I’m writing this on 1st April. My eldest daughter has taped over the light switch in the kitchen. My youngest put pepper in my tea. One of them has drawn on the toilet roll. And my water bill went up by 31 per cent overnight, despite going to one of the biggest offenders during the sewage scandal, a company that has amassed £19bn in debt. The odd one out among the April Fools’ Day pranks is not immediately obvious.
From this month, water bills for all water companies in England and Wales went up by an average of 33 per cent, or £86, a year. Ofwat chief executive David Black told the BBC that this would inject £104bn of investment into the sector in the next five years, helping to cut sewage spills, reduce leaks and secure drinking water supplies. Environment Secretary Steve Reed reassured us that the government would “ring-fence” the money so that it can’t be used for bosses’ bonuses or dividends. The industry body Water UK heralded the £20bn that will be invested from now until March 2026 as “the highest ever level of expenditure in a single year”, which will go “towards” nine new reservoirs and upgrading 1,700 sewage works.
It almost sounds like we should be grateful. As Reed said when the announcement was made, “It is no secret that our water system needs fixing and that our rivers, lakes and seas are choked by pollution.” Perhaps it’s only fair that we start to pay for it.
And yet, we’ve already paid over the odds. More than a third of water bills in England and Wales are not used for water services at all: on average, 35 per cent of money from customer bills in the year from 2023 to 2024 was used to pay the interest on water companies’ debt and as dividends to shareholders, according to a study published this week by the University of Greenwich. The study also suggests that only £44bn of the £104bn will be directly available for those new sewage works and reservoirs. Instead, says Matthew Topham, water lead at the campaign group We Own It, our newly swollen water bills will simply pay for more “profiteering from privatisation”.
The privatised water system is a stitch-up. Since 1989, when the ten big water companies were turned into private monopolies, annual investment has gone down 15 per cent while a debt mountain of over £60bn has been built up from nothing. Shareholders have received £78bn over the last 35 years, much of which has been siphoned off overseas. Thames Water’s biggest investors have included the Chinese national sovereign wealth fund, a subsidiary of the Abu Dhabi Investment Authority, Kuwait’s sovereign wealth fund and pensions funds in Canada, Australia and the Netherlands.
The National Infrastructure Commission finds that regulation is biased in favour of the water companies, while our water system suffers from lack of investment. Failure is also handsomely rewarded. The average pay for a water company CEO is £1.7m a year. Steve Mogford, CEO of United Utilities, was on £2.9m before he retired in 2023, despite United Utilities topping the charts as the biggest culprit for illegal sewage releases.
Every single river in England is now polluted, because water companies collectively discharge untreated sewage into our waterways more than 1,000 times each day.
Before 2015, these discharges—from storm overflows and combined sewer overflows (CSOs)—were almost never even monitored. Since then, the Environment Agency (EA) required that, by 2023, all overflows be fitted with “event duration monitors” to track what was coming out of them. Sewage works were only allowed to discharge raw sewage during (in the EA’s wording) “exceptional circumstances”—meaning heavy storms. But as more and more event-duration monitors were fitted, the true scale of the scandal began to emerge.
In 2020, when the data became public, water companies had discharged raw sewage into rivers in England more than 400,000 times, for a total of three million hours. Exceptional circumstances were happening exceptionally often, including on dry, sunny days. Even when fines started to be handed out (Southern Water was fined £126m in 2019 and £90m in 2021) it was still cheaper to pollute than to upgrade sewage works. The dividends kept flowing as readily as the sewage.
Ash Smith, of campaign group Windrush Against Sewage Pollution (Wasp), recently blogged that “while water company staff struggle daily to try to minimise illegal pollution”, corporate interests and company boards of directors “leave assets operating illegally, while extracting the profits from doing so… the scam continues, even now”. Liberal Democrat MP Charlie Maynard, a prominent backer of Wasp’s campaign, adds that: “Thames Water remains a cash cow for its lenders, while its 16 million customers are left to foot the bill”—including me, with my April bill increase.
Maynard is one of many now arguing that the company should be put into special administration—effectively renationalised—to end what he called the “Thames Water debt doom loop”. Thames Water’s purgatory was allowed to continue following a recent £3bn emergency debt bailout from its existing creditors. Yet an Independent Expert Report to the High Court of Justice found that, “Post-privatization, Thames Water focused on shareholder returns and managed its operations in a way that delayed long-term infrastructure investment. The Company deferred necessary maintenance, which led to aging pipelines, higher leakages, and less efficient systems.”
It’s clear why the water companies, and chiefly Thames Water, are running scared to their creditors. But what, precisely, is the Labour government running scared of? Why not end this mess now and use the special administration measures written into the Water Industry Act 1991 as a failsafe for just such an eventuality?
The government has long trotted out the line that nationalisation would cost £90bn in compensation for the water companies; Defra spokesperson Baroness Hayman most recently did so in the House of Lords, reiterating that, “The Government has no intention to nationalise water companies.” Steve Reed bunged an extra £10bn on it (why not?), telling the Commons that nationalisation “would cost up towards £100bn”. But the £90bn figure comes from a now discredited water industry-funded study in 2018. The Greenwich University research says that “[The £90bn] claim is simply wrong about the law.” Dieter Helm, an Oxford professor of economic policy, called the £90b figure “erroneous” and “economically illiterate”.
Special administration in fact allows the government, as in a bankruptcy, to write off existing debts. In reality, “given that the investors include pension funds—UK funds included —that would be politically damaging”, admits Topham at We Own It. “However, JP Morgan’s advice on what might happen in a special administration at Thames Water was that investors can expect haircuts of up to 55 per cent—meaning over half the debt written off.” As the FT summarises, “Old shareholders would be wiped out and lenders would take whatever haircuts would be needed to reset.” And remember, adds Topham, “a third of all our water bills currently go to paying investors and debt—that would immediately cease to be the case with nationalisation”.
Professor Ewan McGaughey of King’s College London has also argued that special administration would cost the Treasury and taxpayers nothing while allowing 40 per cent more investment “if we stop bailing out banks and shareholders”.
But would a renationalised system really be any better? We don’t have to look far for the answer. Publicly owned Scottish Water has invested £72 more per household each year than the English water companies. If England had invested at this rate an extra £28bn would have gone into infrastructure, and we may never have had the sewage crisis. In England, 35p in every £1 from water bills flows directly to shareholders and banks; in Scotland, just 8p in the £1 is spent on the cost of finance. Oh, and Scottish bills are £113 cheaper. If the government took water back into public ownership, says the University of Greenwich, it could save between £3bn and £5bn a year.
Yet the Environment Secretary still rules out nationalisation. Labour’s election manifesto promised to “put failing water companies under special measures” (my emphasis). The wording teases special administration without meaning it. In March, the government’s resultant Water (Special Measures) Act gave regulators the power to block bonuses for water company executives and bring criminal charges for repeated sewage spills. But the regulatory approach hasn’t worked since 1989, and it won’t work now, says Topham: “Ofwat has had extensive powers for a long time, and they don't use them.” He believes that targeting bonuses “is not because [the government] thinks it can solve the crisis, it’s because it polls well”. Bonuses can also simply be replaced with increased base pay, as happened when similar moves were attempted in the City.
In August 2024, Ofwat fined three water companies for their role in the sewage scandal: Thames Water (£104m), Yorkshire Water (£47m) and Northumbrian Water (£17m). The result? Sewage releases increased by 8,000 hours, year-on-year. The regulatory system has evidently failed. Private venture capital has bled the system dry. Our rivers are dying. Surely it’s time to stop taking bill payers for April Fools and bring water back into public ownership.
