Water Woes
BEN BRUGES castigates the woeful record of Southern Water and wonders whether the company should be abolished.
Recently Southern Water, for the second time, smeared excrement all over Bulverhythe and pumped watered-down faeces onto St Leonards beach. It also left Rye without drinking water. Meanwhile Alexandra Park has been continually poisoned, possibly for the last two years. It took concerted effort from local residents to get Southern to even investigate it.
When Priory Meadow was flooded, and an eel was found swimming in the street, it resulted in local businesses closing down. The subsequent report said that the water company “has yet to locate documentation which provides an assessment of its flood risk implications.” Which points to a stunning level of incompetence… or was it simply a lie as they hadn’t made any flood risk assessment?
Southern Water is £5.6 billion in debt on an annual £792.5 million in revenue. To turn that amount of revenue (household bills are an average £401 a year) into debt is a stunning achievement. Margaret Thatcher first nationalised the industry, wrote off all of the accumulated debt, then handed over the regional monopoly cash-cows to the private sector, underselling them. Water companies started with NO debt. The debt they are now in is self-created.
Keith Lough, Chair of the Board, (£296,400 annual remuneration, going up to £371,000 next year) states that the way they have learnt from five major incidents in the last year will help them “serve customers and communities better in the future”. Five! Five that were in Hampshire and Kent, not East Sussex. We don’t even count as a ‘major incident’.
Chief Financial Officer, Stuart Ledger, (£170,100 annual remuneration, before bonuses) is pleased that SW have completed 98% of the actions in the undertakings agreed with Ofwat in 2019. If true, what does that say about Ofwat? We still ended up with a shit-show. Perhaps those ‘requirements’ didn’t go nearly far enough? In addition, Southern is still subject to a number of ‘Drinking Water Inspectorate’ notices.
Ledger told Bloomberg that ‘large amounts’ of infrastructure investments were needed which wouldn’t be coming from the public purse, adding “I think a private model is the best way of getting the capital into the water industry.” Yet Southern hasn’t paid dividends to external shareholders since 2017 and won’t do so until 2025. Perhaps you can see the obvious problem? How do they think they will get private investment when they can’t pay out dividends?
He also ‘fully expects’ to receive a two-star rating for their Environmental Performance Assessment from the Environment Agency. I have no clue of the worth of a two-star rating, but note that this is for their self-assessment, not for things actually done.
Lawrence Gosden, CEO since 1 July 2022 (£427,700 annual remuneration going up to £480,000 next year before bonuses) says: “We are at the beginning of a long journey to reduce our industry’s reliance on storm overflows.” A long journey? Brace yourselves Bulverhythe. He continues: “We cannot blame the weather for operational issues and water outages that we experienced this year.” Indeed. So that would be incompetence and lack of investment. The next investment period is 2025–30, after which ‘maybe’ the multiple issues will be addressed. I’m not holding my breath, or, rather, I will still be holding my nose.
In the couple of years that they themselves describe as ‘poor’, and I would describe as ‘a disaster’, they awarded themselves a bonus that amounted to 22% of their salary. So the CEO cost us £521,794 – half a million – per year. And will cost considerably more next year.
The board as a whole cost us £2,146,500 per year. Before bonuses. Over two million for a talking shop. Each year. The same board who have seen the company reduced to a Standard & Poor BBB financial rating only one step above ‘junk’ or speculative. Standard advice is to not invest in BBB companies. So where is this private money going to come from?
Perhaps we can look to the general election to solve the problems? Sally-Ann Hart has publicly ‘regretted’ privatisation, but is opposed to nationalisation. Hardly a coherent position. It’s not actually clear what national Conservative policy is, but anyway, who cares? they are set to lose.
Opinion polls suggest that between 69% (Survation, 2022) and 79% (Engineer, 2022) of the public think that water should be re-nationalised. Close on 300,000 people have signed a petition calling for water to be returned to public ownership. It’s a hugely popular policy. Maintaining the current system that syphons off profit and public money while running the service stunningly badly? Hugely unpopular.
Legally and ethically, there’s no reason to ‘buy’ the utilities back. The vultures have made their money stashed away in the Cayman Islands (which is part of Southern’s back story), they inherited a clean and debt-free industry and have trashed their record on both. They have absolutely no ethical right to be paid a penny more.
In three decades, the nine main water and sewerage companies have run up debts of almost £54bn and paid out dividends of £65.9bn while overseeing a lack of investment. Ethically, that’s theft. Presumably it’s legal.
So vote Labour, get a public service back and remove the vultures? Unfortunately not.
Labour, under Starmer, has back-tracked on the promises made at the last election, they will no longer renationalise key services like water and energy. They have two policies for water, both are a mistake for the same reason – they maintain the same system that put us in the merde.
Rachel Reeves, Shadow Chancellor, has said that “nationalising things… just doesn’t stack up against our fiscal rules.” Rules that she set up herself in order to prevent spending on nationalisation. So what WILL Labour do?
Firstly, Labour will set up Ofwat2 without saying how Ofwat2 will be any better than the disaster that is Ofwat1 or how they will put things right. In the case of Southern, Labour is saying it won’t get more public money, and the reality of the market (see above) is that they likely won’t be attracting sizable private investment. No change then.
Secondly, Labour will give Ofwat2 the power to ban bonuses “in certain circumstances”, as if they don’t think now is bad enough to sack them all. As a policy it’s performative. It will simply make people think something is happening when it really isn’t. Before long the anger and attention will have dissipated, they hope, and we’ll go back to funnelling public money into private hands.
Meanwhile, Bulverhythe, our beaches, our parks, our drinking water, our riverways will all suffer.
Southern Water’s annual report: southernwater.annualreport2023.com
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