Making the same old mistake about the water companies

Sigh, they’re doing it all over again:

Ministers will make an unprecedented intervention in water bills and how companies prioritise investment, directing bosses to bring down costs and stop leaks and sewage overflows.

Angela Eagle, the environment secretary, has told suppliers in England and Wales she plans to intervene in the next price review – conducted by the water regulator, Ofwat.

The original point and purpose of water privatisation - and yes, we were involved, we do know this - was that government would not spend the money to clean up the system. Politics would not allow charges to rise sufficiently to fund the necessary improvements, plus politics always had better things to spend any current profits on. There was always a union to be bought off, some other electorally relevant thing to fund than purifying the waters.

Thus privatisation. Cordon off profits made from ongoing operations, cordon off pricing decisions from that electoral politics. Only then could the water system be run on the necessary 20 and 50 year timescales required for fundamental infrastructure rather than according to the 5 or less years electoral cycle.

So, what is politics deciding to do now? Bring back water charges into that electoral decision making. This is not a step forward. It is, clearly, a retrogression to the mistake of 40 years ago. Politics simply doesn’t deal well with the long term as any observation of maintenance, let alone long term investment, in anything politically run shows.

Bad idea.

Tim Worstall