Water torture - Privatisation leaves us high and dry

Brighton news sheet Schnews takes an irreverent look at the privatisation of water supplies in the UK, which since 1988 has lead to huge price hikes for users and bumper profits for corporations – a situation being repeated the world over.

Submitted by Steven. on March 20, 2006

Corporations have to splash out billions every year to persuade us to buy unneeded crap. But no such problems exist when they have a grip on more essential, life-sustaining, natural resources, like water. You don’t need to fork out millions for flashy PR men and mount big dollar advertising splashes to flog H2O. Who has to persuade us to use water? They’ve got us over a barrel on that one.

Privatisation was supposed to bring competition, but if a water company decides to rip you off for the water you use and can’t be bothered to repair cracked pipes, alternatives are in short supply. Worse still, the water corporations’ focus on profits at all cost makes them unable and unwilling to do anything to meet the current water shortages, as money that could have gone into maintenance leaks away into shareholders’ pockets.

Here in the UK the government spent most of the last 150 years (and loads of taxpayer cash) buying up the water companies, convinced that private corporations are not the best organisations to deliver such an essential service. All that changed in 1989 when the Thatcher government flogged off the lot under the 1988 Water Act. And in case no one was interested in picking up a monopoly or two, the firesale came with some additional incentives; £5 billion worth of debts owed by the water authorities would be written off and a £1.6 billion subsidy would be given up front. Monopoly, debt write-off and a cash incentive still not enough for you? Well, how about having the companies at a bargain basement 22% discount too?!

Unsurprisingly pre-tax profits of the 10 water companies then rose by almost 150% in the first 9 years of privatisation. OFWAT, the sector’s regulatory body, identified three main components of customers’ bills: operating costs, capital charges (for investment and renewals), and operating profits. Over the period since privatisation, operating expenditure as a proportion of bills has shrunk; the capital charges have risen; but operating profits, which have more than doubled, account for virtually the entire increase in customers’ bills. And the tide shows no signs of turning.

In the week when Thames Water announced that there would be a hosepipe ban in London, the company’s shareholders also enjoyed a 10% profit. No “cash drought” on the horizon then? Although it’s raining cash for investors it’s more like a golden-shower for the less fortunate customers. Not only has OFWAT agreed to further massive price hikes, but Thames Water also manages to lose over a third of the water through the antiquated Victorian pipe system that they just can’t seem to afford to fix (pissing away 1 billion litres a year, enough to fully supply Birmingham). The company had agreed an investment plan with the regulator, but then curiously spent £350 million less on it than planned, the equivalent of 10% off every customer’s bill. So where did that 10% end up? Drained away down the profit plug hole perhaps?

Thames Water, whose 8 million customers will be affected by the ban, says two unusually dry winters have caused “serious” water shortages. Had the water companies invested in infrastructure maybe they wouldn’t be losing a third of our water. In the current climate of “eco-awareness”, the UK fails miserably in terms of utilising our rainwater. Only a desultory 5% finds its way into our water supply. Our suppliers whinge and moan about shortcomings in the weather, but can’t be bothered to dip into their piggy banks to bale us out – maybe saving it all for a rainy day.

Thames Water did, however, last year feel flush enough to throw a £2.2 million pay-packet at their top four directors. All in, the German owned company’s liquid profits came in at a cool £385.5 million. Londoners must have experienced that sinking feeling, as they suffered a 21% increase in their water bills.

And how likely is it that things will improve now that things are hotting up for all of us climate-wise? Being able to plant your vegetables out a month earlier than usual is not the only symptom of global warming and climate change; the country’s water supply is evaporating at such a rate that hosepipe bans, showering instead of jumping in the bath and putting a brick in your cistern may not be enough to prevent us from getting a lot thirstier yet. With more cars on the road and planes in the sky carbon dioxide emissions will only keep on rising. But don’t worry - the free market will save us…

The idiocy of water privatisation has become a global pandemic (would that be Evian Flu perhaps?) Africans have long been without a proper water supply, but private companies (who picked up local water companies at bargain basement prices during a spate of privatisation in the 1990s) have still been flooding customers with higher bills. According to a report by the University of Wi*censored*ersrand, 22,000 people in Johannesburg are disconnected from water supplies each month because they can’t afford to pay steeply rising water bills. The problem affects the whole country - in a population of 44 million, 10 million South Africans have had their supplies cut. The result? 43,000 deaths from diarrhoea last year, and an outbreak of cholera affecting 135,000.

“I would say they are criminals” says Pascal Kerneis from the influential lobby organisation European Services Forum. No, not the water companies, obviously! He reckons campaigners against water privatisation are just plain stupid not to think that water is best delivered by corporations. Pascal and his cronies lead the drive to include water in the 5th chapter of the General Agreement on Trade and Services (GATS). The European Union has also been pushing hard to include water at recent WTO talks, which are host to the negotiations for a range of GATS agreements aiming to carve up the planet for the general consumption of profit-hungry multinationals. Sustained pressure from a range of activist and citizens’ groups has recently succeeded in getting the WTO to drop the water proposal from the current GATS discussions, but it’s surely only a matter of time before the constant drip, drip of corporate lobbying erodes common sense.

The GATS agreement would have been another way in for the corporations - who can currently only hope to persuade unwilling governments to flog off their public infrastructures through the ‘conditions’ which are attached to any International Monetary Fund or World Bank loans. Whilst this recent victory has made it harder for the corporations, many people in the hottest parts of the planet still can’t afford to pay their bill. This week, The Fourth World Water Forum takes place in Mexico City, and will look at how anti-privatisation activities are breaking the corporate grip on our water supplies.

Edited from www.schnews.org.uk

Find out more at www.comda.org.mx or get to grips with GATS by visiting www.corporateeurope.org/water/gatswater2006.pdf - and pay a visit to the Public Services International Research Unit’s briefing papers on water privatisation across the globe, including the UK at www.psiru.org