GEOFFREY LEAN: Thames Water crisis is wake-up call for the entire industry
The scandal surrounding Britain's stinking rivers, its increasingly pitiful water supplies and its outrageously greedy and incompetent water companies has exceeded our very worst expectations. Thames Water, which serves 15 million people, is locked in crisis talks with ministers to try to avert financial collapse. Emergency measures to take it into public ownership are even being considered. Its chief executive, Sarah Bentley, quit on Tuesday. Ministers are drawing up contingency plans to temporarily nationalise Thames Water, which is mainly owned by Canadian, Chinese and Australian funds. Its perilous state carrying 14 billion of debt may partly have been caused by a previous, Australian owner, which has been criticised for underinvesting in the company, extracting billions in dividends and increasing its debt. Leaks from its pipes are at a five-year high, at some 630 million litres a day, a staggering quarter of its supplies and it is again due to miss its target for repairing them this year. It discharged raw sewage into the environment 8,014 times last year (that's 22 times a day) at 378 locations, over a total of 74,693 hours. Despite this shameful catalogue of failings, it made over 400 million in profit and paid its shareholders 37.1 million. Bentley herself got nearly 5 million in salaries and bonuses over her three years in the job. Earlier this year, she announced she would give up her bonus following poor environmental and customer performance, but still managed to double her pay to 1.5 million. Thames Water's crisis follows hard on the heels of another at South East Water. Their customers were cut off for six days earlier this month and schools had to be closed during exams. It's the third incident in a year after mains failures at Christmas and last summer. South East has also imposed this year's first new hose pipe ban. Yet its reservoirs are full and, as the Mail reported last week, it leaks enough water annually to fill Wembley Stadium 33 times over. You might think the firm three-quarters owned by Australian and Canadian fund management companies would be contrite. But no. It is blaming its customers for working from home. These are just two of such scandals. In all, the industry made a massive 301,091 discharges of raw sewage into rivers and the sea from its 'storm overflows' last year (825 a day). These are supposed to be used only in exceptional weather, but are now routine: the discharges have increased almost tenfold in just five years. Not a single one of the country's 3,651 rivers, lakes and estuaries are in good overall health. Yet in December the Government pushed back the target date for cleaning most of them up from 2027 to 2063. This has special resonance for me. In 1972, when I started covering this issue, exposing river polluters, the government promised a clean-up within five years. Now the task will not be completed in 90. Meanwhile, a gargantuan trillion litres of water annually leaks away before reaching users. That is some 40,000 litres per household or the equivalent of someone turning up and pointlessly flushing your lavatory 18 times every day. The companies only aim to halve this massive wastage by 2050 and that is wildly optimistic. An analysis by the Angling Trust showed that, at the present rate, it would take them 2,000 years to replace their pipes. They have, purposefully, neglected investment. Between 2020 and 2022, almost all companies underspent their budgets for improving water supplies and sewage treatment. South West Water spent only 39 per cent of its allowance for sewage, Yorkshire Water a pathetic 20 per cent. Yet companies have paid out 65.9 billion in dividends in the three decades since privatisation. The payout doubled last year, despite widespread public concern about the companies' performance. Little of this benefited Britons, since over 70 per cent of the industry is foreign-owned. Indeed, even as this dividend bonanza raged, our water bills increased by a third in real terms and some have risen by another 11 per cent this year. None of this was meant to happen. Privatisation was supposed to end underinvestment. Michael Howard, then the minister in charge of the sell-off, promised it would enable suppliers to launch 'the biggest programme of sustained investment in their history'. To make this easier, companies were sold for much less than their market value and given 6.5 billion of taxpayers' money to clear their debts. Ministers also promised that the firms would stay in British hands. There was a bit more investment at first but it soon declined. There were plenty of early warnings of the consequences but they were ignored. Last month the water industry finally apologised for its record and promised to triple investment over the next decade. But, outrageously, it said it would have to put up bills to pay for it: some parts of the country could face rises of 40 per cent. This despite Ofwat, the water regulator, making it clear that the companies already have all the money they need. It is high time that the water industry was brought to heel. This means more, tougher regulation, something that successive governments have avoided. Their long over-indulged owners, not the public, must shoulder the cost of the investments they should have made many years ago. They should pay massive fines when things go wrong, but even that is not enough, since in the past they have preferred these to making crucial investments. Their bosses should themselves be subject to prosecution; last year the then head of the Environment Agency called for them to be jailed if needs be. Both Ofwat and the Environment Agency need radical reform. Although it has been improving recently, Ofwat has been complicit in the scandal of the past few decades, while the agency has been both under-resourced and underpowered. An investigation this week disclosed a 'revolving door' of executives between both bodies and the water companies. Britons simply will not tolerate the companies' scandalous conduct, and the regulators' neglect, any more. It is already emerging as an election issue. The Government must treat the Thames Water crisis as a wake-up call and set about transforming the whole industry without delay.