The next post but one - or but two if you count this - is about the way companies behave as if morality has no part in their activities, their only concern to pay dividends to their shareholders. Sometimes the profit motive leads them into actual criminality, most relevant here being environmental crime. Towards the end of the piece Welsh Water gets a mention, along with Southern Water. The issue is quite simple – can we trust the privatised water companies to look after our rivers and our seas?
Welsh Water, after privatisation in 1989, got into a serious mess involving diversifications into areas such as tourism, and then got into financial difficulties and takeover battles, but eventually in 2001 it became a not-for-profit company. It has no shareholders, and any financial surplus is invested in the company’s infrastructure or possibly in reducing water bills. Its sole business is now water - supplying drinking water and making sure all the foul water and sewage is purified so that our rivers remain clean. Scottish Water too is wholly owned by and answerable to the Scottish government. English privatised companies, on the other hand, mark their own homework – they are supposed to monitor and report their own pollution incidents.
Welsh Water’s record is not that great – there have been frequent incidents of storm water overwhelming the system and causing sewage to discharge into rivers, especially in the more urban parts of South Wales. This is a problem throughout the water industry because of the historic practice of connecting storm-water drains into the sewage system, which can then be overwhelmed during heavy rainfall. Welsh Water also has problems outside its control, such as the effluent from chicken farms which is having such an impact on the River Wye. But I think the model is a good one, and there is nothing to distract them from doing what they exist to do – providing us with clean drinking water and clean rivers. Their 2020 business plan was “to invest a record £2.3 billion over the five years to 2025, to supply…the best quality water, … a safe and reliable wastewater service, and to protect the beautiful environment around us.”
Southern Water is a completely different (privatised) kind of beast. Those who advocate privatisation claim it is more efficient, but Southern Water’s chief efficiency seems to be the adroitness with which it conveys taxpayers’ cash into the bank accounts of its shareholders, who took home £622 million between 2013 and 2017 – money that a not-for-profit water company could have spent improving the infrastructure and ensuring the sea and the rivers were not polluted.
Those who say privatisation is more efficient also tend to talk of the benefits of competition. Southern Water has a complete monopoly, and everyone in its area has to drink its water and pay for its water supply and ‘sewage treatment’. So they have a completely secure and predictable income. Not much competition there then, but a very attractive business model for the investor.
Southern Water is owned by Greensand, a consortium which came together in 2007 solely for this purpose. Presumably they were all drawn in by the profit motive – certainly not, to judge by their record, by a passion for a clean and thriving marine or river environment.
Recently they were convicted of deliberately releasing raw sewage simply because it was cheaper and therefore more profitable to do so:
“This was “the worst case brought by the Environment Agency in its history”, the court was told. Southern Water had acted “deliberately” and had reaped “considerable financial advantage” by allowing the discharges.
The Environment Agency’s biggest ever investigation uncovered how the privately owned company dumped untreated sewage into seas that were home to shellfish beds and were supposed to be some of the most protected marine environments in the country.
Andrew Marshall, appearing at the sentencing hearing for the regulator, told Canterbury crown court that Southern Water, which is ultimately under the control of Greensands Holdings, opened storm tanks to release raw sewage into coastal waters in north Kent and the Solent to increase its own financial benefits. The company also allowed storm tanks to be kept full and to turn septic, instead of putting millions of litres of raw sewage through the treatment process as required by law.” (The Guardian, 6 July 2021).
The Environment Agency does not often bring such important cases, being hampered by having had to shed 20% of its staff at the time of Osborne’s ‘austerity’. But Southern Water is used to fines, having been fined £20.3 million in 2007 for lying about its service and overcharging customers, following an investigation by Ofwat and the serious fraud office. They also agreed to pay £126m in penalties and payments to customers in 2019. Even with the £90 million fine just announced (10 July 2021), they still did pretty well out of it – quite a lot of that £622 million is still safely trousered. Fines seem to be simply a business expense to set against operating profits.
Mr Justice Jeremy Johnson, sentencing the privatised water company, said it had discharged between 16bn and 21bn litres of raw sewage into some of the most precious, delicate environments in the country.
“These offences show a shocking and wholesale disregard for the environment, for precious and delicate ecosystems and coastlines, for human health, and for fisheries and other legitimate businesses that operate in the coastal waters,” said the judge.
He said the company had a history of criminal activity for its “previous and persistent pollution of the environment”. It had 168 previous offences and cautions but had ignored these and not altered its behaviour. “There is no evidence the company took any notice of the penalties imposed or the remarks of the courts. Its offending simply continued,” he said. The company, whose operating profits were £213m in 2019, covered up its actions by “very significant under-reporting” of the number of illegal pollution spills it had made, Canterbury crown court heard.
When the Mafia in the States want to diversify I’m told they invest in businesses like waste disposal. I could imagine they might find water companies in England an attractive investment too. I wonder why the people who run Southern Water – the directors and managers – are still considered fit people to hold such positions, and why the law which allows the state to reclaim proceeds of crime is not applied in such cases.
Thank you for another excellent article Richard.