Trickle-down economics? Not in our water industry

Half of all water industry turnover in England and Wales is now controlled by private equity companies

 

Debate about our utility companies during this election campaign has tended, perhaps understandably, to concentrate on the ‘Big Six’ energy companies. But research published today suggests more attention may need to be paid to the state of our water industry.

The New Policy Institute’s report, A socially responsible water industry? A case to answer in 2015, contains important new information about how private water companies are letting us down on bills, social tariffs, large profits and the living wage.

Half of all water industry turnover in England and Wales (£5.8 billion) is now controlled by private equity companies and only a third by those listed on the stock exchange. NPI explain the problems created by the growing domination of private equity structures:

“Private equity is often more complex, with multiple layers within and beyond the UK. Complexity opens up legal opportunities to reduce tax liabilities, costing the public purse a lot of money.”

In terms of customer bills, privatisation and deregulation have been a disaster for bill-payers. Bills are now 40 per cent higher after inflation than in 1989-90. Incredibly, almost a third of the current average customer bill goes towards the profits of private companies, rather than running costs or investment.

privatisationgraph

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One issue that my union, UNISON, has campaigned on for many years is the availability of social tariffs to ensure that customers on low incomes can afford to pay their water bill. NPI find that 22 per cent of households in England and Wales face affordability problems (defined as households spending three per cent or more of their income on water bills). 

But current tariff schemes cover just 0.4 per cent to four per cent of customers, a tiny proportion of those struggling to pay their bills. The report also reveals that households on unmetered bills, who are more likely to be on low incomes, pay on average £60 a year more than people who receive metered bills.

The government must also take its share of the blame for the poor coverage of social tariff schemes. DEFRA guidance issued to water companies is highly prescriptive in stating companies should seek “customer endorsement” of particular social tariff schemes.  However, some companies have followed this guidance more slavishly than others.

NPI also focus in on the industry’s failure to pay a Living Wage to their lowest paid employees. With only two exceptions, these highly profitable utility companies continue to pay poverty wages to both directly and indirectly employed staff. This is despite it being eminently affordable. At 17 per cent, the wage share in water is less than half the 43 per cent production industry average and only two thirds of the capital intensive energy industry. As NPI conclude:

“Against this background, introducing the Living Wage should be easy for the water industry. Less than 10 per cent of employees in water were paid below the living wage in 2014, half the national average.”

Our water industry needs to step up to the mark when it comes to tackling water poverty and paying the Living Wage. It is not good enough for important public services to be run according to the values of corporate capitalism. If the companies themselves won’t change, we need a government and a regulator that is prepared to make them change.

Clive Craske is chair of UNISON’s Water Industry Sector Committee

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