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It was recently revealed that the privatised water industry has shelled out over £13bn in dividends since 2010.
For those of us who opposed Thatcher and the Tories’ privatisation drive, including water, initiated in 1989, and the love affair of all governments with privatisation and linked policies such as PFI and outsourcing ever since, the findings may not have come as a surprise, but the findings of Labour’s recent analysis are still shocking.
Access to water is a human right, it is essential to our day-to-day lives, yet the current “market” is clearly failing.
The overall picture is that the privatised water companies have continued to pay out billions to their shareholders while pushing up prices for customers and short-changing taxpayers by receiving more in tax breaks than they have paid in tax.
Since privatisation, household bills have risen by over 40 per cent in real terms and just in the years since 2010 these companies have paid out over £13.5 billion in dividend payments — almost the entire amount that these firms made in pre-tax profits.
Annual dividend payments by the same firms during this period have jumped up by around 11 per cent, while at roughly the same time average household water bills have risen by around 8 per cent.
To put it simply, the British public are being ripped off and this is a national scandal.
As mentioned, three of these companies have, since 2010, paid more out in dividends than they made in pre-tax profits over that period.
In 2017 alone, they issued over £1.6 billion in dividend payments — an increase of 24 per cent on 2016. This was over twice the amount they made in pre-tax profits.
Thames Water’s institutional owners, which include 11 pension and sovereign wealth funds, such as the Canadian fund Borealis, the Abu Dhabi Investment Authority and the China Investment Corporation, will not receive a payout in the year to June 2018.
These investors own Thames Water through a holding company called Kemble Water. Thames Water will make £26m in dividend payments into this structure to help service debt, which stood at £11bn in October, up from £10.75bn in June.
The cash will go to a range of financial institutions that hold bonds that back the group.
Six water companies paid out more in dividends in 2017 than they made in pre-tax profits — namely, Thames Water, Anglian Water, Yorkshire Water, Northumbrian Water, South West and Southern Water.
If this wasn’t bad enough, in 2017, these same water companies received £253 million more in tax credits than they contributed in taxes, while increasing the amount they passed on in dividend payments by £324,800.
Collectively since 2010 these companies received almost £500 million more in tax credits than they paid in tax.
Prior to these recent findings, the House of Commons public accounts committee stated in 2016 that water companies made windfall gains of at least £1.2 billion
The reason for this is that these companies operate regional monopolies that have profited at the expense of consumers who have no choice over who supplies their water.
To give more detail, the present system of provision of water and sewerage in England consists of nine large regional private water and sewerage companies, with a few smaller private water-only companies, which both own the entire assets of the system and are licensed monopolies of water and sewerage services in their areas.
This set-up enables them to whack up prices and load up on debt while shelling out billions in dividend payments to shareholders.
Furthermore, despite the promises made when water was privatised, there is no evidence of improved efficiency. The National Audit Office said in 2015 said that the approach of the water services regulation authority Ofwat “does not provide full confidence that leading companies are as efficient as possible.”
Additionally, we have seen 22 per cent of water leaked, while companies continue to be fined for allowing untreated sewage into rivers, causing damage to our health and environment.
These latest figures are further confirmation that our water system is broken and that Labour’s policy of bringing them back into public hands so we see more investment, including to deal with leaks, and lower prices is essential and long overdue.
Labour will replace this dysfunctional system with a network of regional, publicly owned water companies.
As Labour’s shadow chancellor John McDonnell MP has said, “The water industry is quick to waste customers’ money on funding reports by right-wing think tanks to attack Labour, while running from their shameful record.”
And it is not just in terms of Labour’s policy in this area, that the 1 per cent is in a frenzy and seeking to discredit Jeremy Corbyn and McDonnell’s agenda for a Britain for the many, not the few.
With Labour maintaining a healthy share in the polls, the 1 per cent with their political and media backers are desperate to say that there can be no alternative to austerity, including to failed privatisation.
But the truth is, whatever the mouthpieces of the elite may claim, public ownership is common when it comes to water around the world and perfectly possible in England.
Indeed, the systems in Scotland and Northern Ireland remain in the public sector. Welsh Water has been owned by a not-for-profit company since 2001.
Our failing water system is just one illustration of how the current broken system makes ordinary people pay to put excessive wealth in the hands of the few. It’s time for real change.
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