6 July 2023

Toxic lead pipes are yet another instance of water companies’ environmental insolvency

Privatisation has led to the fleecing of customers.

Clean air and water are two of the basics for human life, but both require a political struggle to achieve. Weak environmental regulation, a lack of political will, and the dominance of private corporate interests, all go a long way to explaining why we continue to live with poisons such as lead in our water and particulates in our air.

That we used lead, a material that is harmful to our health, to transport water and to make car engines run smoothly was recognised as a mistake a long time ago. Vested interests kept lead in petrol until the turn of the century, but it was banned in the water industry by the 1970s. So why are there over three million lead pipes still in use, according to a Spotlight report?

A failure to invest is one of the defining features of water privatisation and Ofwat’s failure as a regulator. For the same reasons that only 4 per cent of lead pipes have been replaced in the last five years, none of the privatised water companies have planned and built a new reservoir in the last thirty years. The water companies have borrowed, but that money has primarily been used to pay shareholder dividends, CEO salaries and interest payments.

The accountancy expert and left-wing economist Richard Murphy has done an analysis of the sewage companies. They make strong operating profit margins that have over twenty years averaged 38p in every pound paid to them, but despite this huge profit margin there is nothing left over for investment: 20p in every pound has gone on interest charges, another 15p on dividends and 3p on tax.

Privatisation led to the wholesale fleecing of water customers with shareholders walking away with £72bn in pay-outs, while you and I pick up the bill. The interest payments on all that shareholder cash have become one of the largest items on our water bill. We really should be demanding our money back.

Meanwhile, the scale of the investment needed to deal with sewage over-flows is massive. The government says it’s £56bn. The House of Lords says it’s £260bn. Add to that replacing lead pipes and the water companies can only raise this by charging more, borrowing more or getting the shareholders to finally cough up more.

I agree with Murphy that English water companies are now environmentally insolvent. They are surviving in business solely on the basis that they are being permitted to pollute and to potentially damage our health, without picking up the cost.

The failures of water regulation have become blindingly obvious. With rivers of sewage dominating the news it should come as no surprise to find that two-thirds of England’s biggest water companies employ key executives who had previously worked at the watchdog tasked with regulating them. Money talks, and the Ofwat regulators do a familiar walk over to lucrative positions behind the more luxurious desks of the water companies. The regulators have been captured and the first step in replacing lead pipes and stopping the sewage is to replace Ofwat.

The next step is to replace all the enforcement officers lost as a result of cuts during austerity. This has been a false economy, as we end up paying in other ways with polluted, dirty rivers. We need to rigorously enforce all the existing rules and reverse the government’s recent decision to continue allowing sewage dumping. We should collect up the fines and use them to buy back shares in the water companies.

If companies go into administration as a result of tighter regulation, then so be it. I would be very happy for the government to buy them back for £1 each. Pumping sewage into rivers is wrong and we shouldn’t have to live with it for another fifteen years as the government suggests. Nor should we have to put up with even small quantities of lead in water. There is no safe level, the US has acknowledged, and we should do all that we can to safeguard public health.

The water industry has been run as a machine for making money out of water customers who have no where else to go. It is time for government to end the scandal and get some pay back for this injustice.