Water prices – a way to get them down

Listening to the water industry proposals for 3% price increases each year above inflation (that would mean a 7% water price increase this year) made me think we were living in the Soviet Union circa 1960 under a system of state planning.

The rate of price increase is unacceptable and not necessary. Water is a very abundant resource, especially in a summer like the present cold wet one.If we introduced full competition, including the right to use the existing pipes as a common carriage system, the alleged shortage of supply and the ever rising prices would vanish.

What has the government to lose? Why doesn’t it do this? To those who say it is a natural monopoly I say then remvoing the legal and regulatory parts of the monopoly will make no difference and could not possibly do any damage. I also say they are wrong. Water is no more a monopoly than the supply of oil, and has the advantage that you find it everywhere, unlike hydrocarbons.

If we allowed others to help collect it and clean it we would have lower prices and more of it. Let’s just do it.

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8 Comments

  1. Kit
    Posted August 11, 2008 at 9:12 am | Permalink

    I would also add that water prices should be allowed to rise during periods of drought. I would rather pay more for my water than listen to Ken Livingston telling me not to flush the toilet for "number ones".

  2. Iain
    Posted August 11, 2008 at 9:57 am | Permalink

    The argument from the industry for higher prices went along the lines of….'we need to invest in additional capacity for higher population numbers', which is a pitch for higher prices you would only get from statist monopolies, for it would be inconceivable that say Heinz Beans would make the case to increase the price of their product because they wanted to bring out a new range of beans, and it would be considered a joke if they made a claim for higher prices because they were getting a better volume in sales. Increase in volume in sales is what they are looking to achieve, its only in statist monopolies that an increase in demand is a burden that they want to penalise customers for.

  3. Johnny Norfolk
    Posted August 11, 2008 at 12:11 pm | Permalink

    They will recover their investment from the new customers. The very least I expected from Labour was to get tough with the privatised companies. But they have not even done that.

  4. GeoffH
    Posted August 11, 2008 at 1:42 pm | Permalink

    You should know better than this. Abundant supply is not the issue.

    It's not just a question of meeting increased demand but repairing and replacing an existing infrastructure that suffered decades of increased load, under-repair and l;ack of investment.

    What's more the water companies have been loaded with leakage targets, water quality targets, beach and river water quality targets that simply cannot be met without spending money.

    And before you say, targets who needs 'em. I invite you to drink tap water from an untested, unregulated supply.

    The truth is the Water Companies are dealing with the failure of 100 years of State management of the system. They need every penny they can get.

    Reply: But they don't spend every penny they get on improving the infrastructure. If we opened it up to competition they would do more for less.

  5. GeoffH
    Posted August 11, 2008 at 4:26 pm | Permalink

    Oh, I'm quite happy for water supply to be opened up for competition. It's the notion that, somehow, any water price increase is an unjustified imposition on the consumer and should be resisted. Then, in the next breath, demanding better water quality, security of supply, no leaks etc, etc.

  6. Derek W. Buxton
    Posted August 11, 2008 at 4:38 pm | Permalink

    GeoffH,

    I do not know how old you are but I was drinking tap water 70 years ago, supplied through lead pipes with no ill effects. It was always said in those days that you never drank tap water when abroad, in those days only the rich went there anyway. So what have all the "new" regulations done that wasn't in place before.

  7. mikestallard
    Posted August 11, 2008 at 6:59 pm | Permalink

    I spoke with a Leftie Friend about this. Water is seen by the Left as a sacred right. Folk memories go right back to the "Great Unwashed" and the dignity of the Working Man depends on "cleanliness is next to Godliness". Therefore water must be free and plentiful to all.
    Handing it over to the loathed profit hugging Tories will desecrate a sacred trust.

    Hearing that Scottish lady bleating on about the "vulnerable" on BBC "You and Yours" on the way back from the gymn at lunchtime brought all this to mind.

    I think this answers the question about why this government is going to nothing except insult the "vulnerable" with a £150 giftie.

  8. DBC Reed
    Posted August 11, 2008 at 7:21 pm | Permalink

    The benefits of competition are surely overrated …There are hundreds of thousands of people trying to sell their houses and an almost equal, very large, number interested in buying them but still house prices remain unaffordable.Perhaps there is a hidden element of monopoly at work in this apparently perfect state of competition: land prices exerting an underlying monopoly influence ?
    The proposition that" water is no more a monopoly than the supply of oil " can be re-cast the other way round as: water is no less a monopoly than the supply of oil ,with similar validity.
    Certainly you can choose which petrol station you go to, though ,as with most things, proximity is decisive. (I could travel to Wellingborough to get the train to London instead of the nearer Northampton but don't. A natural monoply? So then is the nearest supermarket ).But you have only one company's water piped into your house. So this is a stone-cold natural monopoly.
    And there is precious little head-on price competition in the real world economy to base a political philosophy on surely.

    Reply: House prices rose so much thanks to a credit bubble encouraged by the Bank and the UK government. Competition in the housing market works fine to establish relative prices. I am proposing the right to have a different supplier through your exisiting pipe, as well as the chance to have a new supplier with a new pipe. There is no natural monopoly in oil or water.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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