coffey proposing earlier his year measures including unlimited fines for firms caught polluting.
Public opinion
Most of the public support renationalisation of the water industry, according to opinion polls.
YouGov found in September 2022 that 63% of the public believed it should be run “entirely in the public sector”.
Even among Conservative voters the idea is popular, with 58% in favour, according to the same survey of more than 1,700 adults.
However there appears to be little appetite for such a move from the government, while Labour has backtracked on supporting the policy.
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A huge sewage spill caught on camera in Cornwall
Scandals
For or against privatisation, public dissatisfaction at water firms remains following a string of scandals and controversies.
Water UK confirmed earlier this year that bills would see the biggest increase in almost 20 years from April.
The 7.5% hike means average customers are now paying £31 more annually this year – taking the typical bill to £448.
The industry body then made an an unprecedent public apology following mounting fury over raw sewage being released into Britain’s waters.
Figures from the Environment Agency revealed it was pumped into England’s rivers and seas at least 301,091 times last year – an average of 824 a day.
Water UK said campaigners had been “right to be upset about the current quality of our rivers and beaches”.
But there was then further anger when firms admitted a planned £10bn investment in measures to tackle the issue would be funded by a “modest increase” in customers’ bills.
Water leaks have become another major issue – especially at a time of shortages and record high temperatures.
South East Water, which this week introduced a hosepipe ban for two million people in Kent and Sussex, has enraged customers over supply issues.
Residents in East Sussex said they had been left without water for 23 days despite the firm admitting that its reservoirs were topped up and said its infrastructure had struggled to cope with demand.
Meanwhile another firm, Welsh Water, admitted earlier this year that it been under-reporting the amount of leakages it was responsible for.
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Ruth Kelly apologises on behalf of Water UK for sewage in rivers
Multi-million pound profits and eye-watering pay packets for firms have further fuelled discontent.
Thames Water reported pre-tax profits of £493.5m in the six months to September 2022, despite the firm introducing a hosepipe ban for its 15 million customers during the year.
In 2021 the firm paid out £11m compensation after it was caught overcharging customers.
Read more:
Ministers weigh contingency plan for collapse of Thames Water
Thames Water boss resigns with immediate effect
The boss of the company who resigned, Sarah Bentley, was reportedly set to receive pay and perks worth £1.6m this year.
It came after Ms Bentley said earlier this year how she was “heartbroken” about the company’s historical failings – while admitting there had been “decades of underinvestment”.
Sky News understands that talks over the future of Thames Water remain at a preliminary stage and the contingency plans may not need to be activated.
Either way, the pressure and scrutiny on such firms is unlikely to go away any time soon.
Storm Bram has been named by the Irish weather service – with warnings for strong winds and heavy rain issued for parts of the UK and Ireland.
More than half a month’s rainfall could hit some parts of the UK in just a 24-hour period, the Met Office has warned.
Yellow and orange warnings are in place across Ireland today and tomorrow, with “very strong to gale force” winds forecast on Tuesday.
Check the weather forecast where you are
The Met Office said strong winds forecast from Monday evening through until Wednesday could cause disruption, with gusts of 50-60mph predicted widely and 70-80mph in some places.
A yellow weather warning for rain comes into effect from 6pm on Monday, and will be in place for 24 hours, covering parts of southwest England and Wales, and stretching to parts of Herefordshire and Hampshire.
The Met Office has also issued a yellow warning for high winds from Dorset to Cornwall and up to north Wales, in place from 10pm on Monday until 4pm on Tuesday.
It said transport networks could face disruption, with delays for high-sided vehicles on exposed routes and bridges, and coastal roads and seafronts affected by spray and large waves. Power outages are also possible.
For 24 hours from 6pm on Monday, up to 40mm of rain could fall in some areas, with 60-80mm of rain over Dartmoor and high ground in South Wales, which would amount to more than half the average monthly rainfall in December.
The predicted rainfall across southwest England and South Wales is expected to hit already saturated ground and could lead to difficult travel conditions.
