Wednesday, 6 February 2013

South West Water, should the supply of water be such a profit intensive business.

Although it must be welcomed that water bills in Cornwall will drop. It must be welcomed that the coalition government has recognised the problem of people here paying much much more than everywhere else in the UK. It also must be welcomed that South West Water are announcing investement in sewerage works, flood defences and the water system. But lets be realistic we're getting ripped off still and the government needed to do more than divert taxpayers money to subsidising not only bills but the parent group Pennon's profits.

Water should be a human right, we can't live without fresh clean water and there are obvious health benefits to a modern sewerage system. Its reprehensible that we still regularly have raw sewage entering the sea from overflow drains during storms and heavy rain. I don't believe water should be a profit making venture. I'm no fan of privatisation I don't think public services and utilities should have shareholders and investors interests as a motivating factor in operation. Public services should be run in the public interest, any savings that can be made should be to the benefit of the tax payer.

This however is not the system we have with water. Its a very profitable enterprise the main concern of the Pennon group is South West Water, the groups is in the FTSE 250 in other words its in the top tied of UK companies. As a press release from Pennon revealed late last year:

"South West Water is continuing its strong operational performance against the 2010/15 regulatory contract with further advances in operating efficiency and customer service. Rigorous cost control, efficiency delivery and stable interest costs are expected to deliver profit before tax for the half year for South West Water up 10% to more than £83m.

We expect to report Pennon Group profit before tax for the half year up over 3% to £111m and to announce an interim dividend up 6.6% to 8.76p per share."

It's a staggering amount of money, although it's obviously good value for the company and it's investors, we have to ask is it good value for the public purse is it good value for users? It's lamentable that the last Tory government sold off the water boards and lamentable that this one's only solution is to use more public money to further subsdise operating profits. Surely rather than paying more than average on bills and some of our tax paying as well the government should have looked to the company itself to alleviate water bills?


  1. History of water industry shows state ownership leads to under-investment, neglect, pollution and overmanning. Like it or not, private companies have invested the billions, government wouldn’t.

  2. I see your point to some extent, it can't be denied that private companies have done good work on stopping raw sewerage outflows and leaks in pipes than when publically owned. However the majority of the investement pipe network and reservoirs was paid for by local authorities. So the idea that the private sector being better at investement is a nuanced point. Besides which here like everywhere else pretty much around the world, privatisation was swiftly followed by rate rises. They do invest more but they have given themselves a much larger budget to do so.

    I'm not naive I don't think when water was public everything was fine and dandy. But it irks me that we pay so much for a basic public utility and everyone accepts people in Cornwall pay too much yet South West Water makes multi millions in profits year on year. There has to be a middle ground between a lack of investement and really cheap water and some investement and huge profits.