Tuesday, December 24, 2024
Another argument to take water back into public ownership immediately
The paper says that the company, which serves more than 16 million customers, cut the funds after senior managers assessed the potential risks of such a move:
Discussions – held in secret – considered the risk of a public and regulatory backlash if it emerged that cash set aside for work such as cutting river pollution had been spent elsewhere.
This could be seen as a breach of the company’s licence commitments and leave it vulnerable to accusations it had broken the law, according to sources and material seen by the Guardian.
Thames Water continued to pay staff bonuses worth hundreds of thousands of pounds, and also paid tens of millions in dividends as recently as March this year, while cutting back on its spending promises. The company did so despite public claims from its leaders that improvements to its environmental performance, including on pollution, were a priority.
Sources told the Guardian that internal deliberations about cutting back on the environmental works occurred as early as the end of 2021 and throughout 2022, when bosses weighed up the political and reputational risks of such a move.
Meanwhile, Thames continued to charge customers for the works and Ofwat was only formally told of some of the company’s plans not to deliver these major projects in August 2023. A letter, seen by the Guardian, was sent to the head of the regulator Ofwat, David Black, by the company’s then interim co-chief executive and former boss of the watchdog, Cathryn Ross.
In its response to the Guardian and the 2023 letter to Ofwat, Thames said sharp increases in its costs such as energy and chemicals – which it claims went beyond standard measures of inflation – lay behind its decisions to delay the works.
It told the regulator that it would not deliver 98 of 826 schemes under the water industry national environment programme (Winep) during the five-year window it had promised. The delivery of these projects, which include schemes to reduce phosphorus pollution in rivers, was a key justification for how much Thames was allowed to charge customers.
The revelation comes as Britain’s biggest water company fights for its survival. It is trying to secure £3bn in emergency funding and at least £3.25bn more in equity investment to prevent its collapse, after years of poor performance, fines and hefty dividend payouts.
Winep projects include statutory obligations for water companies with potential criminal liability if they breach their licence by failing to deliver them.
Thames decided behind the scenes to hold up almost 100 projects as early as 2022 without first warning its regulators. Sources said of some of the projects Thames delayed were among the largest it agreed to do when it asked Ofwat for higher bills as part of its 2019 price review.
The cuts to environmental works did not stop the company from paying dividends or bonuses to staff. It continued to pay both throughout the 2020-25 billing period, for which it claimed it lacked the funds to complete works.
Ofwat fined the company £18.2m on 19 December for breaching rules on paying “unjustified” dividends, after the company paid out £37.5m in October 2023 and £158.3m in March 2024. On the same day it also gave Thames permission to increase consumer bills by 35% by 2030.
The privatisation of water has been a disaster. Not only has it led to money that should have been used to improve infrastructure being paid out to shareholders, but it has led to a near environmental catastrophe, with most of our waterways polluted and unsafe.
At the same time water bills are due to soar over the next five years to try and fund the clean-up, putting many families in a situation where they will struggle to pay them.
The government should seriously consider taking these companies back into public ownership.
The government should seriously consider taking these companies back into public ownership.
