The nationalised water industry had Ā a bad record, putting sewage into rivers and the sea. It spent too little on expanding pipe capacity and on replacing old and damaged pipes, as the costs fell on taxpayers. Water lost out in many a public spending battle under Labour, Conservative and Coalition governments Ā pre 1989. The UK had sewage strewn beaches in the last century as well as dirty rivers.
Privatisation freed the industry to raise new capital, shares and debt. The Regulator limited the amount the companies could spend on new investment and imposed price controls on what they could charge.Progress remained fairly slow in renewing and expanding the system, though more was spent than under nationalisation. Substantial sums were freed through the sale of new shares and extra long term loans. The rapid escalation in inward migration under Labour from 1997, and the further large increase this Parliament added to the need for more capacity.
Thames Water is 51% owned by the Ontario Municipal Pension Fund and the UK Universities Pension Fund. Other minority shareholders make up the mix.
The Company has undertaken substantial investment in recent years, stepping it up to Ā£1.77bn in 2022-23 alone. It has not paid any share dividends to its external shareholder owners since 2017, ploughing back as much money into investment as possible. It has also taken out large borrowings to finance new pipes. Debt now adds up to Ā£14 bn.
Thames provided a breakdown of how it spends each pound of receipts in 2022. 46 p is spent on new infrastructure. 19 p is spent on operational costs and 15 p on employees.7 p is spent on energy, 5 p is paid in tax and 8 p is paid to lenders as interest on the debts.
Labour has said it does not recommend Ā nationalising Ā it. The government have no plans to nationalise it. It would be difficult to increase investment spend as people want Ā were it nationalised given the extra strain that would impose on state budgets.Whether nationalised or privatised the decision is the same. Should Thames be allowed to put up its prices more to speed up and increase its investment or not? I will look at the available options for Thames in a future blog.
March 31, 2024
The average Thames Water bill is around Ā£450 per year. That’s around Ā£8.5 per week for the delivery of life’s most important resource, water and sewage. Putting that up to Ā£10 per week or even slightly higher is hardly punitive though as ever you’re going to have moaning arses but then that’s Britain today.
March 31, 2024
If you didn’t keep expanding the population by a million a year the bigger sewer pipes might not be necessary.
March 31, 2024
The average annual net immigration number during the Labour Government years was 247,000. Under Conservative Governments to 2016 this continued. Since then it has rocketed towards and exceeded 700,000.
March 31, 2024
No, 1.35 million last year if we believe those that left, or the new target is 1 million five times higher than what they promised in their manifesto.
April 1, 2024
net means new arrivals minus those that left.
March 31, 2024
Got it in one, however it is not only pipe work, the processing infrastructure is neglected and cannot cope with increased demand.
We need Ofwat to get out of bed with the operators and drive home fines when they overflow due to lack of capacity.
March 31, 2024
You canāt mean moaning unnecessarily surely?
More greencr*p for us to pay for.
If this is the sewer I have read aboutā¦theyāve put touchy-feely recreation sites near the āstinkholesā.
Yuk!
Can raw sewage do more harm than lockdowns and you-know-what?
March 31, 2024
JR,
UK Taxpayer picks up the bill each time for a greedy few fools failures. We saw it with banking.
Your party imported 3.5 million welfare claimants over two years creating a lot of demand for water and waste. How about the carbon footprint nonsense to build for these people, houses, hospitals, schools, transport etc. a lot of cement and concrete required. Concrete warms the surface instead of fields and trees which are good for the planet!
March 31, 2024
Yes, and London Council Taxes are cheaper too. Not like that here in the sticks. My water bill is likely to be Ā£80 per month from April.
March 31, 2024
Your first paragraph basically highlights incompetent government and surely HMG would be able to sell of surplus property and borrow money just as a private company would. This incompetence has propagated into incompetent regulation of a monopoly.
What was the role of Kemble Water in all this, in particular building up the enormous debt? Why did the regulators allow this financial engineering?
Lastly, as a customer I see no difference between Thames Water and a nationalised organisation – my bill was unilaterally increased by 10% to fund London’s super sewer, which I do not make use of. But I have zero choice, there are no alternatives.
But the government is clearly happy with the 5% of taxes and no responsibility at all … except as a citizen and taxpayer I do hold HMG responsible since they have engineered this foul up.
Reply If you ever go to London you will benefit from the super sewer.
March 31, 2024
There is nothing to say about the calamity of our country’s rivers being filled with sewage except that it has happened on the Conservatives’ watch. They are 100% responsible.
Reply It is unacceptable and has been going on under Labour as well as Conservative governments. I5 takes time and money to fix.
March 31, 2024
There was a time a while ago – 1980s? – when there was a great hullabaloo that the Thames was now so clean that Salmon were found upstream somewhere – might have been Oxfordshire. I donāt care whether it was polluted when nationalised and cleaned when privatised or vice versa- youāre the government – sort it out.
March 31, 2024
Reply to reply: It takes time and money to fix! If you got a problem you do not add to it, try stopping your partyās mass immigration policy we might even feel your party/govt has at least got a little bit of a clue.
We had 9% year on year increases when privatisation first came about. The excuse was to update old sewer infrastructure and now you are claiming time and money to fix it. Your reply makes you sound as incompetent as the fools in charge of this mess.
March 31, 2024
‘under the Conservatives watch’ -have you not considered how many days/instances of flooding weather in the last few years? Yes, the companies are allowing excess water to flow where it shouldn’t go untreated. But they will now have to react to the changing weather and the massive increase in housing, concreting of the fields.
March 31, 2024
I go to London less than once a year. All I seem to have gotton for the extra money extracted from me is more leaks.
However, by your metric I should have been contributing more directly to the upkeep of sewers the world over, particularly Europe, the US and Canada as in the last 40 years I have spent 100s of times longer there than in London.
March 31, 2024
+1
April 1, 2024
When Kemble Water Holdings acquired Thames Water at the end of 2006 the written down value of the fixed assets was Ā£5.8bn, immediately revalued to Ā£7.8bn. Shares to the value of Ā£2bn were issued with the rest of the business funded by Ā£3.1bn in bank loans, mainly at fixed rates, and Ā£3.7bn of other lending and leases. The accounts show ~Ā£2bn of Goodwill.
