Water privatisation

[bensherman]

Of all of the harebrained and ideologically-driven privatisations, surely the water industry was the worst.

In most of the others, the credo of competition was supposed to drive improvement. Didn't happen. Rail companies don't compete with each other for over 80% of services. Power companies simply invented a competitive show, behind which your power supply continued to come from the same place and at the same cost.

Where I lived, in Oxfordshire, the local Chiitern monopoly was the last line BR invested in, giving it updated signalling and new stock. The team that had run if bought it from BR, milked it for a few years, sold it so all they all became millionaires and kept their jobs for the next few years. Then it was sold AGAIN , at a profit.

But water...competition was utterly impossible. So you give a publicly-accountable monopoly to a private business, and create the sham that is OFWAT. Accountants work out the optimum way of extracting stakeholder benefit from the setup, which in the case of water means they became ludicrously leveraged. As interest rates rise, see how that works...

Have a look at how a treasury official thought about the water privatisation process. How vastly it was underpriced.
https://www.msn.com/en-gb/money/othe...f3cb4906c13d34
and go look at the floating of Royal Mail later, and how little was learned.
The shares doubled in price on the opening day, the banks who advised on the price got paid millions for that advice, and one them quietly bought and sold the shares...

[Dirac]

Yes, I agree completely.

Another poster was just getting very het up about "benefits scroungers" on another thread. There is a whole swathe of people who are, and have been, siphoning off astonishing amounts of the nation's wealth for years.

The clever and insidious trick is to get people to concentrate on the far less affluent people who claim benefits. Unfortunately, it's a trick that works surprisingly well.

[bensherman]

I found the banls vastly underpricing the RM shares a real scandal.

Getting paid millions for doing it and then helping their clients benefit from the deal.

[local]

The only thing wrong was OFWAT.

As with all privatisations if the regulator is toothless the service is poor.

Sir Beir Starmer has abandoned rail, mail, water and energy nationalisations.

They realise that their Union "friends" would ruin it so they have invented some specious "fiscal rules"


Starmer when he conned the gullible labour members told some more lies to get the leadership;


Standing for the Labour leadership in 2020, Starmer vowed that “public services should be in public hands, not making profits for shareholders” and said he supported “common ownership of rail, mail, energy and water”.





We need a general election.

[Toodles McGinty]

Yes, I agree completely.

Another poster was just getting very het up about "benefits scroungers" on another thread. There is a whole swathe of people who are, and have been, siphoning off astonishing amounts of the nation's wealth for years.

The clever and insidious trick is to get people to concentrate on the far less affluent people who claim benefits. Unfortunately, it's a trick that works surprisingly well.

I still can't believe people fall for that.

The Mail has a lot to answer for. It's 'scroungers' or immigrants.

I've not read the 'they've all got 'flat screen' TVs and iPhones' for a while, but there are always 'scroungers' who are apparently draining the country. Quite possibly because it's impossible to buy any other kind of TV, and impossible to claim benefits without some kind of smart device.

There are also billions unclaimed by those who deserve it, but that's by the by.

I'd reckon tax evasion costs 10 times the amount of benefit fraud.

And outright robbery by governments that have sold off the assets that belong to us. Water, energy, rail, Royal Mail, BT, BP, British Aerospace, British Steel etc. Trillions, maybe?

But blame scroungers.

I'd say MPs who claim 100s of 1000s of pounds in 'expenses' are the ultimate scroungers. Not some poor sod on JSA, UC or PIP.

[Alikado]

I still can't believe people fall for that.

The Mail has a lot to answer for. It's 'scroungers' or immigrants.

I've not read the 'they've all got 'flat screen' TVs and iPhones' for a while, but there are always 'scroungers' who are apparently draining the country. Quite possibly because it's impossible to buy any other kind of TV, and impossible to claim benefits without some kind of smart device.

There are also billions unclaimed by those who deserve it, but that's by the by.

I'd reckon tax evasion costs 10 times the amount of benefit fraud.

And outright robbery by governments that have sold off the assets that belong to us. Water, energy, rail, Royal Mail, BT, BP, British Aerospace, British Steel etc. Trillions, maybe?

But blame scroungers.

I'd say MPs who claim 100s of 1000s of pounds in 'expenses' are the ultimate scroungers. Not some poor sod on JSA, UC or PIP.

