[krona]

> I think the neglect and failure to invest in infrastructure is the worst

Cumulative capital investment by water companies in England and Wales since privatisation: £250bn.

The infrastructure they inherited was never designed for the things it's being asked to do today, and it has a life expectancy. It would literally cost trillions to upgrade the entire sewerage system.

This isn't apologia, it's just reality. The road network will also face the same fate since much of it was built >50 years ago and has a life expectancy of roughly 50 years. The country simply can't afford to replace it.

[michaelt]

The thing is, if a water company is in good financial health, with low debt and lots of money to invest in infrastructure, it’s completely legal for private equity to buy the company, stop investing in infrastructure, take out loans until a third of customer bills go on interest payments, and take the loaned money as ‘management fees’.

Then dump untreated sewerage in rivers and demand more money from bill payers, because they “can’t afford” to maintain the infrastructure.

In most industries a company so poorly managed would lose customers, go bankrupt, and be replaced by a better run company. But water companies? They have a monopoly, and everyone needs water to live.

[patanegra]

Can you show me which UK water companies are in such a situation?

My provider is Thames Water. They are losing money.

[michaelt]

Sure thing!

According to https://www.bbc.co.uk/news/articles/cgleg70r7rno

> When Thames was privatised in 1989, it had no debt. But over the years it borrowed heavily and its total debt - which includes all of its borrowings and liabilities - now stands at £22.8bn, according to latest financial results, external.

> Its debt pile increased sharply when Macquarie, an Australian infrastructure bank, owned Thames Water, with debts reaching more than £10bn by the time the company was sold in 2017.

According to https://www.bbc.co.uk/news/business-41152516

> Macquarie and its investors paid £5.1bn for Thames Water, of which £2.8bn was money Macquarie had borrowed [...] £2bn had subsequently been repaid. Not by Macquarie and its investors, who had originally borrowed the money, but from new borrowings raised by Thames Water through a Cayman Islands subsidiary.

> Martin Blaiklock said: "That letter was a red flag to me because it showed clearly that the debt which Macquarie funds had used to buy Thames Water had been transferred over to Thames Water." [...]

> the total returns made by the bank and its investors from Thames Water averaged between 15.5% and 19% a year. Mr Blaiklock has 40 years of experience in such matters and said these returns were "twice what one would normally expect"

According to https://news.sky.com/story/approval-for-higher-bills-and-loa...

> The company, which has been crumbling under a £16bn debt pile, was due to run out of money in about a month's time. It has now received court approval for another £3bn loan [...] the company's gearing ratio is 80% and its annual debt interest bill is around £900m (about a third of the revenue it gets from customer bills) [...]

> The water regulator has sanctioned bill increases of 35% by 2030.

> However, Thames wants more. It is seeking a 53% increase, which would take the average bill to £677 a year

This stuff's all pretty widely documented and reported, if your idea of fun is getting angry and depressed while also reading about business accounting.

[marcus_holmes]

The flip side of this is that Thames Water is clearly not an ongoing concern and can therefore be re-nationalised at zero cost [0]. I believe there's language in the original privatisation deal around this.

Ofc, that doesn't claw back the billions that the PE pirates made off with, but at least the UK wouldn't have to pay them even more to get its water supply under control again.

[0] even if the UK had to pay market value for it, the market value for a business so drowning in debt would be close to zero.

[swiftcoder]

> My provider is Thames Water. They are losing money.

Are they losing money because costs exceed revenue, or are they losing money because they are servicing massive loan interest on money they already distributed to shareholders?

[jermaustin1]

Page 10 of their 24/25 annual report says they only pay 8% toward interest payments, the largest outgoing is infrastructure, then opex.

https://www.thameswater.co.uk/media-library/l13deqmw/thames-...

[swiftcoder]

I'm not a financial wiz, but it seems like they are playing games here, as a huge chunk of their stated losses for the year is some sort of loan write-off against their parent company.

> £1,271 million of expected credit loss provision recognised against the intercompany loan receivable from TWUL’s immediate parent company, Thames Water Utilities Holdings Limited. This balance is fully provided for, as it is not deemed recoverable

[nerdponx]

It blows my mind that this is legal in any developed nation. The whole PE playbook seems like embezzlement carried out in broad daylight.

