The Observer view on the urgent need to reform the water industry | Observer editorial

If the private sector cannot develop a water system fit for a dry future it could be time to reconsider the business model

A smelly sewage works in Southampton was the least of Southern Water’s misdemeanours. Almost all the record-breaking £126m in penalties imposed on the company last week by Ofwat, its regulator, was to compensate the region’s 4.3m residents for the dirty, untreated water that flowed into rivers, streams and onto beaches.

Southern’s managers, who covered up leaks at treatment plants from Kent to Hampshire, are a gift for those who believe it is time to end a 30-year experiment in privatisation and take all the water companies into public ownership.

Until now, campaigners have focused on the raw deal given to customers, who must pay through the nose to a private monopoly provider. Loaded with debt by their owners, the water companies must use most of their income to pay the interest, while the rest is paid out of profits to shareholders. Deteriorating networks are maintained to the very minimum insisted on by the regulator. Properly treated water at a fair price is something the privatised industry constantly fails to provide.

Now that Europe is sweltering in record-breaking heat, a second front is opening up against the water companies. And this centres on the investment needed, not just to replace leaking pipes but to support efforts to tackle the climate emergency.

Even in Britain, water is becoming a scarce resource. In the torrential storms that have become increasingly prevalent, the water runs off the land, into rivers, rages through town centres and out to sea. Parts of the country need more reservoirs, which means giving over land near cities that might otherwise be farmed, left fallow for wildlife or used for some form of development. Where aquifers are running dry due to overextraction, public bodies need to decide on the priorities, juggling the competing demands of farmers, local businesses and households.

A water depth marker stands on dry ground at a reservoir in central England, in February 2012.
‘Even in Britain, water is becoming a scarce resource.’ A water depth marker stands on dry ground at a reservoir in central England, in February 2012. Photograph: Darren Staples/Reuters

Polluted rivers must be cleaned up and that can only come about when there is more pressure on farmers to stop putting so much nitrogen and phosphorous on the land.

Treatment plants must be upgraded, as Southern Water will need to do. The World Wildlife Fund found that 40% of rivers in England and Wales were polluted with sewage in 2017, mostly from overflows following heavy rain that existing plants failed to process.

Overflows are allowed under the current regime if they are exceptional. The WWF report says that 8%-14% of the 18,000 overflows it examined over a nine-month period spilled sewage into rivers at least once a week, and between a third and a half at least once a month.

A separate study by Manchester University found that the river Tame at Denton, to the east of the city, ranked as the worst in the world for microplastics. We know others might be worse, we just haven’t tested them yet.

Plastic samples found in the River Mersey.
Plastic samples found in the River Mersey. Photograph: Alex Hyde/Greenpeace/PA

The fund managers who dominate ownership of the UK’s water companies have no interest in collaborating to develop a water system fit for a dry future. And they will say that micro-plastics were not put in the water by them, so why should they pay for the clean-up.

Equally, why should public bodies use their precious resources to facilitate an upgrade of the system when profit-hungry investors are one of the main beneficiaries?

The government cannot sit still while the finger-pointing and blame-shifting prevent more than slow progress. Why should households and businesses, all of them taxpayers, be asked to save water when the utilities’ managers and international owners do little more than count their bonuses?

The same could be said of the energy industry, which must also be at the heart of reforms towards a low carbon future but is largely in private sector hands.

Dŵr Cymru (Welsh Water) is a not-for-profit business that is busily repaying debts from its previous life as a profit generator while also improving the network. It is not the only model for change, but it’s a good start.

• This article was amended on 1 July 2019 to clarify that the penalties imposed by Ofwat relate to wastewater treatment, not drinking water, and were not all fines; they comprised £123m in rebates and a £3m fine.


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