By 2011, net fixed assets had grown to Ā£10.1bn with annual depreciation running at Ā£0.4bn. They had started issuing RPI indexed bonds and floating rate notes – which of course now have seen the amount due for repayment balloon. Borrowings totalled Ā£8.1bn
By 2023, net fixed assets had grown to Ā£18.4bn, indicating significant investment over the period with annual depreciation running at Ā£0.66bn. Total borrowing had escalated to Ā£18.26bn, and the equity in the business had been wiped out by accumulated losses.
Meanwhile revenue is not growing in line with the RPI indexation allowed by OFWAT, because customers on metered supply have cut their use. High energy costs will have cut showers and baths taken. Operating costs have risen because of high energy costs and rising treatment chemical costs as well as wage inflation. The ratio of revenue to assets has fallen from about 1:6 to nearly 1:9.
A nice question is how cost effective some of their investment has been. Much of it has been to replace infrastructure originally built in Victorian times, or in the inter War years. But ambition to achieve net zero by 2030 is surely vanity spending, as is paying out for REGOs for their purchased electricity.
March 31, 2024
I give Thames Water credit for being open about what they spend income on. I would be concerned about the level of debt they carry and sympathetic to reducing it with a modest increase in bills.
It is governments of all shades that saddled them with a low quality infrastructure and then exacerbated it by deliberately expanding the customer base through legal and illegal immigrstion.
The dilema is that if government take responsibility for their actions or lack of them it is really taxpayers who pay. Better any extra company income comes via bills because they have responsibility for spending it and what they spend is visible. The company are more likely to get bang for their buck. Government can’t achieve mouse fart for mega bucks.
March 31, 2024
They admit to 8% of income servicing debts. Charities like Water Aid admit spending 24% of income (donations) on seeking more funding. Are both of these ethical? Or, to be praised?
April 1, 2024
The assets of the business have to be funded one way or another. Cumulative losses have now wiped out the value of shareholder subscriptions, so essentially the whole business is now funded on borrowing. You would expect that revenues would pay for operating costs, ongoing depreciation and borrowing costs. But if we look at say Ā£20bn of depreciated pipes, sewers, water treatment plants, etc. you might expect say Ā£5bn to have been funded by shares issued and retained profits, with Ā£15bn funded by a borrowing programme. The Ā£5bn of shares could normally be expected to pay a dividend – say 4%, or Ā£200m a year (shareholders might benefit from the business becoming more valuable, so may accept a lower dividend). The borrowing might be at 5.5% on average (as it was in 2006), or Ā£825m a year. Total, just over Ā£1bn a year. That’s a lot more than 8% of revenue, which is only about Ā£2.2bn a year. That 8% figure is the result of financial engineering that paid out on derivatives in 2021 before bank rates and inflation really took hold: the flip side is that since then those factors have increased their borrowing costs because they were not locked into long term fixes.
If they borrow more they can expect to pay a higher interest rate because lenders will see them as more risky. Since shareholder funds are wiped out, that is where they are.
Reply I think Thames has Ā£1400 m of equity last balance sheet. Cost of debt from memory 6.5%
April 2, 2024
My figures are for the ultimate parent company Kemble Water Holdings Ltd. which holds 100% of the shares of Thames and other subsidiaries. They show share capital of Ā£1,991.6m, and accumulated losses of Ā£1914.7m. The result is group consolidated including the various subsidiaries that are part of the financing structure.
March 31, 2024
Is this the āstore for treatmentā Super Sewer?
Sounds ominous to me!
What harm can sewage do?
More harm than the inevitable accident likely in the case of saving it all up?
I have never heard of this approach beforeā¦hope itās better than windmills!
March 31, 2024
It used to be used on the fields in South London.
Very good for rhubarb!
March 31, 2024
Thames barged out to the Essex farmlands.
March 31, 2024
Market gardens 18th century Wandsworth. And obviously other places.
Also dumped just any old where.
Hence Mount Pleasantās ironic name!
March 31, 2024
In 1858 Joseph Bazalgette was the lucky civil engineer tasked with building a new sewage system for London.
March 31, 2024
Brighton has a storage sewer located under the beach. It was built about 25 years ago when the original Victorian sewage system could no longer cope with the expanded population. I’m not aware that there have been any problems with it. The Brighton Sewer Tour is very interesting and far less smelly than you would think – if you like an unusual day out š
March 31, 2024
Sounds like a really jolly outing š¤
Eat your heart out Dr Russell!
I see that the Brighton SS was built in the 90s. Can we still do engineering to that standard?
The facts remain howeverā¦too many ( and increasing rapidly) bums on seats and years of no investment have not helped one bit.
Let it all get out of hand and then dig a big holeā¦and seal it up!!
March 31, 2024
I believe that the SS in London will not be ready until 2025?
A lot betwixt etc?
How about the Lower Thames Crossing?
Not making much progress. Not a bucketful so far apparently.
Mind you, maybe a concreted hole isnāt such a challenge.
Not too complex.
Unlike the smart meters that are going doolally.
HORIZON.
Nothing works any more.
Give me a Morris Minor and bring back Boris.
March 31, 2024
All these sewer improvements were meant to stop dumping in rivers, Tory party resoundingly failed in every regard privatisation fed a few cats and left the taxpayer with a huge bill. Sounds like banking scandal, MP expense scandal, wrecked economy scandal, billions wasted in overseas aid scandal, billions wasted on Ukraine scandal, billions wasted on net stupid scandal etc etc.
Under socialist Tory rule. Free markets and mass production led to increased living standards and reduced cost of goods and produce. Socialist EU one nation Tory party want Net stupid to impoverish people, stop manufacturing move jobs east and but same goods from China and India while giving them overseas aid and allow mass immigration from both!
March 31, 2024
Routing clean water in and waste right out is important even to army encampments. Without that basic operation flowing properly they would be ill, unfit to fight, even for themselves. It similarly applies to individual human bodies, right up to entire countries.
