Water privatisation was a Tory rip-off from the start. What does that say about the other share offers?

This Site used to discuss the economy with Jonathan Portes back in the early days, so I tend to trust his observations – especially where he had a direct hand in matters.

So his observations on the water privatisation “rip-off” of 1989, in The Guardian, are very interesting.

He says the Thatcher government was not interested in providing value for money to taxpayers or water consumers; all the effort was put into making a “successful” sale – in which the demand for shares was high.

This was an ideological objective: water privatisation was extremely unpopular, with every poll showing that a substantial majority of people were opposed to the policy – so shares were sold well below their value in order to provide an average gain of 40 per cent to investors on their first day of trading. That’s how taxpayers lost out.

Consumers lost out because the political requirement that shareholders must profit hugely meant there was no support for tighter regulations to restrain future bills and/or require investment in infrastructure improvements.

As a result, over the following two decades the privatised water companies paid more than £57bn in dividends, at the same time as running up large amounts of debt, the interest on which is effectively paid by customers.

So water consumers are subsidising the water companies’ profits by paying off their debts for them, while also pay through the nose for the poor service they receive – because Thatcher wanted to pretend that privatising water was a good idea. How perverse!

Professor Portes goes on to say that the head of the Centre for Policy Studies, Robert Colville, provided the most illuminating political reason for privatisation when he said the “single greatest justification for privatisation is competition for capital”.

He meant that, as a public service, water would always be in competition with other priorities, from HS2 to hospitals, and the result would be underinvestment.

But we have seen that the current operating model, in which companies face public sector levels of competition and risk, and get private sector levels of profits and return, is simply not acceptable.

Prof Portes says keeping water in the hands of private companies may not be a bad idea because “governments, especially but not only Conservative ones, pursue stupid, self-defeating policies for short-term political reasons, so it’s worth consumers massively overpaying the private sector to secure the level of investment that is required, even if the public sector could, in theory, do it more cheaply”.

He suggests that the government should renegotiate its relationship with these firms, pointing out that they are contractors delivering a public service and should be treated as such: forced to bid competitively for the right to operate.

From This Writer’s point of view, it looks like a lose-lose situation.

If we accept the claim about government decisions – and I think that is reasonable in the light of the Tories’ huge failures in recent years – then the water firms can’t go back under public control.

But treating them as government outsourcing firms would create a situation where they ended up claiming they could carry out the work required – infrastructure improvements, value-for-money for customers – with less money than they need to avoid bankruptcy, meaning they would eventually go to the wall. Does nobody remember what happened to Carillion?

Is there another alternative?

Perhaps there is. What’s wrong with saying that the profit motive has failed and demanding that water be run by autonomous, non-profit-making organisations, for the benefit of the consumer?


If this is the case with water, isn’t it also the case with the privatised energy firms? With the railways? With all the other Tory privatisations? Why shouldn’t they go non-profit too?

Source: I worked on the privatisation of England’s water in 1989. It was an organised rip-off

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8 thoughts on “Water privatisation was a Tory rip-off from the start. What does that say about the other share offers?

  1. Jeffrey Davies

    They theived the peasants silver ware right under their noses GPO went gas went electric went water went all the things ones need to live robbed by the greedie ones

  2. Darren Woodiwiss

    I have always appreciated the self destructive nature of governments elected through First past the Post and electoral reform will solve most of those issues.

    However I have always thought the use of Coops, with Not-for-profit community benefit objectives, would have achieved much better outcomes. PLCs and their shares are effectively loans that are never repaid that have interest paid on them until the share is liquidated.

  3. Jenny Hambidge

    Do you mean like Welsh Water????? Is that any better or have we been sold a pup there. too ?

  4. John Smith-Warren

    Of course privatisation of the water industry was wrong. Each of the Council owned Water Boards used Rate Payers money to build reservoirs and the infrastructure but when the Boards were privatised did our councils benefit from their sale? No is the simple answer. The only beneficiaries were
    (1) the Tory government and, (2) shareholders

  5. El Dee

    I remember when the Tories ‘sold the family silver’ and all of these arguments were made at the time. At that point the government was responsible for the underinvestment, they simply farmed that out AND made it more expensive.

    If Labour had a conscience it would ensure that these services were brought under public ownership to ensure security of supply. Even recognising that these are services and not businesses would be a start. They could follow the Scottish model where water is a public body and there are no domestic water meters.

  6. Grey Swans

    Admin Grey Swans seeks moral support from trade unions and individuals, please, for the creation of our new Over 50s (saves all ages) party, that would nationalise, at no cost to the taxpayer, all water companies.

    contact through website please:
    www (dot) over50sparty (dot) org (dot) uk

  7. Stu

    If the status quo is maintained and nothing is done we can expect many repetitions of the Flint Water incident in the USA.
    The corporate greed model seems to be the preferred method by the Tories.

    The UK has followed the USA in many aspects creating vast regional differences rather than the “one rule for all” that used to be implemented years ago.
    The USA companies are encouraging this as it makes it far easier for them to operate in the UK.

Comments are closed.