Privatisation has failed
The ten publicly owned water and sewerage companies were privatised in 1989, with the transferral of public assets to the private sector, and the flotation of water companies on the stock market. Private equity consortia of banks and other financial services firms have been buying up shares in these water companies ever since, and if the rumoured takeover of United Utilities goes ahead, private equity will be in control of 60% of the water industry in the UK. The UK and France are the only developed countries with a private sector dominated water industry; most other countries organise water supply on a municipal basis.
Bills have risen by some 50% in real terms since privatisation, and now forms a sizeable portion of income - 6% for adults with incomes on the poverty line, with record numbers being pushed into debt by their water bills. In 2010/11, 30% of water bills went on operating profit, the majority of which is paid to shareholders as dividends, or used to pay interest on debt.
In England and Wales, every day 3.4 billion litres of water leaks from the system, almost a quarter of the entire supply. Yet shareholders were paid £1.5 billion in 2010-11 according to the water regulator Ofwat.
Research carried out with Corporate Watch has found:
Each UK household would save £75 a year if water was publicly owned (infographic). Public ownership would be cheaper as we would have no need to pay dividends to shareholders, and because government can borrow more cheaply than private companies to finance investment.
Almost one third of the money spent on water bills goes to banks and investors as interest and dividends.
Six companies are avoiding millions in tax by routing profits through tax havens, using a regulatory loophole the government has chosen to keep open.
The CEOs of the 19 water companies were paid almost £10 million in salaries and other bonuses in 2012.
A Centre Forum report shows clearly how some water companies (such as Thames Water) are facing financial difficulty, because they use debt to finance themselves in a way that minimises corporation tax and maximises the return to shareholders. An Open University study of Thames Water’s accounts concluded that ‘a mound of leveraged debt appears to have been used to benefit investors at the expense of households and their rising water bills.’
Research performed by the Public Services International Research Unit (PSIRU) shows that water privatisation is not more efficient than public provision, and tends to mean higher prices for consumers and/or underinvestment. 'The evidence from France and England further supports the presumption that private companies can and will find ways of driving up prices, and/or underinvesting, to obtain monopoly profits, including corruption.'
A ideological commitment to water privatisation has also been blamed for the failure of many World Bank projects to bring safe, clean and affordable water to many developing countries. In the last five years the failure rate of water and sewerage privatisations has increased to 34%, compared with a failure rate of just 6% for energy, 3% for telecommunications and 7% for transportation, during the same period. Where near-universal access to water has been achieved, it has virtually always been through a public commitment to build and maintain infrastructure, according to Corporate Accountability International’s water senior organiser, Nathaniel Meyer.
71% of the British public want water to be in public ownership, according to the latest poll.
WHAT'S THE ALTERNATIVE?
Scottish Water is a publicly owned company providing water in Scotland. Since 2002, the company has invested £5.5 billion and improved nearly 5000 miles of water pipes. Over the last 9 years, leakage has been reduced by over 44%. This compares to a 5% reduction in leaks in England and Wales over the past 13 years. The average household charge was the lowest in the UK in 2012/13 at £324 or less than £1 a day. This is £52 less than the average in England and Wales and has remained the same for the fourth year running. Read more about Scottish Water.
In Wales, much of the country's water is provided by a not-for-profit company, Glas Cymru/Welsh Water. The company has invested £3 billion since 2001, along with returning £150 million to customers through customer dividends, and providing £10 million in support for disadvantaged customers. Bills are lower in real terms than they were in 2000, partly due to reduced costs and improved efficiency. Read more about Glas Cymru/Welsh Water. They also rank first or second on many measures of customer satisfaction.
The tide is turning against privatisation. In 2010, the city of Paris decided to bring its water supply back into public ownership, ending the monopoly of French-based multinational Veolia. The city saved €35 million in the first year, and was able to reduce the water tariff by 8%. A further 40 French municipalities have since opted for municipal control of their water services, including major cities such as Brest and Bordeaux. Berlin have recently wrested control of their water supply from Veolia, after the vast majority of the city voted in 2011 for the disclosure of contracts and the return of water services to public management. Water supply across Germany is municipally owned.
Both the Netherlands and Uruguay have gone so far as to make the privatisation of water illegal.
New research by the PSIRU has identified 180 cities and communities that have brought their water services into public ownership over the last fourteen years. These localities have increased investment, reduced water bills and enhanced the quality and accessibility of their services; and progress is accelerating. They estimate that bringing water in England back into public hands could produce savings in the range of £900m a year.
‘Remunicipalisation: Putting Water Back into Public Hands’ is a detailed study of the transition from private to public ownership of water in five locations across the world, how it was achieved and how the lessons learned from these struggles can help others trying to break the corporate stranglehold on our water resources.
WHAT YOU CAN DO
Track the progress of water municipalisation with this handy tool, and see how people across the world are rejecting privatisation and embracing public ownership of their water supply.