March 31, 2024
But, John you are in Government ?!
I had a conversation last week with an astute friend who predicted the Conservatives would only win 50-60 seats. He reckoned as people came up to the election they would realise every single major Conservative policy was the opposite of what surveys showed people wanted. Which is true.
He said. āItās not they canāt be trusted on a couple of policies. Itās that they have done the opposite of what people want. Not just what Conservatives voters want, but Labour voters as well. Nobody wants a single one of their policies. I think when people start thinking about what the Conservatives are and what they stand for then nobody will vote for them. ā
Reply I am in Parliament but not in government. Mr Sunak did not offer me a Ministerial job
March 31, 2024
Even John Major in 1987 managed 165 seats after his ERM fiasco (and failure to even say sorry for his gross incompetence). Plus he was against a competent politician Tony Blair (though his was an appalling disaster for the country) and not the useless Starmer.
Major had the advantage that, thanks to the collapse of his ERM lunacy, the economy was finally recovering fairly well. Unlike Suankās economy which is still being strangled by net zero, vastly high tax levels, open door low skilled immigration, piss poor public services, endless red tape, rip off energy costsā¦
March 31, 2024
1997 not 1987
March 31, 2024
Your friend may not be right?
And folk might wake up to the certain horrors of a Labour Government.
March 31, 2024
Many of us feel we wake up to the horrors of this Tory Government!
March 31, 2024
Maybe but objectively you are all wrong.
Whatever you hate about the tories you will get the same at least threefold from Labour.
You must know that!
March 31, 2024
We suspect and may be wrong, but more of these Tories is unacceptable.
March 31, 2024
Is right.
85 seat majority given to get Brexit done to thwart rogue parliament who were deliberately conspiring acting against the public mandate to leave the EU.
Unelected Sunak imposed on the nation to thwart divergence and to force EU lock step to betray the nation as a vassal state until public will accept outer tier EU or rejoin. All the nonsense about Ukraine and yet happy to sell out and give away N.Ireland and Gibraltar.
MPs did not learn from expense scandal, rogue parliament after we voted leave. Labour and Tory party need to be obliterated. It will take longer for Labour but that will happen as well once people associate them with betrayal as well.
March 31, 2024
If you are in Parliament, can I suggest you find a proof reader to help you with your communications.
Too many grammatical mistakes, must do better Jav, if you are to get your points across.
I agree with your general view though . All of the policies being progressed by Sunak and past Tory PMs including Boris are against what the voters want and expect from their elected political class.
March 31, 2024
Given ministers often only stay in post for a year or two, difficult to blame anyone. Since 2010 youāve had 5 PMs, 3 in the last 5 years. Canāt blame any of them, then. The only people who we can blame, and who should TAKE the blame, are Tory MPs. If you donāt like the direction of travel, you can force change. And if you find yourself a lone voice, surely you should resign and be independent.
March 31, 2024
selecting a PM using spin the bottle is never a good idea!
March 31, 2024
Reply to reply. But you play for that team! You might be permanently on the subs bench, but that still puts you in that team, not another team which is taking on your team’s ideas and competing to win with them! I think competition from outside the tent rather than within it is underrated and somewhat more useful.
March 31, 2024
You have more influence than any of us but the message remains. Your Goverment haven’t delivered any conservative policy we want or were promised. The biggest is mass immigration and refusal to take serious actions. 300k reduction on 1.3 million is way to small. The boat people policy has taken your party 3 years of abject failure. We all know immediate tow back or return same day is the only solution. Immediate deportation within days. Your Government forgot to Govern for the English not foreign bodies or treaties we didn’t want. You are going to pay for that. Reform.
March 31, 2024
Thames Water’s web site shows who owns the water supply in the area where I live: about 71% of the shares are owned by foreign sovereign and pension funds. It’s another example of foreign takeover of this country’s essential assets. No surprise that last year it was the water company with the worst record for the level and handling of complaints from customers. Customer satisfaction is evidently of little interest to foreign investors, as long as they make their money. I also see from the Independent that Thames Water has paid nearly Ā£100m in dividends to other parts of its ownership consortium, even if not to external investors since 2017. Customers’ money is still going to anything but investing in infrastructure, it would appear.
March 31, 2024
Nationalisation isn’t the answer, this is just the wrong ownership model. Imagine if instead of the shares being owned by foreign sovereign and pension funds it was owned by customers of Thames Water. If the company needed to raise funds for investment, it could get the customers to invest perhaps with preferential shares. Other than that, run the business with a degree of surplus to pay for the occasional larger works, so give up this policy of loading the business with debts.
March 31, 2024
Sounds reasonable. At the moment the customer funds investment via high bills and with no ownership of the company or any chance of dividends, just higher and higher bills. This article says that investment was not done in the nationalised past because the cost would fall on tax payers. Well, any investment the companies make falls on the bill payers (the tax payers) so what’s the difference? There is no free lunch as is suggested by privatisation, just payouts to mostly foreign entities and the managers. I don’t care whether it’s said that Thames paid no dividends since 2017, that’s just sophistry, they paid out big dividends, but it was declared as something else.
They also took out tons between 1989 and 2017. The water companies in general have paid out 72 billion since pivatisation, mostly paid for by loading up debt. Just think what 72 billion would have paid for in new pipes. As it is we have neither the pipes, nor the money and we have rivers full of excrement. Nice one governments.
March 31, 2024
Agreed although finding Ā£14bn amongst customers to pay off this debt before capital for investment might be tricky. The root cause is allowing companies to build up such debt which is unserviceable alongside investment. A regulator should have blown the whistle, else the government blown it on the regulator. The buck stops there.
March 31, 2024
The customers don’t buy Thames Water, they but the asset. Decrepit pipes can be discounted on the valuation. It should really be the government that buys it back, using the money they got for selling it in the first place. They then give it to the new water company owned by the customers, who should have really had it given to them in the first place, seeing it was theirs.
March 31, 2024
DA,
That ownership model does not work for Nationwide building society. They can take over another building society without members voting. Salaries of chief executive have rocketed too.
