Water crisis in the United Kingdom has reopened the privatization debate

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solo12 July 2023Last Update : 2 months ago
Water crisis in the United Kingdom has reopened the privatization debate

“The sad reality is that personal greed is increasingly taking over the world… The water sector has become the biggest fraud story in Britain,” an analyst told AFP.

Fears Britain’s biggest water company is on the brink of collapse, decrepit railways are repeatedly attacked, homes hit by exorbitant electricity and gas bills: Britain’s key sectors decades after controversial privatization are in trouble.

Under the Conservative governments of Margaret Thatcher and John Major, state-owned companies were broken up and sold to the private sector in the 1980s and 1990s.

The move brought new investment but also huge executive bonuses, shareholder dividends and massive debt.

Thames Water, the company that manages the debt-ridden London region’s water supply, announced on Monday that it has raised €880 million from its shareholders.

But the company, whose financial stability worries even the British government, has a debt of around €16 billion.

The Conservative government said in June it was prepared for any eventuality, amid concerns Britain’s biggest water company could sink.

Serving 15 million customers in and around the British capital, Thames Water – along with other water suppliers – has been repeatedly in the news in recent months for dumping raw sewage into the country’s waterways.

According to the press, the authorities are working on an emergency plan that – if necessary – could allow the state to regain control of the Thames waters.

Such renationalization would come at a high cost, yet the idea is popular with voters. one 2022 yougov poll found that a majority of Britons believe that trains, water and energy should be placed under the public sector.

delays and cancellations

Right-wing conservatives have long been in favor of privatization.

However, the opposition Labor Party has scrapped plans to renationalise water, energy and the Royal Mail postal service, although they still plan to bring the railways under state control.

“It is easier for the rail sector because it is already largely nationalised,” Hugh Willmott, a professor at London’s Bayes Business School, told AFP.

In fact the UK’s railways have never been fully privatised, with state funding given to private operators to run and upgrade their services.

Some claim that the huge bonuses these companies pay to their shareholders is tantamount to transferring taxpayers’ money to private individuals.

The authorities have also implemented temporary renationalisation of some poorly managed operators. In May, they took over control of the TransPennine Express, which ran in northern England and parts of Scotland, amid increasing delays and cancellations.

The impact of privatization on public companies has been criticized by several unions, while rail workers, doctors and postal workers have walked out in recent months over pay and conditions.

One crucial area remains under state control: the UK’s National Health Service (NHS), which has just celebrated its 75th anniversary but is also facing a deep crisis.

Speaking to Euronews in January, experts said staff shortages – exacerbated by Brexit – and chronic underfunding had helped bring the service to its knees.

“When it was privatized in 1989 … the water sector was hailed as a success of the privatization program under Thatcher,” independent analyst Howard Wheldon told AFP.

He added, “The sad reality is that, in a world dominated by personal greed, the water sector has become Britain’s biggest fraud story.”

“In 34 years of privatization, water bills have skyrocketed.”

Meanwhile, water companies took on more than €70 billion in debt during this period.

Water companies have also come under criticism for dumping vast amounts of sewage into rivers and the sea, amid a lack of investment in the country’s 19th-century Victorian-era water system.

While water companies have been privatized in England, the situation is different in other parts of the UK, where they are not-for-profits.

Some have argued that privatization helps reduce funds for investment by benefiting shareholders.

“Would nationalization, itself a long and costly process, be bettered by better regulation of the private sector?” asks Professor Len Shackleton of the pro-free trade think tank The Institute of Economic Affairs.

“Certainly, the cost will go down if no dividends are paid. But public borrowing always has a cost. (…) Don’t assume that nationalization is a panacea”, he warned.

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