[Retric]

That doesn’t answer the question.

However, any money paid to shareholders while accumulating debt, including deferred maintenance, etc was financial smoke and mirrors not actual profit.

[blibble]

yes, paying dividends out of debt is completely illegal

but apparently not if you wrap it in half a dozen companies in various tax havens

(that have no legitimate purpose other than various types of laundering)

[VirusNewbie]

Does the government not do this?

[patanegra]

In the last 10 years, they did £18107.3m turnover, and cumulative -1180.3m loss.

Poor shareholders, mainly Ontario Municipal retirement fund pensioners, who are the biggest ones (32%) and retired British academics (20%).

[mytailorisrich]

And yet they have paid dividends until last year and the regulator has now banned them from doing so without approval and fined them, too.

They are a scam operation, frankly.

[Iwan-Zotow]

What is the debt load of TW? Cost of servicing it?

[krona]

You're arguing a kind of strawman of unbridled economic liberalism which hasn't existed in England since probably the late 19th century, if at all.

[ellen364]

Based on "a third of customer bills go on interest payments", I'd guess the original comment was about Thames Water.

In 2023 their interest payments were 28% of revenue. They also made the news for dumping particularly large volumes of sewage into rivers.

https://www.theguardian.com/money/2023/dec/18/water-firms-us...

https://www.bbc.co.uk/news/uk-england-london-67357566

[krona]

> they also made the news for dumping particularly large volumes of sewage into rivers

Yes and they have been fined for doing so, thus proving my point. These companies have statutory obligations. See the Water Industry Act 1991 and subsequent legislation.

[tomrod]

So sewage wasn't dumped, because the law prevented it? Or sewage was dumped, and it was against the law?

I'm having a hard time reconciling the theoretical claims made in the thread with the blinding light of what actually happened.

[krona]

Well sewage has to be dumped (especially in storm conditions), and the water companies have licences to do so. However Thames was found to be in breach of the license, so were fined.

Many people claim these things happen because "shareholders" however it was completely widespread practice to dump sewage before privatisation and the system is literally designed to do so. This doesn't make it OK, however.

[thelastgallon]

They were fined. That must have hurt. They must have made a pinky promise to never do it again.

[xico]

Subsequent legislations are EU directives (and associated EU fines), which are not as corrupted as local legislations, and forced the UK to start building the Thames Tideway for instance. The population chose Brexit though.

[qcnguy]

Governments don't pay for infrastructure by saving up surplus tax revenue in a piggy bank. They take out loans to pay for it, same as the water companies do. The UK pays around 8% of its spending on interest payments and that's rising rapidly, despite the fact it can print money.

British water companies are in lots of debt because they aren't really private. They're forced to spend huge sums to repair Victorian-era infrastructure whilst the government sets the prices they're allowed to charge. Decades of populist left or centre-left governments have kept the prices artificially low whilst requiring investment, resulting in a huge accumulation of debt.

This is exactly what would have also happened if the water companies were not privatized, so the fake "privatization" is a red herring. It's the expected outcome of price controls, not whether the utilities are owned by the state or not.

[happymellon]

You really twist yourself around here. But this?

> Decades of populist left or centre-left governments have kept the prices artificially low whilst requiring investment, resulting in a huge accumulation of debt.

Bloody Tories, the whole problem isn't that they were in charge for 32 years from 1979-2024, it's the 13 years of Blair. They have been powerless to stop the spooky Left and fix the pipes before the water was privatised (or anything afterwards, because obviously it's still the Left)!

[qcnguy]

The Tories are a centre-left party. That's why they lost the support of conservative voters at the last election and are now in the doldrums, with much of their base having defected to Reform.

[happymellon]

> The Tories are a centre-left party.

Oh boy. That's funny.

> much of their base having defected to Reform.

Yes, they found a party they will say the quiet bits out loud, so they don't feel as uncomfortable being bigots and racists.

[ahartmetz]

Maybe they are now (I doubt it), but they surely weren't under Thatcher.

[overfeed]

The Tories decided to flank Farage from the right during the last elections. Calling them "centre-left" is a joke.

[qcnguy]

Correct. But by "decades" I meant in the 40 years since Thatcher.

