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Michael Roberts

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In the public interest

This piece first appeared in Utility Week 

A number of recent articles in Utility Week have challenged the current set-up of the water and sewerage industry in England, suggesting that a takeover by the State is the best way forward. There are at least three good reasons to steer well clear of such arguments.

First, the claim about overwhelming public support for nationalisation is based on an opinion poll carried out in September 2017. The picture now shows substantially less public support for the idea. A new survey by ComRes shows that only two in five (42%) British adults say they support the nationalisation of water and sewerage services in England – about half of the level claimed by pro-nationalisation voices.

The same poll also showed little appetite for the Labour Party’s idea that local councillors and trade unions should dominate the Boards of the new Regional Water Authorities which would take over the private companies under nationalisation. The ComRes poll reveals that only 33% of the public say they have any confidence in a combination of local councils and trade unions running the water industry.

Or take the issue of trust. The ComRes survey shows that trust in water companies remains very high, with nine in ten (90%) British adults trusting their water company to provide a reliable service and ensure good water quality.

Poll participants were also asked whether they trusted water companies more or less than other industries or organisations. Around three quarters of British adults say they trust their water companies more than energy companies (79%), train companies (77%), newspapers (77%), and the Government (74%), with 65% saying they trusted them more than local councils. Further reasons, then, to question the whole idea of taking water into public ownership.

Second, nothing we have heard so far on the proposals for nationalisation in England present any practical proposals for protecting the environment, improving services or dealing with the big challenges of climate change and population growth on the future supply of water.

Instead of building on nearly 30 years of improvements, made possible by bringing in billions of pounds of private investment to undo the problems left by nationalisation, there’s a real danger that we go backwards to a world where decisions are driven by political short-termism rather than the needs of customers and the environment.

In his recent Utility Week article, Labour Party MP Gareth Thomas acknowledges that lack of investment pre-privatisation was the result of political decision-making. That is exactly our point.

Putting water back in the same constrained public sector funding pot as health, education, defence, policing and the rest risks relegating English water companies once again to taking part in an annual competition for the Chancellor’s support against other pressing priorities for Ministers. It’s a live issue today in Northern Ireland where, due to current public spending constraints, there’s a big gap between the money Northern Ireland Water asked for and what government will give them.

Of course, the English private sector model is not the only way to provide services and it differs from the approach adopted in other countries. But to suggest, as some do, that the industry needs to be publicly owned to be run in the public good, is not supported by the evidence.  A recent study of water and wastewater utilities in six European countries by leading international experts Global Water Intelligence found that the sector in England and Wales has outperformed the nationalised water industries in France, Ireland, Italy and Spain since 1990 against the most important measures on water and sewerage. The water sector in Germany delivers a broadly similar quality of service to that of England and Wales, but at greater expense.

Which brings me to my third and final point.  Like any model, the English system is not perfect: but its critics find it incredibly difficult to credit not simply what has been achieved, based on nearly £160 billion of private investment over the last 30 years, but how far the sector is already moving on from the world which they criticise.

For instance, recent years have seen a change in profile of the investors in the industry, with a growing presence of those who are in it for the long term such as pension funds – including those in the public sector. Combined with the challenging price review currently taking place, this has set the context for lower returns and increased efficiency which will deliver further customer and environmental benefits.

The business plans which are now being finalised with Ofwat are due to commit companies to further investment of £50 billion over the next five years, as well as cutting bills by 4% in real terms, the biggest leakage reduction programme in 20 years, and nearly doubling the help available to people who struggle to pay.

Not only have those plans been prepared after one of the most extensive customer engagement programmes undertaken by any sector, they also include exciting ideas for increasing customer empowerment. And companies’ ambitions to do the right thing go beyond the business plans, whether in the form of our goal to cut leakage by 50% by 2050, or in the active discussions with regulators and government about how we can improve resilience over the longer term.

Far from the sometimes arcane debate about ownership, this is a sector which is working with energy alongside its stakeholders on the most important challenges which it faces.  There is plenty still to do, but there should be no doubting our ability and commitment to operate in the public interest.