There may be a vote on executives, but ordinary members donāt bother to vote and a sizeable block vote that could influence decisions is absent.
March 31, 2024
I don’t suppose the ownership model is perfect, but it’s a lot better than the alternatives of foreign ownership or government run.
For example, if your pipes are leaking you’d vote for the investment to mend them. If yours had been fixed but someone else’s were leaking, you’d vote for lower bills. A degree of fraternity is required.
April 1, 2024
Yes, privatisation was a big con. We were invited to buy shares in something that we already owned. ‘Sid’ did, but as soon as he made enough for a cheap holiday to Spain he sold out.
Thatcher had thought we could be a share owning public, but that was a mistake made from the dewy eyed idea that they would keep their shares and buy more. So it all ended up abroad. Only government making up their own rules to suit their ideology could get away with such a con.
Reply Sid making a profit was not a bad thing. Labour cancelling the golden sahre we put in to stop foreign takeover was a bad idea
March 31, 2024
A dire failure of government & regulation. Meanwhile Tories to hold fewer than 100 seats to Labourās 468, says poll – in the Sunday Times today.
This against an appalling opposition from Labour and Starmer with the same duff socialist, net zero, sick policies as Sunakās fake Tories. So Sunak comes out with his surely corrupt extra Easter honours list so as to make them even less popular.
A stuffed teddy bear with a T shirt saying:- Ditch Net Zero, Cut Taxes, Stop Immigration would surely do far better tha dire failed Suank?
March 31, 2024
Itās odd how zealots believe in their own position so passionately. When will you realise that most people have bought into net zero. I voiced my doubts in a public forum recently, I thought I was going to get lynched. I take your point that if people understood the science and the cost, they would be against it. But they donāt, and arenāt.
As an aside there is a real emergency building relentlessly and that is the degradation of our soil. I note where I live in West Dorset that there are endless miles of fields which only grow grass and maize – for cattle feed. They get two crops of grass for silage and one (sometimes two) crops of maize. The fields are ploughed by huge tractors turning the soil over in huge clods. If to examine the soil, weāll, itās not topsoil by any stretch of the imagination. Healthy soil needs its own micro biome that enables plants to take up the various elements we need in our diets. Ploughing over and over again, with just an occasional āmuck spreadā is depleting the soil. Tripling the global population in the last 75 years and the continual industrialisation of farming is killing the soil. Iāve read we only have 40 to 60 harvests left – and then we face global famine. This, it strikes me, is a real emergency, as opposed to the āclimate emergencyā. But the solution means the virtual abandonment of meat eating and using the land to grow plants whose fruit and seeds we can eat without ripping them up, ploughing the land and destroying the soil.
March 31, 2024
I agree the BBC, Government, Charities and similar have indoctrinated very many people, especially those with little grasp of science, into the net zero religion. But more and more people are beginning to understand the absurd costs and pointless lunacy of it.
March 31, 2024
Unbelievable that they care so little now that they’re willing to leave the bridge in order to help the investors in this Titanic into lifeboats before it hits the iceberg!
March 31, 2024
I agree that private companies do a better job than Government led companies. Share value not only comes from dividends but also assets and the potential for future dividends and the sale of assets.
Iām guessing that the water companies shareholders are betting on them being renationalised.
March 31, 2024
Indeed, they perhaps take the view that it is best extract everything of value and load the company up with debt. This before Labour get in and steal or nationalise it all it all off them. Not totally unreasonable.
March 31, 2024
Quite easy to cut water use and bills to circa 10% of what many people use. Flush loos far less often or use grey second hand water to flush. Have very quick showers once a week – needed or not. Do not water the garden other than from collected rain water & do not leave taps running. No need to wash the cars between rainfalls really so long as you can see through the windows!
April 1, 2024
Cutting use strangles water company revenue on metered supply. You’d have to go back to fixed charges, plus some charge for metered use to act as some incentive not to turn the taps on your garden.
April 1, 2024
I disagree with not washing cars, LL, as removing muck preserves the paintwork and thus extends the life of the vehicle. My cars are 19 and 21 years old respectively and will serve me until beyond economic repair – that applies to the cars and me as well!
April 1, 2024
I thought you were a capitalist. Surely the answer to increased demand s increased supply. Why should we go back 100 or more years just to fill the pockets of the already rich. They are not doing the job needed and need to let go. Some things are a public service, not just a profit point, something some Tories cannot come to terms with- everything they think should make money. When I went to Morocco some years ago, the water supply was iffy and the loos were stacked up with bottled water to flush the toilets. I never went back and don’t want that kind of thing in my bathroom thanks very much. We are becoming third world and that would put the top hat on it.
March 31, 2024
But then a competent government would protect against this by disallowing pre-owned state assets to be loaded up.
March 31, 2024
Exactly.
March 31, 2024
Thames failure was it failed to charge more for the water it distributes.
April 1, 2024
In 2023 I paid about Ā£200 more for water than I did in 2016. And you think I should have paid even more than that, do you?
Reply If we want lots of bigger and better pipes to contain sewage we have to pay more. The Regulator has to decide on the price rise which will determine the pace of putting in new pipes
April 1, 2024
If you had paid Ā£50 more in 2016 there would be less need of increases now.
April 1, 2024
That’s if you believe they would spend it on the pipes – bit of an illusion by past experience. Any increases just seem to disappear, whether in dividends or other means it doesn’t end up in better and more service.
March 31, 2024
I hope you comment on the alleged failure of Ofwat to recognise the dangers of previous owners āstrippingā it via large dividends and loading it up to egregious gearing levels.
This has been a financial disaster waiting to happen for many years. Yes the infrastructure was disgracefully under invested in for decades and yes privatisation has vastly improved supply.
However this is an example of everything wrong when regulation fails to curb the excesses of private capital.
Not a good example if you propose to use it in your drive against public ownership. Nat West was/is bailed out to get it ready for re privatisation. You are wasting Ā£10/15 billion through Universal Credit fraud.
So taking a position to ease the pain for Thames Water customers is well within your financial compass. Yet again politics and regulatory failure dumps on the general public.
