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14 February 2024

Water bills rise because we have sold off the very rain that falls on our soil

Private water companies have gorged on debt and neglected infrastructure, leaving Britain unable to deal with either drought or deluge.

By Will Dunn

The main purpose of this week’s column is to act as a quick explainer for the police, when they come to arrest me. I fully accept, officer (or Your Honour, if it comes to that), that I should not have tried to dispose of my own sewage by taking it to the sleek, glass-fronted headquarters of Macquarie Group, one of the world’s leading asset managers. In my defence, it seemed like the logical way to deal with a growing problem in my personal finances.

The problem is this: while energy prices will hopefully become less of an emergency in the coming years, water prices could become the next cost-of-living issue. Energy is in one sense an easier problem to solve: you can make more of it, or trade it with other countries. When Russian gas was sanctioned, Western Europe began importing it from the US at a rate of five billion cubic feet per day. You can’t do that with drinking water.

Droughts and floods are becoming more severe, and water systems need to be upgraded. In many countries, governments are raising the money to do so through green bonds, made attractive by tax reliefs. But in England and Wales, new infrastructure depends solely on the largesse of private investors. We are unique in having sold off the very rain that falls on our soil; even America, where people check their finances before calling an ambulance, wasn’t greedy or stupid enough to privatise its entire water supply.

As an investment, water is supposed to be boring: the returns are limited but guaranteed. But the companies that bought our water supply 35 years ago quickly tired of this stability and began gorging on debt, which they used to pay outsized dividends. During the nine years that Macquarie owned my local water company, Thames Water, they loaded it with an extra £7.4bn in debt.

At the same time, private water companies have underspent on new infrastructure. Britain has not built a major reservoir since 1991, despite our population increasing by ten million people. We don’t have enough capacity for droughts, and our Victorian sewers overflow when it rains.

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The only other way to get the money for new infrastructure is to increase bills, which will rise by an average of 6 per cent in England and Wales in April, and more in the years to come. Energy regulator Ofwat’s website holds plans for the latest pricing review (called “AMP8”); Thames Water’s AMP8 plan shows the typical bill rising 61 per cent by 2030, to £735 a year.

However, the cost to me may well be higher, because Thames has been warned by its auditor that it may run out of money by April. If the company goes into special administration, the cost of rescuing the company may be added to bills, as it has been with all the deregulated energy firms that have collapsed in recent years. And that, officer, is why a customer like me might decide to return to Macquarie some of the effluent that surely belongs to it.

There are practical, and sane, ways to address your water bill. All companies have a “social tariff” that offers very significant discounts (up to 90 per cent) for people receiving benefits or on low income. If you don’t have one, a water meter can also reduce your bills, especially if your house has a few unoccupied bedrooms, because bills are estimated based on the size of your home. The Consumer Council for Water (ccw.org.uk) has a water meter calculator that will help determine if a meter would save you money, and your water company has to install one for free if you ask them. Aerated taps and shower heads use less water and make your water pressure seem higher.

The good news is that saving water is generally cheaper than saving energy; a few relatively small investments around the house can help reduce costs for many years to come.

[See also: Why a 99 percent mortgage means a high proportion of trouble]

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This article appears in the 14 Feb 2024 issue of the New Statesman, Trouble in Toryland

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