Water companies profit as water bills soar

What’s the phrase you hear most, here in wet wet wet England, these days? Here are some examples that have reached my ears:

  • “Wettest drought ever”
  • “We should have a hosepipe ban more often”
  • “You can’t move on my farm for mud”

The last was said (more or less) by the man who delivers our veg. So what’s going on? I’m not a meteorologist (nor any other kind of scientist for that matter) but I do prefer to draw conclusions based on evidence.

Just under a couple of years ago, the Independent newspaper published its analysis of the performance of the water companies, saying that 3,300,000,000 litres are lost every single day through leakage. This has not changed much since and won’t before 2015. The paper went on to report that this represents “20 per cent of the nation’s supply and [is] 234 million litres a day more than a decade ago” and that “The water lost would meet the daily needs of 21.5 million people”. That’s about one-third of the country’s population.

Meanwhile, following the hosepipe ban imposed on substantial areas of the UK, mainly in the south and east, April 2012 was one of the wettest Aprils ever, or at least since records began. Yet, leaving aside the well-understood — by everyone I’ve spoken to — phenomenon that washing a car with a bucket uses two to three times more water than using a hosepipe, we still have a ban on hosepipes.

Rightly so, given that reservoirs remain well below the levels they should be at this time of year, my beef is first and foremost with the water companies.

The government’s regulator, Ofwat, has a job to protect the consumer against rampaging private enterprise which would otherwise rip us off. Somehow competition is supposed to make things more efficient and maybe it does but not when there’s a natural monopoly. There can be few more obviously natural monopolies than the supply of water but that didn’t stop the government from privatising the industry.

But when things go wrong, such as when water companies find it more profitable to pay directors big bonuses, there’s not much Ofwat can do, especially given that one of its three primary tasks is to “ensure that the companies can finance their functions“. This clearly includes paying the directors of water companies bonuses of up to £2 million, with the highest paid trousering £1.6 million.

More specifically, the average annual customer bill for water has risen by £64 since 2001 and is now £376, while the companies collectively made £2 billion in pre-tax profits, according to The Guardian.

So what do we have? Water companies making big profits. Paying directors millions from our mandatory and ever-increasing water bills. Lots of water leakage. And private enterprises whose primary duty is not to you and me but to their shareholders. This does not, on the face of it, seem to me to be a sensible or efficient way to run a natural monopoly.

So remind me again why the government privatised the water industry? Nothing to do with ideology above efficiency, was it? No, thought not.