If the public pays for the super sewer it should own it too

  • Published: Aug 14, 2013
  • Author: Peter Kenway
  • Category: Services

Thames Water’s proposal to levy a £30 surcharge on its 14 million customers to help pay for the super sewer is an opportunity that no populist politician worth their salt would miss.

On the dirty side of the business – what goes down the pan rather than comes out the tap – Thames is a monopoly and customers will have no choice but to pay the surcharge. Although it covers several items, paying for some land needed for the super sewer is the biggest of them. But as land is an asset and Thames is a private company, the proposal is simply that customers should buy Thames (and its private equity backers) a present worth some £273 million. No wonder such a proposal has come out in August when the political class is away at the seaside.

The proposal has gone to Ofwat, the water industry regulator. Ofwat itself is in a state of flux at the moment, following the abrupt resignation of its chief executive back in May. Until she is replaced, considerable power rests in the hands of Ofwat’s chairman, Jonson Cox. From his time at Railtrack, Cox is used to being at the eye of a political storm about how a privatised industry is run. Thames’ proposal that its customers should gift it £273 million might just find him there again.

At one level, water (like any of our privatised industries), is bedevilled with detailed, economic questions e.g. to do with ownership (opaque private equity structures), investment (reminiscent of soviet levels) and corporation tax (extraordinarily low). We went into all this in our report on the industry published in April.

But there are times when it is right to ignore the detail. This is one of them. Instead, just ponder whether a monopolist should be able to force you to buy him an expensive present. Since the answer is so obviously “no”, the question to think about it is what the alternative might be. There is a debate about whether the sewer is needed at all but assuming it is, the only possible answer is that since it is paying for it, the public should own the asset. As a minimum this applies to the piece of land in question but the argument can be extended to the asset as a whole.

On its own, public ownership is an abstraction. But in London’s case it need not be. The Thames area extends far beyond London it is true. But the majority of Thames’ customers live there, and in London there is a democratically-elected body in the shape of the mayor and the Greater London Assembly that can make a reality of the idea of “public” ownership. Thames Water would still be responsible for managing the sewer – public ownership does not preclude a private company from running the thing – but it would be accountable to the elected authority. This sort of arrangement is how water works in France. Wales too splits ownership of the water assets from their operation.

Are these elected London bodies capable of providing effective oversight? That’s always a fair question. Imagine, though, that you were grilling the Mayor about his experience of holding to account an organisation that digs, maintains and runs a vital public service through tunnels under London. He’d have quite a good answer, wouldn’t he?

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