A warning: Water privatisation in England and Wales [View all]

[El_Johns]

To see what would be the consequences of the privatisation of the Water Service we need look no further than England and Wales. In 1989 the water and sewage systems in these two countries were privatised. At the time it was billed as the jewel in the crown of the Thatcher Governmet’s privatisation programme. Even in terms of the privatisation of utilities it was unprecedented. In other countries where the water industry had been privatised, it involved concessions or leases under which the private contractor collects all the revenues for a water service, carries the cost of operating and maintaining it, and keeps the surplus as a profit. Britain is unique in having transferred its water and sewage system completely into the private sector.(1)

In 1989, the ten unitary regional water authorities (RWAs) in England and Wales were privatised... The Water Act 1988 transformed these into private companies and sold them off... The Act gave them exclusive 25-year concessions for sanitation and water supply, protecting them against any possibility of competition. This created private monopolies. The Government took a number of steps to boost the profitability of these companies. It wrote off the all the debts of the water companies before privatisation, worth over £5 billion. In addition, they were given a ‘green dowry’ of £1.6 billion. The government also offered the companies for sale at a substantial discount, 22 per cent less than their market value.(4) A very generous pricing regime was established, and the companies were given special exemption from paying taxes on profits.(5) They had a virtual licence to print money, which of course has been exploited to the full. The abuses are so blatant that even the Tory supporting Daily Mail has denounced water privatisation as the “greatest act of licensed robbery in our history.”(6)

The most noticeable impact of privatisation for the public has been the dramatic increase in prices. On average, prices rose by over 50 per cent in the first 4 years... When the water bill is broken down into its components, operating profits, which have more than doubled since privatisation, account for almost the entire increase...(10) One method the water companies have used to increase prices and boost profits is to exaggerate the level of investment required to maintain their network. Forecasts for capital expenditure are consistently higher than actual expenditure, leaving a capital surplus that can be added to profits... Privatisation has also witnessed a massive increase in the fees, salaries and bonuses the directors of the water companies have awarded themselves...

If water privatisation has been a bonanza for business, the corollary is that it has been a disaster for users, the environment, and those employed in the industry... In Britain the consequences of water privatisation have been wholly regressive....

http://www.socialistdemocracy.org/WaterChargesPamphlet/AWarningWaterPrivatisationInEnglandAndWales.html