The burden of Thames Water

Thames Water continues to be a burden on its customers and the public purse. Its latest financial plan agreed in the High Court is just the most recent step in a catalogue of failure, which drew criticism from water campaigners and trade unions as well as protests outside the court.

The company, debt-ridden and poorly performing, announced earlier this year that it would run out of money by 24 March. It unveiled a plan to deal with the problem, by inviting creditors to pour even more debt into the disgraced utility.

Debt free

The alternative was to submit to an effective re-nationalisation, having been privatised free of debt. But the Labour government, though historically opposed to the nationalisation of public utilities in the late 1980s, has no taste for taking on the running of a company at an estimated £2 billion a year.

Creditors submitted rival bids, naturally focused on their own financial interests and not long term service provision. The High Court ruled on Tuesday 18 February that an offer of up to £3 billion should be approved, even though that comes with costs of £300 million in interest and £100 million in fees.

Ugly face

This is the ugly face of privatisation. Previously debt-free utilities acquire more and more debt and investors rake in huge dividends at the cost of gross underinvestment in the network.

Thames’ 16 million customers have suffered rocketing prices and endured waterways polluted with sewage. They now face a further price rise of 35 per cent with little prospect of any significant improvement in service. And Ofwat is still “investigating” delays to environmental improvement schemes.

Little comfort

They will take little comfort from the ineffective regulator Ofwat, even though it refused Thames’ initial demand for a 53 per cent increase. Thames and five other water companies in England are appealing against “final” determinations of customer charges by Ofwat.

This plan for Thames is a sordid state of affairs, solely concerned with the finances of owners and creditors. This is throwing good money after bad, and offers no long term solution. Once again, this government demonstrates its determination to put the interests of private investors ahead of the urgent need for a properly functioning public service.