2 weeks Ago
Greedy water companies should be allowed to go bust rather than hike our bills, says SAM BARKER By Sam Barker, This is Money Updated: 04:48 EDT, 28 October 2024 e-mail 3 View comments Let's all shed a tear for those poor, beleaguered water companies. Not only do they have to deal with pesky questions about why they are pumping so much sewage into seas and waterways, now many need to hike household water bills to ensure a proper service. Some want to almost double customers' water bills between 2025 and 2030.
That's right - water firms are asking regulator Ofwat for permission to increase bills by as much as 84 per cent by 2030, to pay for improving the nation's pipes and sewers. Troubled waters: Water firms have come under fire for the state of sewage in the waterways The biggest offender is Southern Water, with the previously mentioned 84 per cent planned rise, but it is by no means alone. The average bill increase that water companies are asking for is a staggering 40 per cent.
The sheer gall of these proposed bill hikes is an insult to every water billpayer in the country, and I'll explain why. But first let's recap the myriad of foul-ups by water firms that have led us to this sorry situation. RELATED ARTICLES Previous 1 Next Water firms warned: Rise in bills must not line chiefs'.
.. Moody's warns water sector outlook remains 'negative' amid.
.. Share this article Share HOW THIS IS MONEY CAN HELP Nearly 1m homes must get Radio Teleswitch energy meters replaced in the next nine months or face losing hot water The problem began with privatisation, 30 years ago.
In 1989, Conservative prime minister Margaret Thatcher sold off water firms. The government of the time wrote off all their debts, some of which amounted to £5billion, and also gave the firms' new owners £1.5billion of taxpayer cash to sweeten the deal.
Each water company effectively has a monopoly on supplying water to its local areas. No debt, a fresh start, no competition - you might think these were pretty hard businesses to mess up. And you'd be right in theory, but wrong in practice.
Where these firms messed up was to focus on paying shareholders rather than investing properly in their actual jobs - keeping the water running properly and sewage out of the rivers. Slap a fisherman's cap on me and call me Jeremy Corbyn, but I don't believe water should ever be exploited for profit. It is the most essential natural resource and should always be supplied as cheaply and effectively as possible.
Down the drain: Many water firms have borrowed heavily and are now paying the price The UK is still the only country to have 100 per cent of its water supplied by private companies, and I think we're all beginning to see why we're the odd ones out. Unlike other privatised companies, UK water firms, for reasons known only to themselves, almost never call on their shareholders for cash towards investing in their businesses. Instead, consumer water bills fund the supply of water and the installation and maintenance of pipes and sewers, some of which still date back to Victorian times.
Since privatisation, water firms have spent £160billion investing in the UK's water network. Now, they say they need to spend about £100billion by 2030. Hang on, £160billion in three decades, then £100billion in just five years? What's going on? The answer is the water firms' business model of 'pay shareholders now, worry about the consequences later' has finally started breaking down.
Maybe a few re-nationalised water companies would spook the rest into finally doing the right thing Most of the cash paid out to shareholders has come from water firms taking on debt. To date, water companies have borrowed a cool £60.6billion, but paid out £78billion to shareholders.
Since interest rates began to rise, so too did the cost of paying off that debt. Now, around 20 per cent of every household water bill goes on paying off interest on those debts. But hey, so long as those shareholders get their cheques, right? It is blindingly obvious that if water companies had just managed their upgrade works as they went along, maybe paying the odd dividend here and there, there would be no need for massive debts and no need for a sudden rush for cash now.
The one acknowledgement I would give water companies is that water bills, typically, have never risen very highly year on year, though it seems we're about to kiss that goodbye. To round off this sorry charade, water firm executives were paid out £9.1million in bonuses last year, with overall pay packages totalling £20million.
All that while sewage leaks into waterways doubled in 2023 and around 20 per cent of drinking water was lost to leaky pipes. Great work guys - Mr. Bean would have done a more competent job, and at least we'd have had a laugh about it.
Ofwat now has a decision on its hands. To stick to its guns and allow limited price rises, or to cave to water company demands. The former still allows price hikes averaging 21 per cent, although this is better than letting water companies have their way with typical rises of 40 per cent.
Frankly, I would ban all water bill price rises to pay for infrastructure improvements. Water firm shareholders have had it easy, and now they can stick their hands in their pockets by way of saying thankyou for three decades of creaming off the top. Failing that, my vote would be to cap or ban the planned price rises and let the water companies whinge all they want.
If they can't balance their books fairly, they only have their own greed to blame. The greedy water companies can either sort their act out in a way that's fair to consumers, or they should be allowed to go bust. Maybe a few re-nationalised water companies would spook the rest into finally doing the right thing.
SAVE MONEY, MAKE MONEY 3.75% AER Var. 3.
75% AER Var. Chase current account required* Learn More Learn More 4.91% 6 month fix 4.
91% 6 month fix Prosper rate boost on GB Bank Learn More Learn More Free share offer Free share offer No account fee and free share dealing Learn More Learn More 4.84% cash Isa 4.84% cash Isa Flexible Isa that now accepts transfers Learn More Learn More Dealing fee refund Dealing fee refund Get £200 back in trading fees Learn More Learn More Affiliate links: If you take out a product This is Money may earn a commission.
These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. *Chase: 3.
69% gross. Ts and Cs apply. 18+, UK residents Share or comment on this article: Greedy water companies should be allowed to go bust rather than hike our bills, says SAM BARKER e-mail Add comment Some links in this article may be affiliate links.
If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products.
We do not allow any commercial relationship to affect our editorial independence. More top stories.