[cma]

Water was privatized in the 90s after Thatcher.

[Podrod]

>The Tories are a centre-left party.

You honestly believe this? If so: Jesus H. Christ!

[p1necone]

I was hopeful that the eventual endgame of right wingers blaming everything on the left when the right was in charge for literal decades would be for them to eventually maybe consider that that wasn't the problem.

Turns out I was wrong, all it takes is to no-true-scotsman everything into the "bad wrong left wing" bucket on the quest to move the overton window ever rightwards. Hilarious. The mental gymnastics knows no bounds.

[Der_Einzige]

You must think that the lib dems are now more conservative than them.

Bullocks. All of your argument is bullocks

[scythe]

>This is exactly what would have also happened if the water companies were not privatized

The post office in the United States is not privatized and yet has been able to set prices in a way that sustains the business for centuries. You can't simply assume that all public entities will ignore fiscal reality.

In fact you may run into the opposite problem: when a utility is public, their debts appear on the government balance sheet and legislators are responsible for them. When it's spun off as a quasi-private monopoly, the government can impose debt on the utility without appearing to increase the public debt.

[jdietrich]

The US Postal Service has been running at a loss since 2007. It lost $9.5bn last year, despite a colossal bailout in 2022 that was supposed to return it to profitability. Most of these losses can be attributed to pension and healthcare costs. The USPS is pretty much the worst example of a sustainable nationalised business that you could possibly choose.

[Aushin]

Only because of legislative sabotage in 2006 by right wing ideologues determined to prove that public services "can't work"

https://www.congress.gov/bill/109th-congress/house-bill/6407

[coryrc]

The problem that's at-least-purporting-to-address is one facing all the levels of government: boomers promised themselves future taxpayers would give them lots of services (money) while setting aside wholly insufficient capacity to make it fair to the future working citizens.

[qcnguy]

Yes, in theory nationalized companies can set prices rationally and turn a profit. In practice they rarely manage this for long because sooner or later a populist comes along and forces them to lower prices in order to win votes. It's not just water where the UK has a problem with this. Transport for London has also been forced to underprice its services for years by London's socialist mayor, it's a big part of how he won votes, meaning they've been building up a huge tech debt backlog. He clearly expects that the rest of the country will eventually bail London out and he'll be seen as the hero.

The US is a very right wing country. It's politicians are better able to avoid populist price controls. Maybe with Mamdani that's now changing.

[djankauskas]

Could you explain the case that TfL charges too low for fares due to a "socialist" mayor? Looking at the agency's reported recovery ratios, they actually recover more than 100% of their direct operating costs on the Underground from fares, and even buses have a 70% ratio. In the Western world this is actually abnormally high; in NYC buses don't even clear 20%. It's possible some of this gap is explained by accounting differences, but nonetheless London is clearly not charging cheap fares.

The reasons why Western systems often don't recoup even operating expenses, let alone capital costs, from fares are because transit is a public service with public externalities. Drivers on the road contribute to pollution and congestion, especially relevant in dense areas like London. Some level of subsidy is appropriate to account for the positive externalities of discouraging these negative outcomes while still encouraging regional mobility.

This is not to say TfL is as efficient as it could be; there is a well-documented capital costs crisis in the Anglosphere, particularly when it comes to transit. The issues here are more complex, though, than vote buying from an allegedly "socialist" mayor.

[qcnguy]

Since lockdowns I think the underground only recovers around 70% of its operating costs. Maybe you have seen different figures?

The freezes eliminated investment projects needed to keep pace with population growth. There's also just big problems maintaining the stations and doing more than the bare minimum needed to keep the lights on. Travel on it and the stations are dirty, overly hot, etc.

Drivers on London's roads are very heavily taxed already, supposedly to reflect those externalities. Public transport obviously also contributes to pollution and congestion, especially when building underground lines, it's not externality-free.

I don't think TfL has a cost crisis. Crossrail overran but that was mostly due to the software complexities of the signalling tech debt around the Heathrow tunnels and other issues that can affect any kind of project. It's just hard to tell right now because they can't build at all.

The fare freeze was broken by central government briefly, but only by bribing Khan with central government money for upgrades. Exactly the outcome he wanted!