Only last week I overheard a conversation, it was said that those trailers you see in fields where crops are being harvested are full of illegal immigrants, sometimes 2 or three families in each one, if immigration turn up they simply disappear into the ditches and the farmers are usually tipped off about the visits.

[bensherman]

Only last week I overheard a conversation, it was said that those trailers you see in fields where crops are being harvested are full of illegal immigrants, sometimes 2 or three families in each one, if immigration turn up they simply disappear into the ditches and the farmers are usually tipped off about the visits.

It was bound to happen. They will come illegally, so it's not regulated. They have no protection, and they are not contributing to our national revenue.

It was all so predictable. Far from Brexit reducing immigration, it is driving UP illegal immigration.

And today even the Daily Telegraph echoes the points I made.

With inflation at 10% today. Nobody in Europe has the same combination of problems we do.

I find Truss with her references to "handouts " disgusting. This is the woman who spent £900 on a lunch for 3 people in pursuit of one of her half-arsed trade deals
https://www.theguardian.com/politics...payers-expense
The woman who claims Amazon Prime on her MPs expenses.
Despite having an income close to £200,000.
Who claimed just under £190k in expenses.
Her mate, the contemptible Coffey ( in charge of "handouts") beat her at £200,000

[Toodles McGinty]

Cracking article in the 'Torygraph' this week, pointing out it's OK to be hungry. Helps with all sorts apparently.

I'm sure if Tarquin and Arabella decide to ease up on the quinoa for a day to give the old metabolism a jump start, it's very much their choice.

If Tarquin and Arabella think it's perfectly OK for a good proportion of the population to be starving because they can't afford to actually buy food, I can only suggest they look at French history.

Wilkos could have a run on knitting needles.

[Snig's foot]

The article referred to by Bensherman is by Professor Portes, and published in The Guardian
https://www.theguardian.com/commenti...-failed-regime
It gives a very good review of the way the privatisation of the water companies has led to the current position where the companies are highly controlled by government regulation and policy through the OFWAT regulator, and yet are private companies paying good size dividends to their shareholders.
Why was there a determination to privatise water from the Thatcher government? It was partly ideological, but recognised an uncomfortable truth: the previous decades of public ownership had not provided the investment that the industry needed.This had become more critical after our joining the EU...with its plethora of environmental and public health directives there would be a need for significant investment in our water industry. As Professor Portes recognises in his article, the Treasury supported privatisation because it accepted that it could never adequately finance the industry, given the competing interests in government spending (there's no votes in sewage).
The privatised water companies have delivered much of the investment that was needed. It's worth bearing in mind what the industry was like in the early 80s. About 40% of seaside towns (e.g. the enormously popular tourist destination of Blackpool) had no effective sewage works, whilst Southport belonged in the majority 60%: it had a sewage works, a rather primitive one , dating from 1904, that had had little investment over the years, despite the increased population. We also had Southport Corporation's near unique design of sewer system, with barely any fall: a succession of sluice gates were meant to allow sluicing of the sewers to stop them becoming blocked with silt. By the time of the second half of the twentieth century this system was under maintained and no longer worked. The result was a permanently blocked sewer system that resulted in sewer overflows discharging raw sewage into the sea most of the time. In other words, no better off than Blackpool.
Southport now has a large (though vertical) modern sewage works, a big interceptor sewer that cut off most of those sewer overflows. Blackpool finally got a sewage works, and its own interceptor sewer. Better still, in Liverpool the innumerable untreated sewer discharges into the River Mersey have been intercepted into a massive new sewage works, which has recently been enlarged to provide tertiary treatment.
Drinking water has not been neglected; much of the cast iron supply network has been replaced, major aqueducts such as Thirlmere, Ullswater and Vyrynwy have been drained and repaired by United Utilities. Many lead branch mains have been replaced, and water is treated to reduce lead solubility and remove parasites.
How have they done this? The regulator OFWAT has 'allowed' them to borrow money at commercial rates, and 'allowed' them to service this debt by increased charges on your water rates. There is a problem though....the money that you are paying is nowhere near the level to pay off the debt, just the interest. The water companies are increasingly burdened with debt. This doesn't matter because OFWAT allows them to be 'profitable', as I said, paying decent dividends to the shareholders. The banks are willing to lend the money, on paper they are 'profitable' companies, meeting their regulatory regime, and paying the required interest. The banks know that their debt is safe....these companies are (like the banks themselves know) too important to fail, and will always be bailed out by the government. However, the current model is not sustainable.

