In 1989, Margaret Thatcher’s Conservative government privatized water in England and Wales, making them the first – and to this day, only – countries in the world to have fully privatized water system. The Water Act of 1989 created protected monopolies, giving the new private owners exclusive concessions to provide water and sanitation services. To attract investors the government sweetened the deal by writing off £5 billion of debt (£14 billion in today’s money) that the regional water boards then owed and provided an additional cash infusion totalling £1.5 billion (£4 billion today). Private owners began with a clean financial slate and with substantial freedom to re-price their services. It was claimed that privatization would lead to greater investment, improved services, and lower bills.
Instead, the exact opposite happened. The National Audit Office has estimated that in the 15 years after privatization, the average household bill for water and sewerage rose by 40% in real terms. This money did not go into investment. On the contrary, infrastructure investment has collapsed since privatization: despite an increase in demand for water, not a single new reservoir has been built in the UK since 1992. It is not difficult to see where the money has gone, as shareholders in water companies have received £85 billion in dividends since privatization. Meanwhile water companies have been loaded with a collective £60 billion of debts, meaning that customers are now paying almost 30p in every pound for debt servicing.
After the financial crisis of 2007-2008, the government cut interest rates to historically low levels, making borrowing money extremely cheap. After this, the amount of debt owed by water companies exploded, as they realized that their most profitable business model was to borrow to pay for maintenance whilst using customer bills to pay shareholders. Then, in 2022, interest rates rose and water companies suddenly faced huge increases in their interest payments. This led directly to the collapse of Thames Water, Britain’s largest water company, in 2023. Rather than re-nationalizing Thames Water, the government instead drew up plans to move its debts onto its own balance sheet so that the franchise could be sold again on the private market.
Anger about the state of the privatized water industry in England intensified earlier this year after the screening of Channel 4’s docudrama Dirty Business, which portrays a decade-long investigation into raw sewage being dumped into English waterways. The series intertwined the investigation with tragic real-life accounts, including families impacted by severe E. coli infections and health hazards from polluted rivers and beaches. It highlighted how privatized water companies in England and Wales have accumulated massive debt and paid out billions in dividends, whilst under-investing in infrastructure and relying heavily on combined sewer overflows that discharge raw sewage directly into our rivers and seas.
Regulators and water company executives spent the first half of 2024 locked in negotiations to prop up ailing water companies. But as these companies fail to keep up with their debt repayments, they are less able to pay dividends to their shareholders, meaning that they have even less incentive to invest. None of this should be surprising. In our capitalist system, success doesn’t mean developing a water system that provides affordable clean water to people and disposes of wastewater safely; it means extracting as much money as possible for shareholders. People are often surprised at the huge salaries paid to water executives, but from the perspective of the shareholders who decide these salaries, the water company executives have done an excellent job!
The solution to all of these problems is obvious: do what every other country in the world does and run water as a public service for the benefit of the people. Unfortunately, our current Labour government has signalled that it has no desire to do this. So what can we do about it? One thing we can do is refuse to keep paying our water bills. Such mass refusal has a powerful history in the UK, and was used to successfully bring down Thatcher’s hated Poll Tax in 1989. The campaign group Take Back Water is encouraging people to sign a pledge to withhold their bills, with mass refusal planned once a critical mass is reached. So far 15,000 people have signed up. I have signed the pledge myself and I encourage others to do so too.
What makes all this so distasteful is that water is something which is absolutely essential to human survival. Access to water is legally and morally recognized as a basic human right. The very idea that such a basic right can be privatized should strike us as both ridiculous and utterly abhorrent. (What next – privatized air?!) The very existence of a privatized water industry demonstrates once again what dystopian system capitalism is. Refusing to pay our water bills might have an impact in the short-term. But the only way we will permanently rid ourselves of such monstrously exploitative arrangements is to overthrow capitalism and replace it with a system focused on people rather than profits – namely, socialism. Bring on the revolution!
Leave a Reply