July 2006

Thames Water have made a pre-tax profit of £346.5m, but what does that profit represent? A plethora of satisfied customers? The fruit of ingenius water solutions for the Millenium Age? A just reward for a job well done?…. or the bounty from a state-sponsored monopoly? Well, the jury is definitely out on this one!. 

If we ask Thames Water ‘customers’, we may get a different answer from Thames Water.  So, why? 

Thames Water has failed to reach Government targets for fixing leaks for the third year running.  They have also applied for and been granted a Drought Order, while we are getting soaked by heavy summer thunderstorms. There is currently a ‘hosepipe ban’ with further warnings to conserve water or face the possibility of more draconian measures later in the year. This has not gone down well with the Government or the ordinary ‘Joe’ with a yellow lawn.

Thames Water’s website says that the rainfall for the last two winters has been below average and although the reservoirs are full now, they cannot be sure that there will be sufficient water for our needs throughout the summer – hence, the Drought Order. 

In addition, they say that London is built on corrosive clay soil and they have 3000 miles of Victorian pipe work to replace that is already over 150 years old - so this is their reason behind the leakage issue.       

The soil under London and the 150-year old pipe work were both in place when Thames Water took on this franchise – and surely the cost of replacement formed part of their feasibility study when deciding the worth of the franchise in the first place.  You know, business plans and forecasts and things!?  They have the profits, but have failed on their promises, that formed part of their proposal at the outset.

The Government is anxious to be seen to have come down on the side of the ‘everyday man’ on this one, as instead of fining Thames Water for their inefficiencies, Ofwat (the water regulatory body) are getting tough and forcing them to complete works that are estimated to be in excess of £150m.  An embarrassing blow from the common man, but does this solve the problem? Does it give renewed strength to the argument for re-nationalising public utilities? ..or is this just a drop in the ocean (if you pardon the intentional pun) to a multi-million pound company with profits to match.  A ‘Get-out-of-Jail-Free’ card, as it were.

For those that were against the privatisation of basic utilities in the first place; the events of this past year have gone a long way to providing proof that they were right all along. The privatisation of Water, Electricity and Gas have been an enormous money-spinner for those in the position to take advantage, but for the end user, the experience has been anything but the wonderful efficient, low-cost end product that market forces promised.

Even if there were the political will, the costs of renationalising would be horrendous, not to mention any legal challenges, so do not hold your breath. However, events such as these, bring the entire Contracting-out and privatisation issue back under the spotlight, which applies pressure on the Government to ‘do’ something, before the failings of the Rail industry, The Health Service and Education are all brought into the argument. 

The Long Game – Author’s Summary

Everybody likes a happy ending, so maybe we will get one in the end.  Maybe we and our descendants will be able to drench themselves without guilt and spend endless summer evenings plunging into seemingly bottomless pools of affordable life-giving elixir – all for a mere fraction of our disposable income.  All thanks to those that had the foresight to submit the basic requirement for human life (second only to oxygen), over to the free market economy….and what fools we would have been for even questioning – but somehow the realist (cynic?) in me feels that this is all about making money and not necessarily about supplying water.  We British often are criticised for hating anyone who makes money and there is certainly an element of that, as always, but, there needs to be a balance; a more visible balance between profit taking and service provision and maybe these latest moves by Ofwat will start to deliver for the general good, where we will notice it.

Pascodelta.com