March 31, 2024
+1
March 31, 2024
Indeed. A golden share to prevent this debt gearing would have been the answer. But the chaps needed rewarding for good share performance of course. Shared ownership model is clearly only for the plebs in their houses.
March 31, 2024
Yet again.
What is at the root of needing Super Sewers?
Too many bottoms Iād say!
March 31, 2024
Full marks for resisting the obvious too many arrs(Sic) holes….. many of them ruining our essential utilities.
Next up for state aid will be electrical generating activities…ooh sorry just remembered we have been doing that for years Ā£1billion to DRAX last year and every year going forward.
March 31, 2024
the biggest problem is all the items which should not be put in the ‘pan’ at all!
March 31, 2024
The problem is Thames Water’s debt of Ā£14bn. The interest payments are crippling the company and it is the same for the other water/sewage firms. Total debt was estimated by several sources last week as Ā£65bn across the industry – which is now proving unsustainable at current interest rates
As far as I can gather very little of this debt was invested in new pipes, treatment works or reservoirs. It does seem that in Thames Water’s case, Macquarie Bank took much of this in dividends and humungous bonus payments for top management before they sold out in 2017. Under Macquarie’s control, the total returns made by the bank and its investors averaged between 15.5% and 19% a year (source BBC Business 5 Sept 2017)
Michael Howard was warned in 1989 that this would happen if he allowed private equity firms to buy the water utility monopolies. He was interviewed on BBC R4 last year, when he blamed the customers for wanting cheap water and demanded that bills were raised by “up to” 50% each year for 7 years to pay for the upgrades and resumption of dividends.
Reply Thames invested Ā£1770 m last year and has invested more than Ā£14 bn
March 31, 2024
R to R: But as you say much if this from ongoing income rather than from the debt. Please look at this from a balanced viewpoint.
March 31, 2024
There are two other issues involved in the sewage crisis that receive litte consideration. Firstly, the failure of OFWAT to prevent sewage spills calls into question the whole regulatory framework. And the second is Govey’s disastrous decision to allow the sewage firms to report their own spills – after he cut thousands of Environment Agency inspector jobs during Cameron and Osbourne’s austerity program
The governmentās environment watchdogs were the early targets of austerity cuts and sadly weāre still seeing the fallout today through loss of expertise, skills and funding. And of course, the water companies took full advantage of Govey’s decision to allow them to monitor themselves.
Reply We know more about more spills because this govt has greatly expanded monitoring!
March 31, 2024
I think you mean – the media has woken up to the travesty of water companies’ behaviour?
March 31, 2024
Reply to reply:
Why have your leaders not made a better case for their actons. Opposition is amost always well organised, it seems your government thinks it needs to do nothing, that people will need no help.
March 31, 2024
When free loaders unload it was always going to overwhelm the capacity and break the company.
There is a simple lesson to be learned there.
The government will no doubt bail out the company and save the universities from their deserved loss for bad investment decisions.
The bigger question that needs answering is why did the auditors allow the company to run up a Ā£14 billion debt?
The oversight annual reviews give, are clearly pointless if this scale of financial failure is accepted.
March 31, 2024
Water is essential. We have no choice in who supplies it. Isnāt at least part of the problem that in London, Thames Water has the monopoly, and in other areas their local companies likewise have a monopoly?
March 31, 2024
Thames Water said that it has not paid dividends to external shareholders for the past five years. However, in 30 yrs. it has transformed from a debt-free public utility into a privately owned investment vehicle carrying the highest debt in the industry.
Its executives and the shareholders and private equity companies have presided over decades of under-investment and aggressive cost-cutting whilst making huge dividend payments.
Its accounts between 1990 and 2022 reveal how privatisation ā which was intended to lead to a new era of investment, improved water quality and low bills ā turned water into a cash cow for investment firms and private equity companies, none more so than the Australian infrastructure asset management firm Macquarie.
Over 11 years of control, Macquarie and its co-investors paid out Ā£2.8bn to shareholders, which is two-fifths of the total Ā£7bn in dividends that Thames Water has paid between 1990 and 2022.
When Macquarie sold its stake in 2017, debts had tripled from Ā£3.2bn to Ā£10.5bn as it borrowed against its assets to increase dividend payments to shareholders.
This weight of debt is at one of the highest levels in the industry, with more than half of this debt inflation-linked, leaving Thames facing hikes on its debt repayment, even as it is being told to invest billions more fixing the crumbling infrastructure
When privatized the balance of making investment vs paying dividends favors shareholders not the utility consumer ā thatās what happens when you mix Politicians (their manifesto), Company Directors (share options), Bankers (bonuses), Investors (RoI) and the Public (ignorance) – capitalism at its worst.
And it rolls on – consumers and tax payers once again footing the remediation bill !!!!
March 31, 2024
Thames Water’s shareholders are refusing to give the struggling water giant extra cash unless bills rise.
The first tranche (Ā£500m) of the Ā£3.75bn investment was due at the end of March, but has now been withheld saying its turnaround plan is “uninvestible”.
The owners’ initial business plan asked for a 40% rise in bills over the next five years but the shareholders now want the regulator Ofwat to agree to see even higher bill rises as a condition of injecting more money.
Thames Water said the funding plan drawn up last July was subject to various conditions being met including improvements for customers and the environment over the next three years.
However, sources close to Ofwat have said they are going to “stick to their guns” and won’t be forced into raising customer bills to address the shareholders debt problems.
The regulator insists that even without the additional capital, the Thames Water operating company will not need to be nationalised immediately as it is still generating enough money to keep it going day-to-day for up to 18 months.
The government has previously said it is ready to take over Thames Water in the event that it collapses. ā how much will that cost the tax payer?
The company will need another Ā£2.5bn of investment in the coming years but that is contingent in part on the regulator, Ofwat, agreeing to household bills increasing by 40% on top of inflation by 2030. This is tantamount to Thames holding the regulator to ransom – suggesting that if Ofwat did not agree to the rise, it would essentially trigger a quasi-nationalisation that would cost the taxpayer billions.