[midnightclubbed]

> The US is a very right wing country. It's politicians are better able to avoid populist price controls. Maybe with Mamdani that's now changing.

Rather than placing price controls on private companies the US slashes taxes to the point where public services then cannot invest in infrastructure and maintenance - and then use that as an argument why public services should be privatized.

If tax cuts aren't populist policies I don't know what are. The magic trick of the right wing parties has been to sell tax cuts as a great thing to the very people who don't benefit from the cuts and are hurt by the fiscal fall-out. That and attaching themselves to Christianity while not following any of Jesus's teachings.

When a service is a monopoly there is no good reason for turning it into a for profit company outside of feathering the pockets of the rich. If the electricity supply to my house (and by extension my street and my city) is controlled by one company and they own the cabling and infrastructure then what is the motivation for them to not jack up my prices to generate profits to their shareholders, as they should as a shareholder owned company? What is their motivation for encouraging renewables or improving infrastructure when those would reduce profits and reduce shareholder value?

Mamdani hasn't even been voted in yet. Keep sowing that fear so that the people his policies might benefit don't actually vote for him - because he's a scary socialist (in the loosest, most American, definition).

[qcnguy]

The difficulty of getting people to vote for tax rises is a good justification for privatization. This difficulty isn't some uniquely right wing thing. The Democrats and Labour don't campaign on general tax rises either. At most, the left are willing to campaign on "tax rises for people who aren't you". That's because any party that wants to raise taxes on the majority loses.

So, governments of any color have to work with that as a constraint. Given that nobody has worked out how to convince everyone to accept big increases to their tax bills, you can either pay for new expenditures with borrowing or with cuts elsewhere. Sometimes cutting elsewhere is also hard, so either:

1. Everything gets put on the credit card. This ends badly.

2. Stuff is privatized. This yields an immediate cash influx, and voters are usually happy with the results which is why very few privatizations have been rolled back. The reason is that outside of very left wing spaces most people trust private companies on pricing much more than governments. Private companies run special offers, sales, sometimes cut prices even in the face of inflation and can be visibly seen competing on price. Government owned organizations never do this.

It's also (quietly) popular with governments on both left and right for another reason - it means they have less stuff to manage and less stuff that can blow up. If there's a problem with a privatized industry they can just tell you to switch to a competitor instead of needing to campaign on it and promise to do better.

Natural monopolies do exist and sometimes governments just have to bite the bullet and run such things themselves. But there's a lot of room to debate what is and isn't a natural monopoly.

[danans]

> It's not just water where the UK has a problem with this. Transport for London has also been forced to underprice its services for years by London's socialist mayor

In the US we have a problem with fantastically underpricing public roads. We don't expect their books to break even, much less generate a profit. Meanwhile everyone asks why train systems are not profitable.

> The US is a very right wing country.

Yeah, at least compared with most of Europe.

> It's politicians are better able to avoid populist price controls.

You didn't notice when the current president (somewhat successfully) bullied retailers into swallowing tariff-caused price increases, so they wouldn't damage his popularity? That almost seems right-wing socialist.

[qcnguy]

I don't think Trump is anyone's idea of a textbook conservative, especially not economically. He's a former democrat with populist instincts. Such politicians are often popular. It's frequently said in the UK that the median British voter is socially conservative and economically liberal.

It's true that the US subsidizes its road network. The effect is somewhat different though. If TfL doesn't get enough money in due to price controls then the network just degrades. If the US subsidizes its roads, the network can be maintained using subsidies. For it to be equivalent, roads would have to be privately owned but unable to charge the true cost of maintenance.

[autoexec]

> This is exactly what would have also happened if the water companies were not privatized

This clearly isn't always true and when it does happen the public has the ability to require the transparency from their government to catch it happening quickly and the ability to hold the elected officials responsible for it accountable by voting them out and replacing them. Private corporations don't allow the level of transparency the public needs and aren't accountable to the public either.

Maybe the government could work out some deal that gives the public the right to put webcams in every meeting/board room of the private company, force their bookkeeping to be published to the internet, allow the public to request internal email and other communications, require independent audits/reports, and grant the public the ability to fire and replace any and all employees or executives at the private company who fail to do their jobs, but even then you'd still have the problem that private companies demand extra money on top of what is required to do the job just to line their own pockets. Why should we accept that?

