The Labour party claim authorised sewage discharges have increased by 2,553% in the last five years.
Social media seems outraged by images and video clips of sewage outfalls working at full capacity and signs erected on beaches by local authorities warning swimmers not to swim in water contaminated by human faeces. This is 2022 and we are supposed to be an advanced economy. It's a joke isn't it?
I was among those who believed the government in the 1980s when they said we would benefit from privatisation with more investment and lower bills. In fact what has happened has been the absolute reverse. Since privatisation not one new reservoir has been constructed while the population has increased significantly.
In fact some reservoirs have even been sold off!
The companies themselves are I believe nearly all (if not all) owned by foreign investors registered in tax havens, paying billions in dividends. I read this has been as much as £72 billion since the early 90s. CEO's are paid eye watering sums in salary and bonuses. Householder bills have soared during the same period.
Yorkshire Water for example is owned by Kelda Holdings through a complex series of holding companies and is incorporated in the tax haven of Jersey. Kelda is owned by various overseas investment and sovereign wealth funds, including: RREEF Pan-European Infrastructure Fund (23.4%) Gateway Infrastructure Investments L.P., Gateway UK Water L.P. and Gateway UK Water II L.P., (managed by Corsair Infrastructure Management L.P.) (30.3%) Prudential (10.0%) and SAS Trustee Corporation (10.0%).
It is a license to print money. Liz Truss doesn't even think companies should be doing public good at all but should maximise profits at all costs. And they do.
I see there are some Tories now saying the regulator (OFWAT) isn’t doing its job but they set it up! In any case I am beginning to think no amount of tinkering with the regulator is going to fix the problem.
The same sort of arguments are being made about the energy sector and the railways. Recent polling suggests a reversal in public thinking about the ‘benefits’ of the Conservative’s privatisation agenda. As far as I can see, the only benefit nowadays is that you can get a phone line installed a bit quicker. Everything else is far more expensive and the service not as reliable.
In the 90s I recall Tony Blair having a hard job getting the Labour Party to drop clause 4 of their constitution which set out the party’s ambition for the common ownership of industry. Gaitskell tried to ditch it in 1959 and couldn't. That Blair thought he had to do it and that the membership finally accepted it is an indication how well the Tory party had done in convincing the electorate that nationalised industries were somehow bad.
I wonder if the moment hasn’t come to start a debate about reinstating clause 4?
Personally, I now think the privatisation of chunks of the British economy was driven by a lack of confidence in ourselves. It is not that different to companies who outsource something to others in the belief that there is someone else, somewhere who can do things more efficiently than they can.
Tory politicians in particular have a touching faith in private industry and a corresponding lack of it in the bosses of nationalised businesses. But are they really that different?
I remember once listening to a presentation by an executive from the American owners of the company I worked for. It was about the way they operated in the states and how we should copy their methods and among the slides was one about the 80/20 rule.
You may know it as the Pareto principle which says that for many outcomes, roughly 80% of consequences come from 20% of causes. In other words, a small percentage of causes have a disproportionate effect. He used this rule to show that the US business made 80% of its profits from 20% of its customers or - as our American presenter put it - ‘we tend to screw our friends.’
Later, with another US company, the group owned a very large (80,000 tpa) stretch film plant in Belgium. The film was sold in 20kg reels for automatic pallet wrapping systems. It was high quality stuff but the price they sold the film at varied from £700 to £1500 per tonne for the same product! How?
Existing users with lazy buyers who didn’t get competitive prices from other suppliers paid the most. Users who bought from competitors got the lowest quotes, lower and lower every year until they switched. This meant the competitors either lost the contract or matched our offer thus squeezing their profits.
When the users finally switched, they would find the price increasing each year until it was closer and closer to the maximum. This is how insurance works isn’t it? Or any number of other businesses. They rely on lazy customers and a few good lunches to keep prices high. In other words, screwing your friends.
Now imagine what would happen if that business was a monopoly. Which users would be paying £700 per tonne? Let me enlighten you. None of them. They would all be paying £1800-£2000 per tonne or even more, as much as the supplier could squeeze. They would do this by raising prices above inflation imperceptibly - boiling the frog - so that you hardly noticed, until you did.
As far as I can see, the analogy is this:
You own a business supplying a service to your family that you cannot do without at £X per annum. It makes a small loss occasionally so your costs are £X + the small loss. Because it makes a loss, you decide to sell the company for cash plus a share in the future profits. The company is then taken over by a foreign business and over the years stops declaring profits in the UK but instead increases the price and sends huge amounts of 'management charges' to its ultimate holding company registered in a tax haven where large profits are then distributed to the shareholders.
Worse, the UK management are paying themselves handsomely, taking foreign holidays and living in big expensive houses. Your bill is now 2(£X+the loss). You get no profits.
How have you gained?
