New Zealanders need to be vigilant about the potential for privatisation of our most important asset – water, especially in the context of the government’s frenzied sale of our remaining public assets. The lessons from privatised water in the UK provide more than enough warning. It’s a case of rob the public to enrich the company’s investors.
In an article in the ‘Guardian’ a month or so ago, columnist Nick Cohen, didn’t mince his words. “How long,” he asked, “will it be before the stench from the monopolistic exploitation of water – the very stuff of life – reaches the public’s nostrils?”
Thames Water, Britain’s largest water company, proposes to increase its water levies on the millions of households it supplies, to build a multi-billion pound “super sewer.” (Thames Water is basically controlled by a consortium led by the Australian bank, Macquarie.)
Clearly a new sewer is needed, but what is being criticised is that this company has paid out 1.2 billion pounds in dividends to its investors. It has not provided funding from its ongoing levies over the years, but has instead paid out maximum dividends, while ignoring infrastructural needs. It has been high prices, high dividends and low infrastructural investment.
The Lib-Dem deputy leader has described this as “totally unacceptable.” But more significant is the comment of Jonson Cox (a former CEO of other water companies), who is now head of Ofwat, the water regulatory body. His view is that former colleagues were using “morally questionable” practices.
Further weight was added by a former Ofwat boss (Sir Ian Byatt) who suggested that some 19th century style dividend controls be brought back to life to clamp down on water company practices.
A ‘Guardian’ editorial suggested that regulators “…are worried that the whole dubious edifice of public utilities being owned by private monopolies is in danger of being discredited by obscure company structures, opaque tax regimes and a widespread perception that the customer is being ripped off.”
More than one observer has railed against the water companies, noting among their practices: widespread tax avoidance, high levels of ‘commercial confidentiality,’ loaded their books with debt and provided massive returns to their shareholders.
What seems surprising is that anyone (especially an intellectual newspaper) should expect any different sort of outcome. To give over the precious public natural resource of water to a monopoly, is to give that monopoly a licence to rip off the public. What is even worse is that most of the shares in UK’s water companies are not held by the public, but by private equity. To add a final insult to injuries, many of these shares are foreign-owned, so the profits go off shore.
The public are captives to their suppliers, and either have to pay increasingly exorbitant prices, or reduce their consumption of this vital necessity of life, so that hygiene and other health factors are affected for an increasing number.
Whether by choice or poverty, one of the results of increasing water rates is that there are rising levels of bad debts for Thames Water, because some residents can’t pay, and others won’t pay. Sir Tony Redmond of the Consumer Council for Water said: “Our research shows that one in seven customers say they can’t afford their water bills.”
And “regulators” such as Ofwat are usually ineffective at keeping up with the games the big boys play. They suffer from legal constraints and difficulties with the accounting practices of the monopolies. Even when they unravel a situation and have some sort of solution there is inevitably a time lag which ensures continuing unreasonable profits for the company and suffering for the consumer.
But that’s the nub of the matter. Why should water, a necessity of life, be owned by a few profit-takers instead of the tried and true publicly owned, publicly controlled, non-profit making bodies which we have traditionally had in New Zealand.
There’s a story that one of the northern water companies rationed water to its own customers because it wanted to sell water to a neighbouring company at a higher price!
Don’t think it wont happen here. It is already happening with long-term contracts with firms such as United Water Limited, and the water companies controlling water supply to dairy farmers in Canterbury.
The price of water depends ultimately on the ownership of that water and its distribution. And the price of that that to a minimum is constant public vigilance to ensure that this vital asset remains publicly owned, with direct accountability through a publicly elected Board and with the traditional requirement that it be a non-profit organisation.
This is something that needs to be constantly hammered home to governments and councils by all of us.
(26.10.13)