April 1, 2024
Ofwat wanted Thames Water to make very extensive investments, but clamped its revenue earning on the grounds that ZIRP made borrowing cheap. Well, it did, until ZIRP ended and inflation wrecked indexed borrowing. Ofwat have shown themselves to be incompetent at assessing long term finance issues.
Back in 2006 the company was paying about 5.5% on its borrowings on average, in a rather more normal interest rate environment, though the financial crisis soon made it abnormal. Gearing was kept below 75% in the initial years. If Ofwat had targetted more sensible financial ratios we would not have the current problem. Perhaps they Ofwat would have been forced to choose fewer investment demands if they felt unable to raise customer bills accordingly. The vanity project to achieve net zero by 2030 is one obvious candidate that should have been chopped long ago when other issues are more pressing. Thames have made extensive investments, but not necessarily the right ones, and they have found some much more costly than expected. They have run into the buffers rather than tackle the issues. Both to blame here, I feel.
I also think that the FCA have been avoiding offering government and regulators some friendly advice on financial issues – in part because they too don’t really have the necessary expertise to hand either. I tried to interest them in advising OFGEM before the energy crisis blew up, pointing out that the retail energy business was really a massive speculation on energy costs with extensive complicated embedded derivatives that OFGEM plainly were unable to analyse. They didn’t want to know.
March 31, 2024
I read that Oxford University put their loss of the Boat Race down to having to row in turdgid waters.
When sailing in UK waters I had a pair of electro platers arm length gloves for anchor lifting. The waters off Blackpool and the Ribble Estuary were a particularly insanitary anchorage.
What with ULEZ, no traffic zones, cost of housing, daily street knifings, and the Thames overflow sewer, London must be a very unpleasant, expensive and threatening place to live. One virtue of its sewage system is that from it you can measure the level of drug dependency in the capital. Perhaps with Khan it has exceeded its sell by date, whatever the quality of its water.
March 31, 2024
Oxford University is blaming the loss of the boat race for E. coli pollution in the River and Thames Water. However, it is only polluted because they have not completed the Tideway tunnel. But the reasons for the delay are:
a) the adverse impact of lockdowns (9 months).
b) the excessive amount of time it took to plan the project. Originally conceived in 2001, work only started in 2014 (after thirteen years). While it has only taken eleven to build when it is completed next year (including the lockdown delay).
These were outside Thames Water’s control and the responsibility of the various governments. Ironically, the planning system is extra long-winded because it incorporates rules designed to protect the environment! We should have listened to Oxford Professors Heneghan and Gupta on the impact of lockdowns.
March 31, 2024
Clean water is one of the most fundamental needs of life. Leaving it in the hands of a bunch of reckless wasters in government with buckets elsewhere created the current mess.
Only the consumer can pay the cost. Better operators would have been efficient in keeping the system properly maintained.
Adding millions more users and takers from overseas every year strains the system even further to breaking points. Stop the floods of increasing waste, and upgrade the creaking water works at source.
March 31, 2024
I think the point is that it’s had both the time and the money to fix it. Rather like border control which is a concomitant situation. People have joined all these dots finally and realised that 14 years is enough time to have sorted out at least some of these things.
March 31, 2024
As you pursue your policy of high immigration, you presumably create forecasts for the water, gas and electricity providers so they can invest in upgrades? Given that, say, you allow half a million extra people each year and the second they arrive they produce bodily waste and consume water, gas and electricity – you, one assumes, let the utility companies know what to expect and tell them how much money they need to raise to build the necessary increased infrastructure – well in advance of people arriving?
Or, do you just let loads of people in – in a desperate attempt to get āgrowthā – and just hope that water, gas, sewage, electricity, telecoms (etc. e.g. roads, housing and railways) will just magically be taken care of by the market.
As an aside – do you have in mind a maximum population for this small island which imports half its food and has a massive balance of payments deficit. We keep getting told we have unfilled jobs. When will they be filled? Do you have a cut off number? It seems to be one of those situations where, no matter how many millions you bring in, you never get the jobs filled. Is there a leak somewhere?
How I yearn for the General Election.
Reply I have been continuously making these points about the need for a big reduction in legal migration. The government says it will do so. Labour has not.
March 31, 2024
Reply to reply:
Your government ‘says it will do so’ and you obviously believe it. But it doesn’t, the nation of England, in particular, continues to be lied to and betrayed, by your party and its elite establishment.
March 31, 2024
After 14 years Sir John no one believes your Governments promises on anything. Fool me once etc.
March 31, 2024
The government says it will do so! Oh, well thatās alright then. The government SAYS it will do so but DOES the opposite. But Labour say NOTHING. That excuses you?!
March 31, 2024
Privatised or nationalised the same people are going to pay for whatever Thames Water do – the public – so the following claim is pretty meaningless:
“It spent too little on expanding pipe capacity and on replacing old and damaged pipes, as the costs fell on taxpayers.”
If the costs don’t fall on taxpayers then they fall on Thames Water customers (who are also tax payers).
March 31, 2024
No matter how one looks at the performance of Thames Water its record is a bad one . Parts of Oxford for example have suffered poor sewage control for years and there is little evidence that effective measures to control this have been made . In my village in South Oxfordshire simple changes that could have been applied to re-direct water from a cattle feed to a nearby household took years for it to occur . The problem – as always , is in management control and direction and increase in population and housing development .
March 31, 2024
An article appeared in the Telegraph:
“The owners of Thames Water have refused to provide a Ā£500m cash injection to prevent its collapse as they renew demands for household bills to increase by 40pc…”
Sir Jacob Rees Mogg posted on his Twitter/X account:
“Thames Water ought to be allowed to go bankrupt. It would continue to be run by an administrator, the shareholders would lose their equity but they took too much cash out so deserve no sympathy and the bond holders would face a partial loss. This is capitalism, it wonāt affect the water supply.”
The answer might be somewhere in the middle ?
March 31, 2024
Payment is a problem. Imagine a country where almost ALL the governmentās income came from tax on water it supplied at source.
Every user and business would pay according to use automatically, whatever their consumption involved.
Nuisances like food manufacturers pumping water into ham to raise its weight would be discouraged, as would people leaving their tap running needlessly while brushing teeth.
