Kate BaylissIt is notable that no other country has copied this fully privatised model of water delivery
Water is not like any other commodity. It cannot be manufactured, we all have to have it, and we have no choice about it.
Countries have different arrangements for managing and financing their water and sewerage. Most water systems are in the public sector, including in Scotland and Northern Ireland. However, in England, unlike most other countries, there is a fully privatised water system. The networks of pipes and pumps are almost entirely funded by customer bills Ė but beyond that we also contribute towards dividends for shareholders.
So in an ideal world, we should know where our money goes so that we can be sure the system is fair. This is all the more relevant as the cost of living crisis has put immense strain on many households. According to Ofwat, more than half of water bill payers report that they expect to struggle to pay a utility bill in the coming year, with many cutting back on non-essential spending in order to manage bills.
Investment in the water sector clearly has to be paid for, and infrastructure is often financed upfront through borrowing to be repaid over several years from company bills, so some interest payments would be expected. But in England water company debts have ballooned since privatisation, and at the same time companies have been paying generous dividends to shareholders. Arguably if these dividends had been reinvested in the water infrastructure, debt costs would be considerably lower.
Given that we all have to contribute to the water system, we should also be able to know where our bills go and who benefits from payments of water company dividends. Some shareholders are pension funds so their water dividends are going towards retirement incomes. But some shareholders are investment funds managed by private equity managers, often via offshore tax havens. In these cases we donít know who ultimately benefits from dividend payments. We do know that pension funds invest in these types of funds, so some of the dividend may reach pension payments that way. But private equity funds pool finances from different sources for investment in global portfolios. So beneficiaries are likely to also include wealthy investors.
A full assessment of whether this is a fair way to manage a water system would need to be able to trace what funds are flowing where and for what purpose. But bill payments often trickle up to shareholders via complex and opaque corporate structures. There are many unknowns. The system is far from transparent and the truth is that we donít know where the dividend payments end up.
But from what we do know, it seems that businesses and households are paying into a system that is likely to be boosting the earnings of the worldís richest, simply through their consumption of water, while pension pots may also benefit. The way we provide our water could be contributing to growing inequality in the UK and beyond. It is worth noting that no other country has copied our model of water delivery.https://www.theguardian.com/environment/2022/nov/30/england-water-is-this-a-fair-system