With Chief Execs paid millions, where is the resilience in our water companies?
Shadow Environment Minister Holly Lynch writes about the chaos which has seen thousands of homes without water over the last few days and halted production at firms like Jaguar Land Rover and Cadburys.
Last week’s freezing weather presented serious challenges all over the country. However the failure of water companies to supply water to customers has now descended into chaos. With executive pay at these companies out of control and billions of pounds paid out in dividends, this latest resilience failure shows exactly why the current model is broken.
As we head towards a warmer week, the aftermath of ‘the Beast from the East’ means that 5,000 homes have been without water in Kent, with thousands of properties affected across Wales. Parts of the Midlands and Scotland have also been affected by intermittent supply. In London, Thames Water have been working to re-establish supply to about 12,000 homes who lost water over the weekend.
Two of the country’s flagship businesses, Jaguar Land Rover and Cadburys, were amongst the firms forced to cease production at the request of Severn Trent Water, as it sought to prioritise household supplies.
Jaguar Land Rover’s two plants in the region, which employ 14,000 people between them, would ordinarily see more than 1,200 cars a day roll off the production lines. But yesterday, as workers were sent home, we saw the clearest demonstration of the economic impact of these supply problems.
Going into this crisis, six companies had already missed their leakage targets for 2016/17 according to Ministers. We all accept that some leakages are inevitable, however it’s unacceptable that some firms are still failing to take this problem seriously.
Thames Water’s performance data, for example, shows that 677 million litres are being lost to leakages every single day. To put that into context the entire usage of the city of Cape Town is 631 million litres a day. This total works out as an average of 180 litres per day being lost for each property the company supplies.
Despite these failings on leakages, water bills have risen by 40% above inflation since privatisation with many consumers set to see another rise in a few weeks’ time. While consumers continue to pay out, the companies are making huge profits and paying a fortune to their top executives.
Analysis by the House of Commons Library shows that executives at the top nine water and sewerage companies operating in England earned a combined total of nearly £23 million in 2017. The highest paid executive is Liv Garfield, CEO of Severn Trent, who took home £2.45m; a figure which equates to 16 times the Prime Minister’s salary. This is on top of the billions paid to shareholders. The owners of these companies paid out £18.1bn in dividends in the 10 years to 2016.
With financial figures like these it’s easy to see why a study by the University of Greenwich found that consumers in England are paying £2.3bn more a year for their water and sewerage bills under the current system than if the utility companies had remained in state ownership. This model cannot be sustainable when pay-outs to shareholders are trumping investments in the network or reductions in bills.
Even more of a worry, is the fact that six of our water companies have offshore finance structures registered in the Cayman Islands.
Some Water companies are engaged in good, proactive partnership work, investing in innovation, and going above and beyond on flood risk management.
However, whilst Secretary of State Michael Gove had no trouble outlining many of the problems which persist with water companies in his speech last week, he failed to reflect on the fact that this was occurring on his watch. The power to change things is entirely his, so where was the appetite and the plan to do so?
With water leaking out of the pipes and billions leaking out to chief execs and shareholders, it’s time for a new approach.
Holly Lynch is the Shadow Minister for Environment & the Labour MP for Halifax
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.