Those who waste would automatically pay the highest price for their own carelessness. Perhaps neglected leaking pipes should be a criminal offence too.
March 31, 2024
All water companies, not just Thames Water, must be under tremendous financial and infrastructure strain as a result of our Parliamentās twin major policies of high mass immigration and the economy destroying Net Zero and as a consequence we must pay the price.
But then, what can be more important than saving the planet, for as PM Johnson said at the UN 22/09/2021 āWe were the first to send the great puffs of acrid smoke to the heavens on a scale to derange the natural orderā?
March 31, 2024
Don’t mix environmental pollution with the nut zero scam of the life giving gas, CO2. The Chinese driven propaganda has all the fools in Westminster convinced. Who stands to gain???? Ummmmmm The Chinese. Reform.
March 31, 2024
To me the flaw is still their management do not have the focus of competition, that is what makes everything else work. There maybe a regulator but who are the accountable and responsible too? Who takes responsibility for the regulators actions?
March 31, 2024
349 Christians crossing the channel yesterday in 7 small boats ā¦.SirJ even your seat isnāt safe, under this leadership
March 31, 2024
GB News are reporting that 600 have crossed the channel this weekend for the free easter eggs
March 31, 2024
Let us hope at least JRās seat is safe! Listen to the Sunday Times Willian Hague interview of Rishi Sunak to see why Sunak is unelectable. He blames everything on a āhospital passā from er.. Chancellor Sunak. But above all he has all the wrong policies and is so tedious & boring.
March 31, 2024
Dishonest too – on Covid Vaccine safety, the non existant tax cutsā¦ he and the BoE were the main cause of the 11% inflation !
March 31, 2024
GC: That is 2738 total ( MoD stats ) up to yesterday plus whatever number are confirmed for today 31/3 which should bring it to a nice round 3000 for this month, give or take. Those 16.000 homes mentioned last month must be well whittled down by now.
March 31, 2024
The Thames Water situation is no different to a lot of things we are hit with at the moment. There is a combination of those that are given a task for which the Taxpayer funds, yet are neither held responsible or accountable. Then there is a general lack of transparency and accountability from those that get to develop their own sense of well-being, esteem and empires. So called Regulators have become personal thief-doms by those that fail elsewhere. We now have secrete Courts taking place behind closed doors that can fine and punish but can’t be challenged. None of which causes a free open society.
Blair & Brown may have kicked started this trend of destruction of Society but there has never been a sound reason for a Conservative Government to pick up the ābatonā and pull-down society to the lowest of the low. Honesty and integrity starts at the top. The list is long but it all starts with the same thingās responsibility and accountability ā 5-year terms for politicians the No 1 joke on us all, an unaccountable House of Lords No 2 joke on us all, the unaccountable Quangos. Laws & Regulations from Foreign places that our own legislators have no democratic control over as such making our democracy subordinate to others, the unaccountable, on and on the problems, we face are as a result of our elected MPās all refusing their job. Although recent accounts from Parliament identifies that it is this Government withholding the details that would allow the HoC to hold them fully to account.
In essence this actual Conservative Government is fostering all the problems faced in all the facilities below the top tier, to many āminnie-meā leaders mirroring what is demonstrated at the top. Yet the Conservative Government that was a UK Government could reverse this decent overnight but they refuse. So you get to question their honesty and integrity and whom do they think they serve?
March 31, 2024
Just as an aside the new Super Sewer in London will not eliminate the discharge of raw sewage into the Thames but will only reduce it. Explicit in its design is the assumption that there will be conditions occurring fairly frequently (around 4
times per year) under which it canāt cope and direct discharge to the river (up to 4.2 million cubic metres of sewage per year) will continue as before. Why you would design it on that basis I donāt know, but they did.
March 31, 2024
John,
The party you support has done almost the exact opposite of your advice on so many important topics, the question is surely why you still support them?
March 31, 2024
I normally agree with your comments.
However, Thames water is not a business which I believe deserves to be allowed to increase charges by āup to 40%ā in near future, which I believe you are trying to justify. It is a victim of its own conduct. Reckless and greedy.
Reply No i do not justify 40%! If you want private capital to put in new sewers you need to allow a return. If government nationalises you need to up taxes to pay to take over the assets and to pay for thenew sewers.
April 1, 2024
Reply yo reply
Conversely if you allow dividends you should expect some responsibility. They could easily pay for the upgrades on the money they have had out of the businesses but didn’t and your party was either complicit or asleep at the wheel. Why not just admit that the Tories in particular have been taken for a ride by foreigners rather than trying to justify the unjustifiable and wishing more taxes on the people you represent. Who do you represent, the voters or the big foreign asset strippers?
Reply Labour took away the golden shares which we put in to stop foreign takeover. I am now trying to find the least cost way through the need for roe pipe capacity to b e installed. The nationalisation option which would be a lot dearer.
March 31, 2024
Problem with sewage is the rainwater run off from roads and housing estates being dumped into the sewer system. Why dumping of sewage generally only happens when it rains.
Fundamental problem of a highly developed infrastructure: unforeseen consequences…..
March 31, 2024
They’ve had three and half decades under privatisation to rebuild and extend sewage water pipes ….they’ve done nothing
Reply How about tge new Ā£4.5 bn London super sewer
April 1, 2024
How about the billions taken in profits and sent abroad? They have had over thirty years to do this and still it’s not operational.
Reply Thames Water borrowed Ā£14bn to increase the physical assets
March 31, 2024
Wherever Iāve lived and worked (in the construction industry) storm water and sewers are completely separate. I know some areas used to have combined systems but all new developments have separate systems.
April 1, 2024
So why is sewage dumped when it rains?! Genuinely interested…
Reply Because our drains mix sewage with surface water. Volunes get too big when it rains
April 1, 2024
#Mike Wilson says that storm water and sewers are separate systems. What surface water are you referring to then? And how does it flow into the sewerage system?
Or if #Mike Wilson is correct, where does storm water drain to?
Reply No they are often not separate which is why we have the problem. It is excessive run off waster from rain that overloads the sewers
April 1, 2024
Is it known approximately what percentage are not separate? Or if it is older or newer systems that are separated?
