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Renationalising the water industry will pay dividends to society rather than to shareholders, says Dr Emanuele Lobina. Photograph: Jenny Dettrick/Getty Images
Renationalising the water industry will pay dividends to society rather than to shareholders, says Dr Emanuele Lobina. Photograph: Jenny Dettrick/Getty Images

Privatisation, water poverty and leaks

This article is more than 6 years old
Emanuele Lobina makes the case for public ownership of the water industry, while Peter Simpson of Anglian Water defends the privatised company’s record on reducing leaks

Nils Pratley (Labour’s water renationalisation plan is a damp squib, 17 May) argues that there is no need to renationalise water because regulation is enough to tame the monopolistic behaviour of the private operators. This argument is not convincing when you look at the experience with water privatisation since 1989.

First, the private companies have prioritised paying dividends to shareholders over providing good quality and affordable water services to consumers. Overcharging – the result of price hikes and tactics that include gaming the regulatory system and fraudulent behaviour – has led to a concerning increase in water poverty. In 2009/10, an estimated 23.6% of households in England and Wales were spending more than 3% of their income on water and sewerage (11.5% were spending over 5% of their income). Second, the economic regulator Ofwat is part of the problem. For over 25 years it has presided over profit-seeking and increasing water poverty.

As Ofwat has selectively defined its own remit to exclude the protection of vulnerable consumers, there is no reason to expect that it would champion the water-poor on a future government’s say-so.

As to the other arguments advanced, research by the Public Services International Research Unit (PSIRU) shows no evidence of superior private efficiency, either in the UK or internationally. Bringing water back into public hands (as Paris did in 2010, followed by a rapidly growing number of cities in developed and developing countries) allows for an ambitious social and environmental agenda that cannot happen under private management.

Another international lesson is that private companies regularly overestimate the costs of nationalisation to discourage any such attempts. Financing these costs always makes economic sense in the long term. What is needed in England and Wales is not tinkering with a privatised system that has failed to deliver on its promises but radically changing the priorities of water operators so that people come before profit. By abolishing the payment of dividends and lowering the cost of financing investment, nationalisation can do just that.
Dr Emanuele Lobina
Principal lecturer, PSIRU, University of Greenwich, London

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Your article on water leakage (Fifth of water supply leaks before it gets to taps, amid drought warnings, 12 May) was right to say companies needed to do more. But it was wrong to suggest that any leading company, like ours, would tolerate leakage rising again.

For the 4 million customers living in the Anglian Water region there will be no hosepipe ban this summer. That’s despite it being a dry region and the recent low rainfall. Our work on leakage is one of the reasons we can be so confident in reassuring customers of this.

We’ve set our own ambitious targets because we operate in the driest part of the country and because we know leakage matters to customers. Investing more to stop leaks and go further than any other company was central to our five-year business plan – a plan that our customers explicitly supported when we spoke to them about it.

Reducing leakage requires sustained effort over decades. We know this because that is the trajectory we are on; going further than most of the industry, because we know it’s right for our customers, and for the environment.

Having made reductions every year since privatisation, our leakage is at record low levels – around half the national average. That’s in the face of a 33% increase in the population we serve. Despite this we still put the same amount of water into supply as we did nearly 30 years ago, which is only possible because of our performance on leakage, approach to voluntary metering, and encouraging customers to be water efficient too.

We have set the most ambitious targets in the industry and we will go further, which is why we have a 300-strong leakage team working day and night and using every technology at their disposal, including thermal imaging drones and specialist robots. By 2020 we will have spent £124m in just five years to drive leakage down.

Our war on leakage isn’t about meeting regulatory targets, it’s about beating them. We hate leaks as much as our customers do, and the suggestion that our hundreds of passionate leakage experts would take their foot off the gas now does their ambition a disservice.
Peter Simpson
Chief executive, Anglian Water

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