An amber warning for wind has been issued for northwest Scotland on Tuesday.
Flying debris “could result in a danger to life” – and there could be damage to buildings and homes along with the risk of roofs being “blown off” due to the “very strong and disruptive winds”, the Met Office warned.
Forecasters added there was the potential for large waves and beach material “being thrown” across sea fronts, roads and properties.
There are also yellow warnings for wind and rain on Tuesday across Northern Ireland, Scotland, Wales and northern and southwest England.
Weather warnings issued for Tuesday. Pic: Met Office
Yellow warnings for wind have been issued for Scotland and parts of northern England on Wednesday.
The Met Office’s deputy chief meteorologist, Steven Keates, said: “A deepening area of low pressure will approach the UK from the southwest later on Monday, bringing with it heavy rain and strong winds, which are likely to affect the UK between late Monday and early Wednesday.
“The exact track, depth and timings of this low are uncertain, which makes it harder to determine where will be most impacted by strong winds and/or heavy rain.
“This system has the potential to cause disruption, and severe weather warnings are likely to be issued over the weekend as details become clearer. We therefore urge people to keep up-to-date with the latest Met Office forecast.”
The Met Office said the rest of the month remained unsettled, with further periods of low pressure predicted.
It also said it is too early to provide an accurate forecast for the Christmas period.
Volodymyr Zelenskyy is heading to Downing Street once again, but Prime Minister Sir Keir Starmer will be keen to make this meeting more than just a photo op.
On Monday the prime minister will welcome not only the Ukrainian president, but also E3 allies France and Germany to discuss the state of the war in Ukraine.
French President Emmanuel Macron and German Chancellor Friedrich Merz will join Sir Keir in showing solidarity and support for Ukraine and its leader, but it’s the update on the peace negotiations that will be the main focus of the meet up.
The four leaders are said to be set to not only discuss those talks between Ukraine, the US and Russia, but also to talk about next steps if a deal were to be reached and what that might look like.
Ahead of the discussions, Sir Keir spoke with the Dutch leader Dick Schoof where both leaders agreed Ukraine’s defence still needs international support, and that Ukraine’s security is vital to European security.
But while Russia’s war machine shows no signs of abating, a warm welcome and kind words won’t be enough to satisfy the embattled Ukrainian president at a time when Russian drone and missile attacks continue to bombard Kyiv.
Keir Starmer welcoming Volodymyr Zelenskyy to Downing Street during a previous visit. Pic: AP
What is the latest in negotiations?
Over the weekend, Mr Zelenskyy said he had discussed “next steps” with US President Donald Trump’s advisers and was “determined to keep working in good faith”.
“The American representatives know the basic Ukrainian positions,” Mr Zelenskyy said in his nightly video address. “The conversation was constructive, although not easy.”
But on Sunday evening, ahead of an event at the Kennedy Center, President Trump said he was “disappointed” with Mr Zelenskyy, as was asked about the next steps in Russia-Ukraine talks following negotiations.
He said: “We’ve been speaking to President Putin and we’ve been speaking to Ukrainian leaders, including Zelenskyy, President Zelenskyy.
“And I have to say that I’m a little bit disappointed that President Zelenskyy hasn’t yet read the proposal. That was as of a few hours ago.
“His people love it. But he hasn’t – Russia’s fine with it. Russia’s you know, Russia, I guess, would rather have the whole country when you think of it. But Russia is, I believe, fine with it, but I’m not sure that Zelenskyy’s fine with it. His people love it but he hasn’t read it.”
Read more:
Ukraine has become Europe’s war – so why doesn’t it act like it?
Inside a secret underground military base in eastern Ukraine
On Saturday, Keith Kellogg, Trump’s outgoing Ukraine envoy, had told the Reagan National Defence Forum that efforts to resolve the conflict were in “the last 10 metres”.
Kremlin spokesman Dmitry Peskov praised new US security strategy over the weekend, adding that Russia hopes this would lead to “further constructive cooperation with Washington on the Ukrainian settlement”.
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