A High Court judge approved plans this week to restructure Thames Water with a loan of up to £3billion – just weeks before the struggling firm was to run out of money. In return, the firm is seeking higher bills to fund its future investments and survival.
Thames Water is requesting an eye-watering 53% increase in bills by 2030, far exceeding the 35% rise allowed by weak-willed regulator Ofwat. This would mean an additional £151 per year for customers already grappling with sub-par service. The audacity of utility companies demanding more money from the very residents they have failed is staggering.
The larger question, however, is whether we will ever stop rewarding corporate mismanagement. For years, Thames Water appears to have prioritised shareholder dividends over a reliable service – and it is time for the Government to let it face the consequences.
Whitehall has been preparing for a potential renationalisation of Thames Water. A plan codenamed Project Timber would transfer most of its £15.6billion debt to the public purse, with lenders to Thames Water’s core operating company facing losses of up to 40%.
There is precedent for renationalising public assets in this way. If Thames Water were taken into public ownership, a new arms-length public corporation would be established to manage the utility, similar to the company that delivered the £18.8billion Crossrail project.
But shareholders, including major investment funds such as USS and Omers, would lose their entire investment. And there’s the rub. Yet while financially painful for some investors, this approach reflects the reality that they lent to Thames Water assuming their investment carried minimal risk, akin to government debt.
Well, tough. Perhaps if Thames Water had spent more time serving its 16 million customers instead of extracting billions of pounds for its shareholders, it wouldn’t be in this situation.
Predictably, some conservatives have decried the impact nationalising Thames Water might have on business confidence. It’s a pity they can’t muster the same outrage over how pensioners and low-income households have been fleeced for years by failing utility firms.
In fact, it is precisely because of business confidence that Thames Water must be taken over. What message does it send if the British public is expected to tolerate such apparent mismanagement? Allowing Thames Water to continue in its current state undermines the notion of accountability in business.
According to Ofwat, Thames Water is among the worst-performing privatised water companies. It regularly fails to meet legal standards on sewage treatment, pollution control and internal sewer flooding. In 2022 alone, it was fined £50million for failing to meet leak, sewage, and pollution obligations.
Moreover, the company loses more than 630 million litres of water daily and shows no sign of meeting its leakage reduction targets any time soon. It has had ample opportunity to reform, yet continues to fall short.
Meanwhile, rising utility prices are not merely an issue of corporate strategy – they can be a matter of life and death, especially for pensioners who cannot simply increase their income at the drop of a hat.
And in case you were in any doubt that Thames Water may not be prioritising the needs of the British people it serves, just look at a few of its investors. Its five biggest ones include a Canadian pension fund, a UK university staff pension scheme and hedge funds from the UAE, Australia and China.
Is anyone surprised that an Emirati hedge fund doesn’t care whether Doreen in Richmond has faecal matter floating in her local river – especially if fixing the problem means lower returns on their investment?
Thames Water is also by no means an outlier. Many utility giants follow the same pattern: privatisation, foreign ownership, underinvestment and soaring bills.
What have Britons really gained from gutting public assets and selling them to the highest bidder? Rail is another example. Fares have skyrocketed to the point where flying across Europe can be cheaper than domestic rail travel.
While market efficiencies should not be dismissed outright, the interests of the public must remain at the core of any economic system. Who truly benefits from privatisation if essential services become unaffordable? When we bail out failing private companies, the real losers are the British public.
It is time to end the cycle of rewarding corporate failure and start prioritising the people who depend on these essential, and basic, services.
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