[bensherman]

The article I referred to was by a former Treasury official.

Who described in detail the great underpricing of the sell-off and the well-worn routine where the government pays advisers large sums for bad advice

They were selling businesses where an essential commodity is supplied to entirely captive customers. That is, as they say, a "licence to print money".

You might have put that down to naivety except that it was repeated in the sell-off of RM. So it is reasonable to conclude that there were other motives in determining the pricing.

Yes the water industry desperately needed investment. Someone decided the private sector would do that when the public sector had not. And some has taken place , but you cannot be sure that would not have happened anyway. Certainly the record of a number of the major companies in dealing with waste and effluent disposal suggests that there has not been enough. Southern Water, for example, could swallow a £90m fine and still pay its executives a record bonus and handsomely reward shareholders.

As for the borrowing, it has been so extreme that OFWAT had to tell Thames Water to stop. While it continued to pay out massive dividends.

The major reason steel and coal were nationalised post war was not ideological, but the fact that neither industry in private ownership had invested enough to cope with foreign competition. There are limits to which the public sector can provide investment, but the previous private owners weren't doing any, having made big profits during WW2.

In reverse we see the opposite happening now. It needs major investment which it is not getting and the case is on the way to say that private sector owners would do it. Yet if you look at the private NHS sector currently , they do not invest in the technology of healthcare (unless they have a cast iron subcontract from the NHS). They do not go anywhere near A and E, critical care, gerontology, paediatrics... When my wife had a hip replacement in a private hospital ( which is in the grounds of an NHS hospital) she was told that if something went wrong she would wake up in the Intensive care ward of the NHS hospital.

The only time a private operator took over a complete hospital was when Circle Health took over Hinchingbrooke. After a couple of years they gave up and handed it back with its finances in a worse state than when it started.

Worldwide the UK is criticised for under-investment and trying to make what it's got last too long. That is why the comments by Truss are so offensive about the qualities of British workers.

[local]

I suppose the Consultants and Doctors always have had the upper hand in the history of the NHS and to get them on side the fairly unique ability to go between private and public sector work has embedded a lot of our problems.


It's perceived as some form of blasphemy to criticise the NHS and my actual observations are usually met with some opprobrium but it needs substantial reform it gets a lot of our taxes.


In our own town, a private hospital relies on the NHS to pick up the pieces and allow it to operate and make a profit.

The water companies as said above have done a lot of work to correct a woeful situation.

Nationalisation is not the answer, once people get welded into the public sector they take it easy and we all suffer.

[Toodles McGinty]

OK, water is private. Privatisation is good for choice, competition, which is good for keeping the cost of goods and services down. Apparently.

So I'd like to change my water supplier.

Do I just ring another company? Do it online perhaps?

No. Because it is a monopoly.

Essential services should not be in the hands of shareholders. Ever.

[bensherman]

I suppose the Consultants and Doctors always have had the upper hand in the history of the NHS and to get them on side the fairly unique ability to go between private and public sector work has embedded a lot of our problems.


It's perceived as some form of blasphemy to criticise the NHS and my actual observations are usually met with some opprobrium but it needs substantial reform it gets a lot of our taxes.


In our own town, a private hospital relies on the NHS to pick up the pieces and allow it to operate and make a profit.

The water companies as said above have done a lot of work to correct a woeful situation.

Nationalisation is not the answer, once people get welded into the public sector they take it easy and we all suffer.

Absolutely a myth.

[Dirac]

Absolutely a myth.

Ah - another local fact and data-free post containing lazy assumptions that just happen to be in line with her/his prejudices.

I'm shocked, shocked I tell you...

[bensherman]

It's not just local.

This idea is widespread.

And no doubt local will dish out scorn but...

I did 22 years as a management consultant. I worked across a wide range of organisations in the private and public sectors. So I have some experience, and I found very similar levels of effectiveness, energy and application in both sectors. It's just that there's good management and bad management.

I know the need to make profits is alleged to sharpen people up, but in the real world many private sector firms muddle along and are in situations where profit accrues from what they do, however badly they do it, because they have little or no real competition and/or captive customers.