Finally, the rain is falling, such a relief after a long, hot and dry summer.
Rain, a true ‘public good’, not owned by anyone, accessible to all, an essential resource free to be enjoyed by everyone, vital for food production and for life itself; a gift falling from the comforting grey skies. Rain, a free resource, until it hits the ground and is captured, owned, controlled, no longer shared – it becomes private property to be sold back to us for multiple uses, or fenced off to prevent access.
And with the rain come discharges of untreated sewage polluting rivers, damaging ecosystems and closing down our beaches because of contamination, yet it remains integral to the functioning and health of ecological systems on which we all depend. We pay multiple times for our ‘free rain’.
As taxpayers we have paid, over decades, for the water supply and sewage treatment infrastructure to be built[i], we have paid for improvement and maintenance, we pay for the provision of clean water and the removal of waste, we pay during periods of drought when water restrictions are applied, and we pay when heavy rainfall creates polluting discharges from overflow pipes, restricting recreational use and damaging aquatic ecosystems. We pay the service costs, which makes sense, but also for the social and environmental costs created when ‘profits’ are diverted away from needed investment and into the pockets of shareholders and the excessive salaries and bonuses of senior managers.
Who owns the rainwater that washes off buildings and runs over the roads, the water that filters through the soil into streams and rivers that flow across our land into the sea? Who owns the aquifers under the ground that supply the wells, the water held in lakes and in peat bogs and marshes that regulate streamflow?
Not you, not me.
Who controls the quality of water in the streams, who decides how much can be taken out, who decides how much sewage should be dumped untreated into our rivers and the sea?
Not you, not me.
Who decides how much you should pay for the water that comes out of your tap, on how much profit to make from supplying ‘consumers’ with the foundation of life, on how much should be invested to ensure a sustainable supply with a rising population and a changing climate?
Not you, not me.
Since 1989 in England and Wales, the answer to these questions has been – the private water companies. That was the year that regional monopolies were created out of the publicly owned and managed water boards. Overnight, water changed from being a public good, managed by public bodies for public benefit, to a private good that could be sold to generate profit, creating a guaranteed low-risk return for shareholders. Water supply and waste-water treatment systems require large scale infrastructure investment and maintenance, which tends to be most efficiently delivered at river basin level, and as such they form natural monopolies where competitive markets cannot develop. To prevent monopoly pricing requires government regulation (Ofwat), one reason why water services are often delivered through the public sector[ii], another is the need for long term strategic investment planning.
The story of water privatisation has been told before[iii]. Studies have shown that privatisation is no more efficient than public sector management and if anything, results in a diversion of funding away from investment to provide dividends to shareholders, as well excessive levels of pay to the managers of private companies[iv]. In England and Wales, the experience of water privatisation over the past 33 years has resulted in a reduction in system resilience in the face of population growth, increasing water consumption per capita, more extensive impervious areas which accelerate run-off, and climate change (warmer and wetter winters, hotter and drier summers, more intense storms[v] ) while ‘profit’ flows out of regional economies into shareholders accounts.
In addition to the lack of long-term strategic planning, lack of investment, and failure to create more resilient supply and treatment systems, governance mechanisms have failed to protect environmental quality, in both fresh and marine waters. Large volumes of untreated sewage are mixed with rainwater in combined sewers and discharged into rivers and marine environments each year[vi]; a system that in many urban centres dates back to the Victorian period[vii]. The Environment Agency describes combined sewer overflows as ‘valves to reduce the risk of sewage backing up during heavy rainfall’ and states that ‘overflows of diluted sewage during heavy rainfall are not a sign that the system is faulty (but)…are a necessary part of the existing sewerage system…’ while making it clear that monitoring is the role of the water companies[viii]. The outcome is a lack of monitoring data, damage to the aquatic ecology of rivers and contamination of bathing water on beaches around the coast[ix]. The private water companies operate within a weak regulatory system[x].
None of these concerns are new, and the need for large-scale investment has been apparent since the mid-20th century, which was one of the factors driving privatisation. The Conservative government in the 1980s did not want to raise taxes, or water prices, to provide the resources for investment, and at the same time were able to sell the existing infrastructure (paid for by households and businesses through taxation and service charges) and reward those with capital who were able to purchase shares. The result was a public utility sold off cheap and debt-free, to encourage purchase of shares[xi].
