Revealed: Where up to a quarter of your water bill is really going

It's been branded 'daylight robbery'

An image showing bank notes and pound coins

An investigation by the Guardian published today has revealed that staggering proportions of the public’s water bills are used to service private water firms’ debt. According to the paper’s analysis of financial data over a quarter of some water companies’ revenue goes on servicing debt.

The UK’s largest water firm, Thames Water, uses an astonishing 28 per cent of its revenue to service debt. Southern Water and South East Water both also use more than a quarter of their revenue for the same purpose.

Almost the entirety of water company revenue is made up of customer bills. As of March, the private water firms in England had racked up combined debts of more than £60 billion. Meanwhile, since privatisation of water in England in 1989, private water companies have paid out over £70 billion in dividends to shareholders.

The Guardian notes that Scottish Water, which remains publicly owned, spent just 10 per cent of its revenues financing its debt, less than all of the private water firms in England.

The revelations have led to a furious public backlash and renewed calls for England’s water to be taken back into public ownership.

Labour peer and Left Foot Forward columnist Prem Sikka branded the situation as ‘daylight robbery’, saying that money had been ‘borrowed to pay dividends, and that ‘companies want more from captive customers’.

Cat Hobbs, director at public ownership campaign group We Own It told Left Foot Forward: “It’s completely outrageous that the privatised English water companies rely on our bills to pay for their irresponsible debt. These new revelations show Thames Water customers paying almost a third of bills towards this.

“We can’t allow this monumental rip-off to continue. The government should be exploring how to bring these companies permanently into public ownership at the least possible cost to the public.

“We shouldn’t have to pay for their mistakes. This is urgent. The system right now is both environmentally and financially unsustainable and it’s us who are footing the bill.”

We Own It is currently running a petition calling for Thames Water to be taken into public ownership. At the time of writing, it has received over 17,000 signatures.

Despite the public anger, private water companies have defended the current situation.

A spokesperson for Thames Water told the Guardian: “A spokesperson for Thames Water said: “Customers’ charges are set according to Ofwat’s notional company and not versus its actual cost of debt. It is for the company to manage the revenues it receives, to cover operating costs as well as investment in the business, debt servicing and dividends.”

A representative of Southern Water, meanwhile, said: “Just as homebuyers borrow to buy a home, through a mortgage rather than savings from household incomes, it would be entirely impractical and inefficient to try and fund investment to build new assets solely from revenue – customer bills would be far too high and unaffordable without this model of funding being used.”

And South East Water’s chief financial officer Andrew Farmer told the Guardian: “The rise in inflation has affected numerous companies in a similar way, both in the water sector and in other industries where a proportion of index-linked debt is the norm.”

Chris Jarvis is head of strategy and development at Left Foot Forward

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