April 1, 2024
Sorry, but you are wrong. Think about it. If every time it rained, all the water that goes down road gulleys was entering the sewer system, the sewers would be running full of water. You probably know nothing about the flow in sewers. Sewers are laid at a very specific fall so that there is enough liquid flowing steadily to carry the solids. Because of this, sewers are quite small. On a typical housing estate a 150 mm sewer may drain 100 houses or more. There has to be quite a lot of houses connected before you move up to a 225mm pipe. This is because, obviously, not everyone flushes the loo at the same time. If a sewer takes surface water as well as sewage, the pipe has to be much larger to cope with the exponentially higher volume of water you get when it rains heavily. If you do this, when it is not raining, there is not enough water to give a steady flow and solids get left behind. These can build up and cause a blockage. That is one of the reasons why, many years ago, it was decided to separate sewage and surface water. Go to any street and youāll see manhole covers down the middle of the road. Lift the cover and observe a steady flow of water – usually in a relatively small pipe. Wait for it to rain. Notice any increase in flow? You wonāt because the road gulleys are connected to a separate, usually much larger, storm drain. Wherever feasible this water is directed to natural drainage- ditches, streams etc. Before being discharged thus, the water goes through a petrol interceptor. I wonāt bore you with the details. I spent 20 years in construction and every job I was on had drainage. Storm and sewer were never mixed. I worked on a job years ago – 1.5 miles of sewers under an town to provide extra capacity. The job was tunnelling with 6ā and 7ā diameter concrete tunnel segments. Inside these sewers were laid in pipes getting gradually bigger along its length. These were encases in concrete and, over them the concrete was shaped into a sort of vee. This was a much bigger area for storm water. At the end there was a balancing tank for the storm water which then continued via an artificial stream to a river. The sewer terminated by connecting to a n existing main sewer. The Building Regulations are very, very clear on the subject and have been for a very long time.
If storm and sewer were mixed, every time it rained the sewage works at Slough would flood.
Where I live now the sewage is stored in a big tank. Every 6 weeks or so a fleet of tankers take it away. With the amount of rain we get here, if the rainwater was in with the sewage, those tankers would be there every day. I noticed in a recent planning application- among the huge amount of documents, mention made of the 150 mm sewer that serves half the town being unable to cope if more houses were built. Road gulleys have a 150 mm outlet. Just one road gulley could fill a 150 mm sewer in heavy rain conditions.
Reply Yes there are some systems with different pipes for rainwater. By definition these do not tip sewage into the rivers when it rains a lot.
April 1, 2024
why aren’t ‘soilds’ trapped on the way to the outlet overflow pipe ?
April 2, 2024
#Mike Wilson
I appreciate your experience, but do you then deny that sewage dumping generally occurs after heavy rainfall? Implying that surface water ends up in sewerage systems.
Given your insight, perhaps you are well placed to explain?
March 31, 2024
I worked at a sewage farm in Rainham, Essex once. It processed sewage from London. The process was completely mechanical. Filtration through sand separated liquid from solids. Aeration broke the urine down to methane. The filtered solids were pumped onto the surrounding land – left there for a while (years, I think) and then dig up and sold as a very sought after manure. After the filtration and separation etc. the water that was left went into the Thames via an outfall. There was an enamel mug in a chain. A chap who worked for whoever the client was (canāt remember the name of the mob running the place – we were there to build new tanks I.e. to increase capacity), used to show visitors around and would dip the mug into the water flowing into the Thames and drank it.
It all seemed very low tech to me – but it worked. Hardly rocket science – why is it so tricky to increase capacity.
April 1, 2024
It is being reported in the Telegraph that council tax on 80% of second homes is going to be doubled, thanks to Michael Gove.
For a conservative government to penalise second home owners in this way is a disgrace.
There can be no justification : council tax is a charge for services rendered, yet second home owners use far fewer services than residents.
This the kind of action based on greed and envy, the kind of thing you would expect of the socialists in the Labour party. And no, I no longer own a holiday home in the UK. However, If I were 20 years younger, I would be leaving the country because it has degenerated into a place where working hard and becoming better off is so heavily taxed that it just isn’t worth the effort and you can no longer spend the little amount you can retain to spend as you wish.
Is this really what the Conservative leadership wants ? No wonder the party is going to be routed in the election.
There can’t be any part of the electorate left that they represent.
April 1, 2024
The answer to your question depends on whether state subsidies are allowed. Provision of water and sewerage services is expensive. Everybody needs them but the cost per head might be deemed too high for poorer people. Ergo a state subsidy is required unless it is decided some should go with less or none. It is in the health interest of all that the services are provided equally to all. This is not socialism. It is the civil good and the societal good. There is an argument that all should contribute what they can to pay for state services, not least so that they value them and, if they receive tax payers’ money to make them affordable that they appreciate the support they get from others. If the state service is not a common good there is a stronger argument for users bearing the full cost.
So the first thing to do is to assess the true cost of the services and then decide whether an equal tariff per head per unit consumption and a reasonable miniumum level of consumption results in a cost that is too much for some reasonably to pay. If so then public money must be made available to those people. If not then everyone using the service should pay at the same rate. There are various ways of structuring the tariffs and channelling public subsidy to be considered once these first principles and costs have been determined.
Demand for water is more elastic than most people think. If people pay a high enough price per unit consumption they will use less than they would otherwise and clearly part of the current problem is that demand exceeds supply by some considerable and foul margin. There may be incompetence and inefficiency as well but that can be addressed as part of determining the true cost of supply. Back to demand management as with electricity – necessary but if done badly can be both inhumane and against the common civil good.
Reply Rationing clean water by higher water prices does not tackle the shortage of sewers and storm drains.
April 1, 2024
PS if state subsidy is required it should be channelled directly through the user not the supplier to avoid making another monster like the NHS.
April 1, 2024
I would like to know how today’s pollution in the Thames compares with historic trends since the 1960’s.
Reply They did not monitor so well last century. I think it was dirtier then. The beaches clearly were.