[OtherShrezzing]

>Decades of populist left or centre-left governments have kept the prices artificially low whilst requiring investment

The overwhelming majority of people would disagree that the Conservative Party can be described as "left". Since 1979, the Conservatives have been in power for all but 14 years.

[qcnguy]

Their voters obviously don't agree. Not only have they defected to Reform on a massive scale, but Reform recruiting former Tories like Dorries is hugely controversial within the party base, exactly because Tories are viewed as being too left wing.

[4ggr0]

that's like saying the CDU in germany is left because CDU voters started voting AfD. people flocking to an even more conservative party does not mean that the original party is somehow left.

[qcnguy]

Good example. The CDU is in a coalition with the left wing parties and refuses to work with the AfD in any way, not even winning votes with their votes, on the basis that the AfD is right wing and thus inherently evil. So the CDU is indeed not a recognizably right wing party anymore, and has suffered mass defections for that very reason. If it were, it would enter into coalitions with other right wing parties rather than being taking orders from a partly literally called Die Linke.

[gjm11]

Within whose party base? If you're saying that the Tories are viewed as too left-wing by Reform voters, then I assume that's true because Reform are further right than the Tories, but so what? If you're saying that Conservative voters find it "controversial" (whatever exactly you mean by that) that Reform is recruiting former Conservative politicians -- well, I'm sure they don't like it, no one likes it when some other party poaches their politicians, but I would like to see your evidence that their dislike is "exactly because Tories are viewed as being too left wing".

So far as I can make out, here in the UK the near-universal view is that the Conservatives are a centre-right party, Labour are somewhere between a centre-left and a just-plain-centre party (unsurprisingly, people who are further to the left see it as further to the right and vice versa), and Reform are a not-so-centre right party. (People who aren't Reform supporters would mostly describe them as far-right. Not many people like to use that sort of terminology to describe themselves, so people who are Reform supporters would say other things.)

Pretty much no one other than extreme rightists would describe the Conservatives as a centre-left party. Likewise, some people further to the left would describe Labour as a centre-right party. I think more people would do that than would describe the Conservatives as centre-left, but that may just reflect the people whose opinions I happen to be most exposed to.

(I mean, specifically, in the UK. Other countries have different overall political leanings. Someone in the US, comparing with the parties there, might accurately describe the Conservative Party as centre-left. But in terms of the UK political landscape: no, of course they are not a centre-left party.)

[qcnguy]

> Pretty much no one other than extreme rightists would describe the Conservatives as a centre-left party

If an election were called tomorrow your next government would be Reform with a massive majority of 339 seats. It is the most popular party in the country by far. It would collect 33% of the vote vs Labour's 18% and the Conservatives would get only 17%, translating to their near-total destruction (only 35 seats).

Reform's popularity is driven by the belief that the Conservatives have become so captured by left wing "wets" that they cannot be fixed. Otherwise it makes no sense to split the right, and right wing voters there resisted doing so for a long time. The most commonly cited reason for switching to Reform is a belief that the Tories won't actually enact any right wing policies no matter what they say, and so that's a third of the country saying through their votes they think the Conservatives are a center-left party.

The fact that you believe "pretty much no one other than extreme rightists" has this view and that Labour is seen as a "centrist" party indicates that indeed, your gut feel is correct, and the people you know aren't a representative slice of the population. How many people do you hang out with regularly who read the Telegraph or Daily Mail? Maybe it's none?

If centrism means anything it means trying to adopt mid-way positions that appeal to the majority, but Labour's support for far-left ideology is so intense they're reacting to continuously dropping approval numbers by doubling down. That's not what centrists do, they chase votes, doubling down is what ideological extremists do. They'd rather drive their own party into the ground than compromise on modern left wing goals like unlimited mass immigration.

[jdietrich]

The regulator (Ofwat) also deserves a great deal of the blame. They determine the maximum prices that water companies can charge. Since the start of privatisation, they have prioritised low bills above all else and are proud of the fact that water bills fell by 45% in real terms between 1989 and 2020. The consequences are obvious - the supposed "efficiency" that pays for those lower bills inevitably means neglecting maintenance and reducing infrastructure investment. The short-term thinking that has led to this situation has been dictated by government, not shareholders.

