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.

Whatever happened to the railway?

Have you noticed how no-one talks about the railway any more? From BBC downwards, the place where you catch a train is now a train station, not a railway station. In other words, we talk about the vehicles, not the system. And the problem with that is that we’re getting a worse service and it’s costing us a lot more.

The reason why we’ve lost the concept of a railway system is clear: there is no system any more. Since the rushed, ideological privatisation of British Rail in the dying days of the last Tory administration, the railway has been run by train operators, such as Southern or First Great Western, and an infrastructure operator, Network Rail. Within each of these two broad groups — train and infrastructure operators — there are further schisms, such as train leasing companies, train refurbishment companies, track maintenance companies, signalling and telecommunications etc etc. The list goes on.

Railways are inherently complex organisations: they’re subject to disruption by all sorts of events, most of them not entirely or at all under the railway’s control. People fling themselves off platforms in front of trains, hardware wears out or fails before its time, external electricity supplies go down, weather results in key personnel — think train drivers and signalmen — being unable to get to work, and so on. You can imagine.

At the best of times, for a system such as a railway to work effectively it needs communication between the various elements. In the days of a single railway organisation, it wasn’t perfect but at least everyone was working for the same employer and could be orchestrated as such.

Today, that is no longer the case. Each organisation has a profit motive first which means there has to be a cash incentive to make something happen that’s out of the ordinary. Usually, that works to the disbenefit of the rest of us. For example, you want to make a train connection but your incoming train is 10 minutes late. In BR days, the connecting train might well have been held for the benefit of the arriving passengers. No longer. There’s a financial penalty for train operators if they are late so today you can happily watch your connecting train drive away as you arrive at the station.

Another classic example is a small incident that happened in July 2011 at the entrance to Edinburgh Waverley station. A train derailed but it was a slow-speed incident, the train stayed upright, and no-one was hurt. In BR days, a crew would have been out to to jack it up and get on its way, and make overnight repairs to the track. In this incident, before the train could be moved, there had to be a full investigation to find out what had failed in order to establish who would pay for the damage. This meant that, instead of there being a delay of perhaps an hour or three, it took a day and a half before Edinburgh was fully open for trains again.

Given that, you can imagine what happens when one railway company needs to contact another in an emergency. Something has gone wrong and it needs to be sorted out, as passengers are stranded in the middle of nowhere. Since the profit motive comes first, the various parties have to talk about who will pay, who is at fault and therefore potentially liable, and whether it’s worth fixing now or later. That’s before they get around to talking about how to solve the problem. Meanwhile, passengers sit in trains for hours.

This is not a hypothetical problem: it’s happened plenty of times. Yes, we’ve had some nice new trains following privatisation. We’ve also had beyond-inflation price increases every year to pay for them — and for the huge profit margins the trains companies demand before they will get involved, even though their profits are underwritten by the government — that’s you and me.

Privatisation of the railways has been a disaster overall. We’ve lost the concept of a railway system, and replaced it with a patchwork of train operators’ turfs, each of which doesn’t connect, and results in a blizzard of confusing ticket prices as they attempt to segment the market and screw more cash out of the customers (we’re no longer passengers). Woe betide you if you miss a train, even if it’s not your fault, as the mega-prices are backed up by penalties if you don’t get exactly the right ticket.

As my good friend John May sings: it’s time for a change.