Today Offwat have told us that our water bills will all rise above the rate of inflation for the next five years. This is on the back of the water companies continually under investing in infrastructure and polluting our rivers and seas while at the same time paying their shareholders and executives millions of pounds for several decades.
This is frankly a national scandal and a prime example of how an essential privatised nationalised utility company has been allowed to get away with doing whatever it wants.
The list of mismanagement is long and doesn't just involve the water companies but also the regulator Offwat and overseeing successive governments.
In summary, the water companies were privatised in the late 80s on the cheap to encourage investment. Initially this seemed to be working and investment in infrastructure increased.
The problems seem to start in the 1990s with some gross mismanagement, the solution decided by Offwat was to allow them to raise more investment by increasing their leveraged debt on assets from 35% to 55%.
At the same time the water companies decided they had the expertise to suddenly become multi faceted businesses and several bought other private businesses, such as engineering firms and hotels, not only in the uk but overseas. They had no experience in these busineses and they often ended in disastrous financial consequences. Offwat just watched silently on.
This ability to leverage more debt opened up further in the early 2000s, again under the guise of allowing more investment and not to scare investment away, a decision made under new Labour.
This resulted in a plethora of takeovers with, in some cases numerous offshore shell companies, from outside investors who clearly had no interest in running a water company. They did invest some more money in frastructure, but often paid out much more in dividends to shareholders and often avoided tax via the shell companies. The debt piled up while the interest rates were cheap and the bills for customers were allowed to way above inflation.
All approved by Offwat, who gradually allowed the debt to climb above the already revised guidance of 55%. Some debt now stands at over 80% in some companies.
Interest rates went up and the hedge funds and banks who owned the companies, quickly divested themselves of these companies to other private investors. Offwat stood by and did nothing, the horse had already bolted and there was nothing that could be done apart from letting the mismanaged companies put customers bills up even further.
So here we are today. David Black the CEO of Offwat has again agreed to huge above inflation bill rises, way above what they said they would be only a few short months ago, and surprise surprise all on the back of promised investment and that the empty promise that the investment would go into infrastructure.
Only back in 2023 Black stated that some water companies borrowed too much, and the risk for correcting this belongs to the companies and their shareholders.
So why the sudden change of tack by Black and Offwat. Well it would seem that we have a classic case of gamekeeper turned poacher. Over 35 executives of Offwat have left and joined water companies in the past few years.
The above catalogue of disaster doesn't stop there. Pollution of our rivers and seas is continually going unchecked, under reported with falsified environment records produced for submission to the Enviornment Agency. I know this as I downloaded the actual discharge consents from our local waste water treatment plant and identified fake laboratory testing. The Environment Agency is so under staffed it can't check all these records, so the illegal pollution just goes unchecked.
Panorama recently investigated Severn Trent setting up fake companies to inflate their book price to enable them to borrow more money, in excess if their profits. Offwat has done nothing on this issue, as it is clearly beyond their ability, experience or remit or they may have just complicity agreed to it, who knows!
The new Government has announced a review of the whole industry. Which is clearly long over due, I am not sure who is doing this but clearly Offwat should not be involved. Frankly a public enquiry would be more apt to investigate this national scandal. Fingers crossed this is a thorough and independent review by the new Government.
IMO, water companies should never have been privatised in the first place for two reasons, firstly they are essential and secondly they are monopolies. After privatisation the problems just exasperated with little or no regulation. Because they are essential services, they are deemed too important to let fail financially and go bankrupt. Personally I believe there must be a way the Government could do this with some form of nationalisation, without the taxpayers again taking on the debt and leaving that with the private bankrupt companies. But the Energy Minister said this wasn't possible this morning.
The saga goes on.
If I haven't bored you enough already. Nils Pratley of the Guardian produced a brilliant but damming summation back in July of this disaster which can be found online.