As mentioned elsewhere in the comments, the planning system is also a huge obstacle to infrastructure investment, with numerous important projects being blocked due to spurious environmental concerns.

https://assets.publishing.service.gov.uk/media/687dfcc4312ee...

[lazide]

A lot of this is (imo) a desire to keep juicing returns - often encouraged by things like pension funds, which happily look the other way.

The economy always goes through these cycles - people find a way to scam/‘extract economic value’ from something no one is worried about at the time. They weren’t worried at the time, because it was well run and ‘what is the worst that can happen’.

Over time, what was working well gets blown up as part of the resource extraction, leading to the thing being a giant expensive scandal now.

The issue starts getting resolved - in the case of a public service often by necessary price increases because of stuff that wore out/deferred maintenance/disasters caused by the prior situation. If it’s a private company, bankruptcy.

Eventually, even the dumbest of the population realizes the prior attitude was wrong and they got scammed. The thing starts maybe not being terrible for awhile.

Scammers move onto another part of the economy as people are looking for them now.

After a generation or so, people forget. Lather, rinse, repeat.

[autoexec]

If a country can't afford to maintain it's infrastructure it's a failed country.

Very little in our world was designed to do what we need it do 50 years later. It's unlikely that anyone will even know what our needs 50 years from today will be. This is why the expectation is that systems we build will be constantly maintained, upgraded, modified, expanded, and redesigned as needed and with the next several decades in mind (to the best of our ability).

It's what we've always done with all infrastructure and even our cities themselves. Neglecting things like sewer systems until they are overwhelmed, failing, and prohibitively expensive to fix isn't inevitable. It's just bad governance. It doesn't matter if it's private companies or governments, neglecting infrastructure so that a few people can line their own pockets until the situation becomes critical should be criminal, but at the very least nobody should accept them throwing their hands up and saying it's just too expensive to fix now.

[arichard123]

But "investment" as the water companies define it is every penny not taken as profit. Staffing costs? Investment! Fixing leaks? Investment! So that figure sounds like money above and beyond, but I don't think it is.

[FromOmelas]

The 250bn figure is one pushed by the private owners, trying to defend their high yields. It's likely inflated with bonuses and short term schemes to juice returns. Meanwhile, they've extracted 85bn in dividends since privatization began. Privatizing them cost approx 7.6bn - that's a 12x return over less then 40 years. Pretty nice if you can get it.

[bluecheese452]

These systems were built at a time when the country was much poorer. It can afford to replace it.

[fredrikholm]

Sweden's conservative government are pressuring building regulators to re-evaluate whether "all rooms require windows" in order to make the construction of apartments cheaper.

"Perhaps a better plan would be to replaces cranes with horses and ropes such that we can once again afford windows" was my first thought when I read that in my turn of the century starter apartment with giant windows in every room.

Like, GDP and productivity has tripled since that apartment was last renovated, let alone constructed. The idea that we can't afford a 20th century living standard anymore is nothing but absurdist propaganda.

[hardlianotion]

<< Perhaps a better plan would be to replaces cranes with horses and ropes such that we can once again afford windows

No - just bring back window taxes

https://en.m.wikipedia.org/wiki/Window_tax

[kccqzy]

That's a good thing to re-evaluate. The government shouldn't dictate people's preferences. People's lifestyles have changed. It's now normal for this generation of people to prefer a dark cave-like room where they play video games and socialize online. Glare from windows restrict where monitors could be placed. If they want natural light, they would prefer to go outside for a walk or a hike.

And that's not to mention rooms like kitchens and bathrooms. Older houses invariably have windows for kitchens too since you need to open the windows to let out the fumes from gas cooking. And they would have windows in the bathroom to let out moisture. These days newer houses are already designed not to have windows in either kitchens or bathrooms.

[fredrikholm]

Sweden is very green and comparatively car free. Having open windows during summer to let in light, fresh air and bird sound is culturally strong here.

You can buy curtains, you can't retroactively insert a window as easily nor should you have to my lord.

I can't imagine living in a dark, centrally ventilated container. Most Swedes agree (massive pushback when this happened, gov backtracked).

