Bills up, dividends up, and the worst polluters in Britain. It's time to bring the water companies back into our control...
The great water robbery
WORKERS, OCT 2006 ISSUE
Water companies in Britain are robbing the people, depriving them of the use of water, polluting it, and failing to provide security of supply for the future. They are losing 3.6 billion litres every day through leaks. In 2001, Thames Water lost 181 million gallons a day; it is now losing even more – 241 million gallons a day, 30 per cent of its water. It is imposing hosepipe bans on 14 million homes, and threatening standpipes next year, having just avoided one this summer.
The industry regulator Ofwat decided not to fine Thames for its failure, for the fourth year in a row, to reduce leaks as agreed. This is no surprise, since the firm, Halcrow Management Science, which produced the "independent" report into its failings, works for Thames. Ofwat eased the company's leakage targets for the next two years and is also allowing all the water companies to raise their prices by 4.2 per cent on top of inflation.
Thames is responsible for more incidents of industrial pollution than any other private sector company. This includes sewage spills at Swindon, Cholsey and Stevenage. Severn Trent and Southern Water also figure in the top ten polluters.
The water sector is responsible for more than a quarter of all serious industrial pollution incidents, making it the worst polluting sector of British business. The same three companies also face huge fines for missing agreed target times for rectifying supply interruptions and sewer flooding and for responding to complaints and billing enquiries. Severn Trent has to pay more than £110,000 to 5,000 families in North Staffordshire when taps dried up from 2 to 4 July.
Average water bills have more than doubled since privatisation. Severn Trent's profits rose by 18 per cent last year, United Utilities by 21 per cent and Anglian Water's trebled to £2 billion. Thames Water wants to raise prices by 24 per cent by 2010, on top of its 18.3 per cent rise from April 2005, and the 4.4 per cent rise in April this year, to add to its bumper pre-tax profits (up 31 per cent to £346.5 million last year).
It paid a record £216 million in dividends to its owner, Germany's RWE, 52 per cent up on the previous year, while it spent just £181 million on fixing leaky pipes. RWE's Chief Executive Officer got £8.1 million last year. Between them, the five-man board of RWE get £24 million every year. Since 2000, it has taken £800 million in dividends. Just from 1990 to 1996, its dividends totalled £7 billion. RWE's profits rose to 4.1 billion euros for the six months to June, up from 3.5 billion a year earlier.
RWE is trying to sell Thames for £7 billion. Private equity firms, like the buyout specialists Terra Firma and 3i, are interested. They have no industry experience.
The Daily Express said in an editorial in 2003, "The privatized water companies knew that their network was wearing out. They have had years in which to set aside money to pay for the work but it seems that, instead of doing so, they preferred to reward their shareholders and enrich their directors."
The Institution of Civil Engineers says that Britain must invest in new water resources, including reservoirs, to guarantee long-term security of supply. Since privatisation in 1989, there has been little investment in new reservoirs. We need to invest in new and upgraded infrastructure, in research and development for innovative alternatives e.g. improving capacity and quality for recycled water and transferring water between regions through a National Water Grid.
Privatising the rain
In the past ten years, three giant global corporations, France's Suez and Vivendi Environnement, and Thames, have seized control over the water supplied to almost 300 million people in every continent. Vivendi increased its water revenue from $5 billion in 1990 to over $12 billion by 2002, RWE from $25 million in 1990 to $2.5 billion in 2002.
What are the results? These companies claim to be "passionate, caring and reliable", as one company states, yet they push for higher rate increases, frequently fail to meet their commitments and abandon a waterworks if they are not making enough money. As Suez's Chief Executive Officer said, "Water is an efficient product. It is a product which normally would be free, and our job is to sell it." In France, charges for privatised water services are 13 per cent higher than for public services.
For two months in 1998, after privatisation, more than three million residents of Sydney were forced to boil their drinking water to kill parasites. Fifteen months after the city of Adelaide signed a contract turning over its waterworks to Thames Water and Vivendi, the city was engulfed in a powerful sewage smell, "the big pong".
