Sarah Olney MP: Why we must turn water companies in the UK into ‘Public Benefit Companies’

'The goal is to simply restructure water companies and change the way that they operate, not use public funds to replace them or subsidise the services they provide.'

water pollution

The failure of water companies in the UK, particularly Thames Water, to do their jobs and provide the essential service of a functioning water system to consumers is a disaster for the whole country. The government cannot put off a proper response to this crisis any longer. We need legislation and government action to help ensure that water systems operate as they should.

Headlines in recent weeks have revealed that Thames Water is severely in debt after decades of financial mismanagement. When water firms were privatised in the nineties, they had a clean slate and zero debt. Now, Thames Water is saddled with billions of pounds of debt and its future viability is in jeopardy, at a time the current interest rate is the highest it has been in 14 years. Meanwhile, they have failed to maintain and invest in the pipe network and supply infrastructure, choosing to prioritise shareholder dividends over delivering a good service for consumers.

The biggest collapse of responsibility by water companies and Thames Water is the abundance of raw sewage that has been deposited into our rivers, along with leaking pipes throughout their area of operation. Releasing sewage into the rivers is permissible by law only when copious amounts of rain have overwhelmed the system capacity of the water tanks. It has become far too commonplace these days with 7,000 hours of sewage being pumped into 31 London rivers last year alone.

I have heard personally from residents in my constituency of Richmond Park about the consequences of the failing water system. Along with sewage overflow into a car park, some residents have actually been driven from their homes because of the raw sewage coming up from their plumbing. This state of affairs is unacceptable in modern society, and cannot stand as a new normal.

Some leaders in the UK have called for the renationalisation of the water industry. While this solution is intended to ensure these companies get back on the right track, it would ultimately amount to be a costly distraction that would not solve the pressing infrastructure issues. However, I do believe government intervention is needed.

The Liberal Democrats have unveiled a plan to turn water companies into “Public Benefit Companies”. Our Thames Water (Public Benefit Corporation) Bill would restructure the company into a new model that requires the company to prioritise public policy benefits. In the case of Thames Water, this would compel them to ensure sewage dumping and leaks are prioritised, as opposed to a sole focus on delivering returns for shareholders. It would also require them to limit the payment of dividends until there is a plan to slash the debt accrued by the corporation, and – crucially –  include representatives of local environment groups on their board.

The Liberal Democrat plan also dictates that water companies must become more open and transparent to the public. Currently, companies are not required to respond to Environmental Requests for information. This requirement will allow for more desperately needed accountability and public awareness of the affairs of the company.

The need for water companies to pay due regard to the environment has recently been driven home for me by Thames Water’s plans to remove between 75 million and 100 million litres of water a day from the river near my constituency. They intend to replace the lost water with highly treated effluent from the local sewage works, claiming this will have no substantial negative impact on local wildlife. Beyond the obvious worries over water contamination, the project would destroy acres of unspoilt local nature reserve to make way for shaft tunnels and roads. What is most galling about this project is that had Thames Water maintained their pipe network properly over the past two decades, it is likely that it would not be needed as the company loses more than 635 million litres a day to leaks and cracks.

A key point of the Liberal Democrats’ plan is that it will not cost taxpayers a thing. The goal is to simply restructure water companies and change the way that they operate, not use public funds to replace them or subsidise the services they provide.

The concept of public benefit companies is not novel. In the United States, 36 states and Washington, D.C have successfully established public benefit corporations. These companies are required to provide one or more public benefits in addition to responsibilities to their shareholders. This established model can serve as an example for us to learn from as we create our own version. The end result of this restructuring still allows for companies to make a profit while ensuring that they are meeting certain obligations to the public as well.

Water companies such as Thames Water clearly cannot be trusted to operate properly when left completely to their own devices. The Liberal Democrat’s plan offers a viable and suitable alternative to the costly and complicated option of renationalisation while still calling for government intervention. The transformation of these companies into public benefit companies will push them to prioritise fixing leaks and sewage spills and not just paying back their debts. The Liberal Democrats have a history of holding these companies to account, as we previously successfully campaigned for many of their CEOs to give up their bonuses in response to the crisis. This bill will continue to put the needs of the public first.

Water is a resource that we use every day, essential to our lives and wellbeing. There is simply no room for the poor management of companies to interfere in this vital service, and we must act to fix their mistakes.

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