Liquid Assets

Thames Water, the company holding the monopoly over water supply and sewage treatment in the Greater London area, is in crisis... or is it? The company made a profit of £450m on a turnover of £1.4bn last year, and returned £246m to shareholders in dividends - what crisis?

The other side of the story is that the company's water leakage record is scandalous. They have failed to meet their own targets on leakages from public water mains three years running, and are still replacing Victorian mains in many areas. Surely Victorian piping should have been replaced 50 years ago...

The company defends itself by saying that it has to make a profit or shareholders will not invest. This is simultaneously patronising and absurd, and shows why privately-owned profit-making companies should not be running public service monoplies like water supply. They also argue that they have fixed more leaks than the previous nationalised utility, but this entirely due to the ever-aging network and poor maintenance by said utility.

However, this does not excuse Thames from doing a generally awful job. Surely the first thing the chairman of the newly-formed monopoly company should have said at the inaugural board meeting should have been, "We must replace all of these Victorian pipes." It seems that such an obvious measure was overlooked in favour of cutting rates (relative to previous years' rises) to persuade the public that privatisation was working.

Yet again a privatised public service has failed, and yet again it is not accountable to anyone. The regulator, OFWAT, could fine the company, but they would argue that such action would reduce their ability to meet their targets in future years. (In any case, money raised from such fines goes directly to the Treasury and does nothing to help alleviate water supply problems.) They could also be ordered to cut their rates, but this would bankrupt the company as banks would refuse to offer loans due to "regulatory risk", i.e. the risk of said fines being applied.

In addition, there is no competition in the water supply sector. I am not proposing that there should be - indeed, I would prefer to see the whole system renationalised and amalgamated into a single company - but the gas and electricity supply sector is doing relatively well since market forces were left to do their work.

All this just goes to show that the purpose of privatisation is to move problems in public services away from government ministers and into the hands of unaccountable private businessmen, and a regulator which has no power to do anything to remedy the situation when things go wrong is no regulator whatsoever.