Wednesday, July 05, 2006

Thames Water and how the Government screwed us again.

Thames Water currently has a big budget advertising campaign full of wonderfully retouched photos of famous London landmarks filled with wonderfully clean, clear water, informing us how much water their new pipes will save over a given period of time.

Pants propaganda

What they fail do do is to tell us how long it will take to install the pipes that will save us the water! An advertising faux pax perhaps? How long will it take?

Here is what I think:

Thames water have successfully hoodwinked the water regulator into allowing them to increase the residential water rates by 24%, under the aegis of needing the extra money to upgrade the incredibly leaky system that we currently have. At the moment a full third (894 million litres of water every day) of all of the water so expensively processed and so urgently needed is lost through leaks.

What have they done with this urgently required money? They made record profits (a 31% rise in pre-tax profits to £346.5m) which they have then paid to the parent company RWE in a massive dividend.

Okay, its a business and being a child of the 80's I can understand that making profits for its shareholders is what its about, but I've got a barren wasteland that used to be a garden in my backyard and I'm not happy!

So why the costly advertising campaign? Now that they have made a huge profit they are trying to improve the public image of Thames Water. Is it to make angry customers like myself feel more confident that they are doing something about the problem and that there will be a solution to the problem in the near future? No it is so that they can sell it; and hopefully make more profit. At the moment it looks like damaged goods, so RWE can't possible find anyone to buy Thames Water, but they are hoping to raise the profile of the company and counteract some of the bad press.

What about the water regulator OFWAT you ask? Why aren't they doing something about this huge social injustice? [I can't believe I just said that!] Well they are pretty much unable to do anything about it. Well due to the fact that they were neutered at the point of inception, not much really. They set targets which the companies can happily ignore without fear of retribution. Reviews are few and far between, and when they are held, what is the regulator going to do, fine the company? That really won't help the customers. If they could prevent the company from keeping more than 5% of its profit if it didn't reduce leakage to below 5% that would be a start, it would certainly give RWE some incentive to fix the leaks.

I blame the government. I don't care which party is in power now, was in power then, or will be in power next, this is ridiculous. Water customers don't have a choice of providers so by privatising the water industry all they have done (and are maintaining) is a sytem of regional monopolies. Everybody knows that monopolies are bad for the consumer when the product or service is essential for day to day living. So why did they do it? To fudge the public borrowing figures so that they looked like they were doing a good job, that why!

It works like this, the water infrastructure for the country costs money to maintain, this money comes from one of two sources, taxes or public borrowing. At some point in the past the government decided that it couldn't raise the level of taxation, and didn't want to borrow money to maintain the infrastructure so they came up with a brilliant plan. Sell the water infrastructure! This would improve the balance sheet twofold, there would be an auction for the services which would raise money immediately and then the maintenance costs for water provision would disappear from the public budget. Brilliant plan, if it didn't screw the population of Great Britain. What wankers! Probably got them re-elected though.

As a consequence ideas at the time of privatisation like a national water grid, which could be used to move water from plentiful areas (like Wales) to areas affected by drought (like London) will never happen. There is no incentive for the private comapnies to spend any money on the infrastructure required to do this.

So what is the solution? The government could do what it did to RailTrack. Effectively re-nationalise all of the water suppliers by making it impossible for them to turn a profit, driving their shares through the floor and then buying the companies back. The problem with this is that it makes it hard for the government to then privatise anything else, at least without guaranteeing huge publicly funded profits for the private companies with no possible risk to the companies taking over the services (London Underground anyone!).

So what is to be done. I'm thinking about emigrating, seems like the only sensible thing to do.


Anonymous Anonymous said...




7/8/06 00:01  
Anonymous Matthew Byrne said...

Hi there Jon,

Like your article.

We came up with a neat idea that we've pitched at Thames Water today that reinforces the Hosepipe Ban Campaign, and saves water.

Take a look:

Matthew Byrne
The Originals

29/11/06 22:35  

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