If we are to maintain public support for a privatised water industry, bills must come down
Privatisation has been good for the water industry with improvements in infrastructure and supply – renationalising would see those benefits go down the plughole, warns Neil Parish
Labour wants to renationalise the water industry. But plans to do so are as leaky as the pipes that privatisation has now replaced. It’s a flawed policy based on ideology over evidence.
Years of underinvestment in our water infrastructure meant that by the time the industry was privatised in 1989, we had a creaking, pipe-leaking network. The track record of government-owned water infrastructure speaks volumes – underinvestment, dire infrastructure and spiralling costs.
Take South West Water, in my own constituency, as an example of underinvestment. The 2009 Walker review found my constituents to have some of the highest water bills in the country. But this was not the result of greedy shareholders, as everyone likes to think. According to the review: “since privatisation, South West Water has had to spend a lot on infrastructure to raise the standard of infrastructure to around the same level as everywhere else”. This is the evidence Labour chooses to ignore.
Under public ownership, investment was delayed and kicked into the long grass – forced to compete with spending priorities such as health and education. Yes, bills were lower when the water industry was under public control, but that’s only because private water companies have since had to play catch-up, investing in the broken infrastructure they inherited.
Indeed, since privatisation, we have seen an unprecedented £140bn investment in our water network. While consumers have had to pay higher bills, they are now five times less likely to suffer from interruptions to their supply. This is good progress and must continue.
The Environment, Food and Rural Affairs Select Committee, which I chair, published our ‘Regulation of the Water Industry’ report in October. We found the water industry is facing a number of challenges. As the UK’s population increases and the impact of climate change becomes more apparent, pressure will be put on water resources and the industry’s ability to provide a reliable and safe supply of water to commercial and domestic consumers. Their investment and expertise will be vital.
With the majority of leaks occurring in difficult to detect underground locations, cutting-edge research and development by private water companies means it is now much easier to detect a leak. Even now, 3bn litres of water are lost each day through leaks. That’s equivalent to 1,273 Olympic-sized swimming pools – and the money to fix this has to come from somewhere.
As we face hotter summers with more droughts, and colder winters, which see more pipes burst, fixing these leaks to prevent water wastage takes on greater significance. Far better investment comes from private companies and their shareholders than the public purse.
Public ownership would mean 343,865km of pipes become the sole responsibility of government overnight. This includes upkeep, repair of leaks and resilience planning – all of which require investment. The question is: do you trust the government to run things smoothly? Anyone who has dealings with the Rural Payments Agency (RPA) over the years will tell you they want the government running fewer of their affairs, not more.
Further, renationalisation isn’t just the day-to-day drip of the taxpayer funding an additional industry. At budgets, the Treasury would need to factor in long-term planned and unplanned investment, at taxpayer and consumer expense.
And what about the upfront cost of renationalisation? The Social Market Foundation estimated that renationalisation would cost the British taxpayer £90bn. Using this estimate, that would add 5% to our national debt, equal to 13% of all government spending. It is a titanic purchase – and will end the same way.
Today, we are at a critical point. Privatisation has replaced the ageing and underfunded infrastructure legacy of public ownership. Bills must now come down. Fortunately, government forecasts show water bills are set to fall by an average of 4%, in real terms, by 2025.
If we are to maintain public support for a privatised water industry, this forecast must be realised.
Neil Parish is Conservative MP for Tiverton and Honiton, and chair of the Environment, Food and Rural Affairs Committee
Get the inside track on what MPs and Peers are talking about. Sign up to The House's morning email for the latest insight and reaction from Parliamentarians, policy-makers and organisations.