Committee slam a ‘lack of leadership and deep-rooted complacency’
A House of Lords committee has given a damning judgement into the work of environment secretary Therese Coffey, finding ‘deep-rooted complacency’ in government dealings with water companies.
This has come at the risk of water shortages and extreme environmental consequences, the industry and regulators’ committee found, due to a ‘lack of leadership’ in government which has meant water companies have failed to protect the environment and the water supply.
In a letter to Coffey, the committee warned that a continued under-investment in water infrastructure will have ‘serious long-term consequences for the environment and the security of water supplies’, risking future water shortages.
The inquiry was launched in June as a follow-up to a previous report titled ‘The affluent and the effluent: cleaning up the failures of water regulation’ which concluded large scale failures in the water system from under-investment and insufficient government strategy.
Three major water companies illegally discharged sewage hundreds of times last year on days when it was not raining, a BBC investigation suggests.
The practice, known as “dry spilling”, is banned because it can lead to higher concentrations of sewage in waterways.
Thames, Wessex and Southern Water appear to have collectively released sewage in dry spills for 3,500 hours in 2022 – in breach of their permits.
Water UK, the industry body, said the spills “should be investigated”.
Collectively throughout 2022, Thames, Southern and Wessex illegally started releasing sewage on dry days 388 times – research by the BBC’s climate and data teams suggests – including during last summer when these regions were in drought.
There even appears to have been spills by all three companies on 19 July 2022, the hottest day on record, when temperatures topped 40C in some places and many people tried to cool off in rivers.
Parliamentary committees need to investigate water company accounting, especially as they are continuing with the practices that brought down Carillion.
Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.
Ever since its privatisation in 1989, the water and sewage industry in England and Wales has set new standards in ripping people off.
Profits are made by not plugging water leaks and by dumping tons of sewage in rivers and seas. More than one trillion litres of water is lost to leaks from crumbling pipes each year. In 2022, raw sewage was dumped into rivers and seas 824 times a day, nearly 301,000 times a year over 1.75m hours. Despite higher demand, no new reservoirs have been built since privatisation. With captive customers and no competition, companies have hiked charges by 40% in real terms. The biggest winners are shareholders. More than 90% of the nine water companies are owned by overseas investors.
Since privatisation, companies have paid £72bn in dividends and another £15bn is expected by the 2030. These are largely funded by over £60bn of debt. To soothe public anxieties, Ministers claim that since 1989 water companies have invested £190bn. Such claims need to be treated with caution as the companies have a history of murky accounting practices.
Thames Water is England’s’ biggest water company. Since 2010, it has been sanctioned 92 times by the regulators and paid fines of £163m. Since privatisation, it has paid £7.2bn in dividends and has debts of around £14bn.
Taking cue from the water company, in June 2023 a Minister told parliament that “Thames Water itself has not paid any dividends for the last six year”. Of course, water companies are not operating as not-for-profit organisations and are masters of financial engineering and obfuscation.
Page 43 of the company’s 2022-23 financial report describes £45m payment (£37m for 2022) to its immediate parent company Thames Water Utilities Holdings Limited as “dividend” which then forwards it to Thames Water Utilities Limited and is still described as “dividend”. The same page then claims that it is not really a dividend because its purpose is to “solely to service debt obligations and group related costs of other companies within the wider Kemble Water Group”. Page 22 of the 2022 accounts of Thames Water Utilities Holdings Limited shows “Dividend Income” of £37.1m. Anything described as a “dividend” in the accounts is a dividend and in the last two years alone this amounts to £82m (£45m + £37m). Since privatisation, vast amounts are likely to have travelled via this route to the company’s ultimate controllers but are not included in the £7.2m of dividends.
Yorkshire Water is also engaged in sleight of hands. Since 2010, it has paid £1.2bn in dividends and claims to have stopped paying dividends from 2017-18. However, page 137 of its 2022-23 financial report states that the company paid £62.3m “dividends” to its parent company. Its 2021-22 accounts (page 99) state that “the Board of Yorkshire Water has approved the payment of £52.6m in dividends.”
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Exclusive: Assessment that used to happen annually will now take six years despite rising concerns
A nationwide annual health check of England’s water bodies which used to take place annually, will now take six years to complete, prompting anger from campaigners and politicians, as public alarm grows over the state of the nation’s rivers and coasts.
The assessments, undertaken by the Environment Agency, look at the ecological and chemical condition of rivers, lakes, groundwater, and transitional and coastal waters, and are required under the Water Framework Directive (WFD).
In 2019, the last time the full assessments took place, just 14% of rivers were in good ecological health and none met standards for good chemical health. Before 2016 the tests were done annually, but the government has now opted not to deliver a complete update until 2025, the latest permissible under the WFD.
Clean water advocates accused the government of trying to hide the data.
Rivers activist Feargal Sharkey said: “The future of England’s rivers has been sacrificed in a cynical act of self preservation by the very same failed government agency set up to protect them.”
The Green party peer Natalie Bennett said the government “clearly recognised the huge public anger about the parlous state of our waterways, but instead of taking action to clean them up, it is instead trying to hide the data”.
She added that the “stench of pollution, the choking of our waters with sewage, plastics and farm runoff is evident to all”, and that the Green party wanted to see a return to more frequent publication of the river health statistics. “Democracy demands transparency, and that’s one more thing this government is not delivering.”
SIX private water companies across England are facing landmark legal action over allegations of under-reporting pollution incidents and overcharging customers.
Severn Trent Water, Thames Water, United Utilities, Anglian Water, Yorkshire Water and Northumbrian Water could end up forking out more than £800 million in compensation to over 20 million customers if the cases are successful.
Environmental and water consultant Professor Carolyn Roberts, who is being represented by Leigh Day Solicitors, claimed that the firms have broken competition laws by misleading the Environment Agency and regulator Ofwat.
She alleges they have been under-reporting the number of sewage discharges, resulting in customers being “unfairly overcharged” for wastewater services, and that had sewage discharge reporting been accurate it would have lowered customer bills.