The problems are currently receiving some attention. The Government’s 25-year Environmental Plan recognises the need to improve waste-water treatment and reduce discharges of untreated sewage over the next generation[xii] and the House of Lords Industry and Regulators Committee is currently examining Ofwat’s performance to ascertain ‘whether it has the powers and resources needed’ to meet its objectives[xiii]. The House of Commons, in a recent report on river water quality suggested that a key objective for delivering objectives of the Environment Act 2021 should be ‘Improving the quality of the water in rivers in England…through which the Government and public bodies can deliver on the legally binding duty…to halt the decline in domestic species by 2030.’ They also identified ‘outdated, underfunded and inadequate monitoring regimes’ as a barrier to improvement in water quality[xiv]. The report also makes recommendations for ‘challenging improvement targets and timetables for this progressive reduction to inform the drainage and sewage management plans to be drawn up by each water company’. However, it is doubtful a privatised industry, focused on profit generation from provision of a narrow set of services, can ever deliver the wide-ranging social, economic, and ecological benefits (many of which are not incorporated into price calculations) generated by water in its many forms.
A change in governance can be achieved, but it requires recognition that in terms of its natural characteristics water is not a private good that can be bought and sold without creating negative externalities. Water is an integral part of a complex and shared socio-ecological and economic system. Taking water from one part of the system for a specific purpose, such as drinking water or flushing waste, means it cannot be used elsewhere (such as irrigation, or maintaining river flow). In that sense it is a (partially subtractable) public resource, where one person’s use means another person cannot use it (at least not before it is treated). It is also difficult to prevent people from accessing and utilising the resource (such as swimming in rivers/the sea, abstracting water for irrigation, or disposing of waste into aquatic environments).
Public goods require strong regulation, and sufficient investment, to ensure optimal and sustainable use over time that will maintain the integrity of a socio-ecological system, which a privatised market has not been able to provide, despite all its promises. The private water companies hold most of the water management rights and the ability to profit from regional monopolisation of water and waste water service delivery. They also have permissive rights to dump raw sewage into marine and freshwater environments – our shared aquatic ecosystems, not theirs. They have free rein to pollute. Under a privatised system, clean water comes at a high price and when it rains – it would seem – not at all.
John Powell is a Senior Research Fellow at the CCRI and former
president of the International Association for the Study of Commons.
[i] Beginning in the late 19th century in most of the developed world, inefficient and costly private companies were gradually taken into the public sector. France and the UK are the only OECD countries with extensive private provision of water, but even in France expansion of provision was ‘financed through a massive cross-subsidy from households and businesses already connected to the system’. [Source: Hall, D. and Lobina, E. (2008) Water Privatisation. Public Services International Water Research Unit (PSIRU)]
[ii] Ofwat employs around 250 people and costs approximately £28 million per year with costs recovered through licence fees paid by the water companies. [Source: Water Services Regulation Authority (Ofwat) – Annual Report and Accounts 2021-22].
[iv] The Guardian reports that the heads of 22 water companies ‘paid themselves £24.8m, including £14.7m in bonuses, benefits and incentives, in 2021-2022’ despite the high number of pollution incidents. [Source: Bonuses for water bosses in England up 20% last year despite sewage failures]
[vi] Between 1989 (when privatisation occurred) and 2006 the average annual bill for water and sewage increased an average of 39% above inflation. While operating costs remained constant ‘the increase in customer’s bills is almost entirely due to the elements associated with the capital – capital charges, interest, and profits – which nearly all have doubled, in real terms, over this period’. [Source: Hall, D. and Lobina, E. (2008) Water Privatisation. Public Services International Water Research Unit (PSIRU)]
[vii] One recent report estimates there are 15,000 storm overflows in England of which 13,350 discharge to inland rivers but only a subset of these (9,2408 in total) are monitored and are reported to have operated 342,346 times in 2020. [Source: Stantec (2021) Storm Overflow Evidence Project: Final Report, prepared for: Water UK]
[viii] Creating a Better Place – Combined Sewer Overflows Explained. Environment Agency Blog.
[ix] Surfers Against Sewage – Water Quality Report 2021 states that ‘a total of 3,328 sewage pollution discharge notifications were issued during the Bathing Season (15th May – 30th September)’ in 2021 and ‘2,187 sewage pollution discharge notifications were issued outside the Bathing Season by the five water companies who share year-round sewage pollution data’. This is estimated to amount to a loss of ‘16% of swimmable days in 2021’.
[x] Ofwat response to wastewater company river water quality action plans (2022), notes that they [Ofwat] are ’…pleased to see that several companies have made ambitious public commitments to achieve reductions in the use of storm overflows, increase monitoring and improve transparency…but that not all companies have made the same commitment to reduce storm overflow spills and thus pollution events. Environment Agency monitoring data reveal that average spills (per storm overflow) in 2020 range from 21 for Southern Water to 59 for United Utilities while the total duration in hours of spill events was 197,213 and 726,450 hours respectively’.
[xii] A Green Future: Our 25 Year Plan to Improve the Environment HM Government (2018)
[xiv] Water quality in rivers: Fourth Report of Session 2021–22 House of Commons Environmental Audit Committee (2022)