Dirty water - no good for fish, no good for people

Water companies tried to blame climate change for water shortages last summer, rather than their lack of investment and too many leakages. But they are failing badly on water quality too – and that certainly is in their control.

Raw sewage is all too often discharged into our rivers and coastal waters. In 2021, the Environment Agency recorded over 2.6 million hours of sewage spills in England and Wales – 25 times more than in 2016. It was even worse in 2022.

Local communities and other groups have been active in tracking these failures – with little effective response from the companies or the regulator, Ofwat. The government has an Environmental Improvement Plan, with “improving nature” as the top priority, but little idea on what to do about sewage spills – or much else either.

For example, on 12 January, environmental campaigners Surfers Against Sewage (SAS) flagged over 70 sites where sewage had been released within the previous 48 hours.

 An SAS spokesperson said, “…regulation only permits sewage overflows to operate in ‘unusually heavy rainfall’. Yet, the government admitted sewage overflows ‘are being used significantly beyond their original purpose’. It is a blatant and outrageous disregard for our blue spaces.”

Crumbling

SAS alone exposed over 140 potentially illegal instances last year of water companies discharging sewage when there was no rain. They said Ofwat is “…allowing water companies to persistently exploit a public good for their private profit. Ofwat stands by as they let infrastructure crumble and let our waterways die.”

As Dr Ruth Tingay, director of the nature conservation campaign group Wild Justice, said, “We are particularly concerned that a continued lack of action on Ofwat’s part will lead to a collapse in biodiversity, both within rivers and coastal waters, and, as a knock-on effect, in the areas surrounding those waters. This will be disastrous for nature conservation generally and wildlife in particular.”

After growing pressure, Thames Water, England’s biggest privatised water firm, created what it calls a “near real-time” interactive map showing the scale of its sewage dumping in inland waterways through storm overflows.

And that scale is vast, evidenced by regular reports of lengthy sewage discharges into water courses, even at times of low rainfall.

Dee O’Connell, of London Waterkeeper – which has been calling on Thames Water to provide real-time data on sewage releases, told The Guardian newspaper, “…this is important because it gives communities information and enables them to put pressure on the company to invest in local areas to stop this. With this knowledge people can hold the water company to account.”

After privatisation in 1989, the water companies were sold on periodically to new owners, initially to other utility companies, but later to consortiums of banks and private equity and sovereign wealth funds. These new proprietors were interested in cash flow, not water flow, in financial engineering, not hydraulic engineering. They were distant and unaccountable.

Tax free

In the ten years after Australian investment bank Macquarie bought Thames Water, it paid itself and fellow investors £1.6 billion in dividends. It loaded Thames with £10.6 billion debt, and paid exactly no UK corporation tax.

Over half the shares in Thames Water are now owned by a selection of overseas companies, including a Canadian pension fund, a Chinese sovereign wealth fund, and the Queensland Investment Corporation.

Between 1989 and 2018, the English water companies paid out £56 billion in dividends to shareholders. Three of them, Severn Trent, Yorkshire and Anglian, paid out more in dividends in the ten years to 2017 than their pre-tax profit totals. These companies became licences to print money.

Debt

And under the current financial structures, the water companies are now heavily indebted – adding high interest payments to their outgoings and leaving even less for improvements and investment.

In its last year under Macquarie’s control, Thames had to pay a record £20.3 million in fines and costs for dumping raw sewage. In 2018, Thames lost 645.6 million litres a day from leaks. In 2020, that figure was still sky high, at 543 million litres – nearly a fifth of the water entering its pipes.

In 2006, Thames announced a plan to build a new reservoir south west of Abingdon. But it’s taking its time about it. The company’s latest plans are for the reservoir to be on stream by 2037.

Fined

In July 2021, Southern Water was fined £90 million for repeatedly, deliberately and illegally dumping millions of litres of untreated sewage into the sea and rivers over several years.

At privatisation, the government did not give the regulator, Ofwat, powers to prevent all this. In fact, the government gave the companies veto powers over any changes to the terms of a company’s licence.

And The Sunday Times reported on 13 February that Defra is about to open consultations that would give the water companies the opportunity of pushing back on increased fines. The government apparently fears that it would frighten off “investors” – like the ones who have already taken so much out of the industry.

The Environment Agency has never used its civil powers to fine polluting companies. Apparently it does not use current powers because the limit is too low to affect what the companies do.

‘The Environment Agency has never used its civil powers to fine companies.’

But EA chairman Alan Lovell spoke out against the government’s reported wish to increase the limit for those powers from £250,000 to £250 million – describing that as more than what is needed. But as Ashley Smith of Windrush Against Sewage Pollution, pointed out, “The upper limit of £250 million does not prevent the penalty being applied at a lower level.”

Ofwat’s first director-general, Sir Ian Byatt, wrote – long after he had retired – “Customers have been overcharged; dividends have been excessive.” He wrote of Thames Water, “Nearly everyone on the board are investors and one cannot resist the idea that they are more concerned with money than with serving the public.”

Corporations by legal definition, that is, by design, are anti-social beings. The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self-interest, regardless of the often harmful consequences it might cause to others. As a result, left to their own devices, shareholders will enrich themselves and let society go hang.

Underspent

Ofwat warned in December that the water companies are not investing as much as they pledged to improve sewage treatment and reduce spills. Between 2020 and 2022, 14 companies underspent their budget for improving their water network, and eight underspent their budget for improving their wastewater network.

Yorkshire Water spent just 20 per cent of its wastewater enhancement allowance. The main areas of underspending were drought resilience, improvements to sewage treatment works, improvements to storm tank capacity, and reducing spill frequency.

Scottish Water was not privatised, but its performance and that of the Scottish Environmental Protection Agency is deteriorating too. Though its problems aren’t due to excessive dividends, it bears a heavy cost from interest payments on debts from earlier PFI contracts. While SEPA does try to blame excessive sewage discharge on climate change, its evidence for that linkage is scanty. As with England and Wales, the infrastructure is not up to the job.

The theft and waste of public resources, the continued fleecing of the public, the lack of research and development, of investment, of improvement, are a major scandal. Of course, the question is why we put up with it.