New Jersey, Buenos Aires, Bogota, Manila and Jakarta have all experienced problems after privatisation. In 1996 Hamilton in Canada experienced its worst sewage spill ever, when 48 million gallons of untreated human waste, heavy metals and chemicals flooded into Lake Ontario. Atlanta, Georgia, gave control over its water to Suez five years ago, and quality and service dropped. The city returned control to the public utility.
In Cochabamba, Bolivia, the water bills doubled after Aguas del Tunari, a Bechtel subsidiary, took control of the city's waterworks in 1999. The contract allowed the company to close down people's private wells unless they paid Aguas del Tunari for the water. Union leader Oscar Olivera said, "They wanted to privatise the rain." The city's people organised a referendum. Most voted to end the contract and forced Bechtel out of the country. Similarly, in 2000 the people of Grenoble succeeded in returning their water and sewage system to public control.
In Iraq, the US state put Bechtel in charge of rebuilding the water and sewage systems. But, as the US Agency for International Development reported, "Baghdad's three sewage treatment plants, which together comprise three-quarters of the nation's sewage treatment capacity, are inoperable, allowing the waste from 3.8 million people to flow untreated directly into the Tigris River." A UN survey in May 2004 found that 80 per cent of families living in rural areas had no safe water. Only 64 of 249 planned water projects have been completed.
In 1999, South Africa initiated five water privatisation programmes, aiming to make people pay the full cost of having running water in their homes. As Nelson Mandela had said, "Privatisation is the fundamental policy of our government. Call me a Thatcherite, if you will." Consequently, ten million South Africans had their water cut off for various periods, forcing people to get water from polluted rivers and lakes, leading to South Africa's worst outbreak of cholera. More than 140,000 people were infected and 265 died.
The Congress of South African Trade Unions (Cosatu) says that 98 per cent of whites, but only 27 per cent of blacks, had access to clean water in their homes in March 2001 – a smaller proportion of the population than in 1994. In rural areas, only 2 per cent of blacks had indoor plumbing. Two million people have been evicted for not paying utility bills. Many poor families pay 30 per cent of their income for water. Despite South Africa's rating by the United Nations Development Index as a middle-to-upper-income country, one child in 22 dies before reaching the age of one, often from diarrhoea caused by poor water. The 13 per cent of South Africans in the white minority is 18th on the Human Development Index, equal to New Zealand. The black majority is 118th, in line with Bolivia. Of all the countries in the world, only Guatemala has a wider gap between rich and poor.
In 2004, the Organisation for Economic Co-operation and Development concluded its study of privatisations in sub-Saharan Africa, "profit-maximizing behaviour has led privatised companies to keep investments below the necessary levels, with the result that rural communities and the urban poor were further marginalised."
The European Commission has been driving privatisation of all our utilities, and its new EU-wide water regulations should mean fat new contracts for the water giants. Since 1998, Vivendi and Suez, backed by the European Bank for Reconstruction and Development, have secured water concessions in at least 23 major cities and districts in Eastern Europe.
The big three are also moving into the USA, buying its largest private water utility companies. They have increased their lobbying and federal election campaign spending. In Washington, they have already secured beneficial tax law changes and are now trying to persuade Congress to pass laws that would force cash-strapped municipal governments to privatise their waterworks in exchange for federal grants and loans. It is estimated that US cities will need $300 billion over the next two decades just to maintain their aging waterworks.
Water, like air, is a necessity of human life. It must not be treated as what Fortune magazine calls, "One of the world's great business opportunities. It promises to be to the 21st century what oil was to the 20th: a precious commodity that determines the wealth of nations." By 2002, the six most globally active water companies ran drinking water distribution networks in at least 56 countries, up from 12 in 1990. Yet private companies still run only about 5 per cent of the world's waterworks.
In 1989, Blair wrote, "The major utilities – gas, water, electricity and the oil, postal and telecommunications networks – are uniquely important to the national economy. Their operations underpin the rest of industry. We believe that the great utilities must be treated as public services and should be owned by the public – by the community as a whole."
Public utilities offer better, cheaper and fairer water services than private firms. Countries need to keep water in public hands, under democratic control.