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Fantasy figures on water costs from Labour

Commenting on the alleged costs and savings relating to water in the Labour Party’s new report on the cost of living, Water UK Chief Executive Michael Roberts said:

“These fantasy figures take no account of inflation, which is how real people feel the difference in their pockets. On average, customers have seen water bills going down in real terms for the last 10 years, and they will keep going down over the next five years. And according to Ofwat, bills in England and Wales are £120 lower than they would have been without privatisation and regulation.

“It’s also completely untrue to state, as the Labour document does, that ‘privatisation has not meant more investment’. Investment doubled in the decade following privatisation compared to the previous ten years when the industry was in government hands, and companies have now invested around £160 billion in making our water and sewerage service one of the best in the world.”

Facts about the water industry in England

Since privatisation in 1989 around £160 billion has been invested in the water industry in England, with plans for another £50 billion over the next 5 years. Bills are roughly the same in real terms as they were 20 years ago and there are plans to reduce them by at least 5% in real terms over the next 5 years, meaning that by 2025 there will have been 15 years of falling bills in real terms. Average water bills are now around £1 a day.

Leakage is down by a third since the mid-1990s and is due to be cut by at least 16% by 2025 and by 50% by 2050. Water companies have spent around £25 billion on the environment since 1995, with 10,000 miles of rivers being protected and improved since then. Environmental work since privatisation has resulted in wildlife returning to rivers that had been biologically dead since the Industrial Revolution.

Customers are now 5 times less likely to suffer from supply interruptions, 8 times less likely to suffer from sewer flooding, and 100 times less likely to have low water pressure than they were when the industry was in Government hands.

A major new international survey revealed that the satisfaction rating for Great Britain’s water supply and sewerage services is the second highest in the world. GB comes second only to Germany across 28 countries surveyed, with results 18 points higher than the global average.

The Ipsos poll for the Global Infrastructure Investor Association revealed that 73% of respondents thought GB’s water and sewerage services were good, compared to 55% globally and a 60% rating for the same services in the G8. Britain’s satisfaction rating is well ahead of individual countries such as France, Poland, Sweden and Spain.

Within Britain, water and sewerage is the second highest rated infrastructure sector, just behind airports, with an improvement of 8% on last year’s results. The 73% finding is significantly above major roads and motorways (60%), wind energy (49%), rail infrastructure (38%), and flood defences (32%).

Impact of nationalisation on pensions and savings

If a future government only paid a fraction of the market value for the English water industry if it took it over there would be a substantial impact on pensions invested in the industry.

In total there are 67 UK pension funds identified by the Global Infrastructure Investors Association with investment in the English water industry, with 4,011,717 members of public sector schemes and 1,768,942 in private sector schemes.

Pension funds affected include the 158,099 members of the UK Mineworkers Pension Scheme, the 370,142 people in the Greater Manchester scheme for local authority workers, and the 134,339 members of the Merseyside local authority pension fund. Around 350,000 workers at Tesco and more than 300,000 BT workers would also be affected by the impact of nationalisation on pension funds.

Economic consultants NERA have estimated that households in the UK could lose an average of nearly £1000 each under Labour’s nationalisation plans. A report by NERA shows that if a future government paid less than fair market value for water and energy networks and Royal Mail – for instance, net asset value – the loss to average households would be in the region of £600. But if shareholders did not get any compensation at all, that figure would rise to £960.

The figures are calculated based on direct losses from pensions and savings, and indirect losses on holdings of other investments such as UK debt or gilts.