[lansol]

No, you are right. It is absurd. The same government also increased the income tax deduction on renovations both in percentage and amount.

So is the suggestion of less light and more isolation in Sweden. One of the darkest and most lonely countries in the world. There is already no requirement for windows in bathrooms and kitchens, as you can't regularly open windows in winter anyway.

[physicsguy]

They were largely also built when planning wasn't a concern. Can you imagine the city of Birmingham being able to just buy land and building resevoirs in Wales and viaducting it all to the city today? https://en.wikipedia.org/wiki/Elan_Valley_Reservoirs

[username332211]

These systems were built when the nation could build. That capability has been significantly diminished. London's equivalent to Paris' RER costs north of 1 billion pounds per mile.

[krona]

The UK doesn't have enough lawyers or legal infrastructure in general to handle that kind of case load!

[runako]

> The infrastructure they inherited was never designed for the things it's being asked to do today

I am not British, but this is confusing. Was private capital forced to take on the burden of privatizing the water system? Or did private investors err in their economic analysis? (Or did those investors just assume the problems would happen long after they personally had gotten paid?)

[mr_toad]

They’ve being paying out dividends and bonuses while running up debt and not investing in infrastructure. Some of these companies are already worthless on paper. Clearly they intend to make as much as possible and then walk away.

[qcnguy]

They placed a bet on the government allowing water prices to rise to match the level of investment needed, and lost that bet.

[another-dave]

I mean, all the more reason it shouldn't be privatised. If it only makes sense to have one of something (road network, water system) it's a natural monopoly, _and_ it's going to require large public investment to be maintained, why wouldn't you in-house the expertise needed to do that and avoid the shareholder dividends overhead?

[qcnguy]

The overhead of having shareholders in this case is minimal. The profits they make are small, but having a goal of making profits does create discipline in resource usage.

The water system is like the electricity system. It's perfectly possible to have inflows and outflows be fully private, as long as the government keeps its hands off the pricing. The network itself can also be run privately, as both supplier and buyers want supplies to flow. The trick is to ensure there are numerous different companies with the expertise to maintain pipework and then allow local communities to quickly change to different contractors.

[KoolKat23]

This is why the state owned company structure exists. The board and management are correctly incentivized and the profit can be reinvested if necessary. No parasites.

You need a counterbalance to efficient resource use, usually competition ensures they don't skimp, that doesn't work with natural monopolies.

[juuular]

Kind of shows how toxic things have become in our culture when people need to be bribed with profits to provide the basics necessary for a society to function, instead of just being incentivized by wanting a functioning society.

[lazide]

Cynically, if you’re someone trying to make a lot of money, why wouldn’t you take a well run system, convince people they can save a bunch of money by ‘cutting waste’, then pocket as much money as you can by cutting long term maintenance and pocketing the difference - and when it blows up, sell them the solution at inflated prices too?

It seems like the voters actively encouraged this kind of behavior.

Eventually people figure it out (maybe) and go all fire and pitchforks - but that sounds like a problem for ‘future me’ eh?

And if you’re good at structuring everything, maybe they’ll never even have anyone concrete to blame but themselves! (Classic referendum/politician behavior there)

[mtrovo]

I can't understand the perspective of those who defend privatizing natural monopolies. I'm not against privatization in any way, but good governance is impossible without consequences for failure.

Focusing on Thames Water's particular example, if we assume malice as the cause, what would be the potential consequences? While the government could impose fines, the possibility of non-payment exists and what would happen in that case? Instead of debt collectors taking action, like ripping pipes from the ground or causing pension fund collapse, the government would act as a last resort investor, potentially providing further funding for a few additional years before the situation likely repeats.

[lazide]

Notably, public utilities are often seen as ‘above consequences’ too when part of the gov’t, since usually governments make it impossible to sue them or give them real consequences either.

In theory, with privatization the gov’t can arrest people or the like. The gov’t very rarely does that to itself.

Politicians can be swapped out of course, but most smart ones setup scape goats and a lot of levels of abstraction so they can claim successes and point the finger elsewhere if it goes wrong.

[krona]

My point is the differences you're postulating are a rounding error in the scale of the problem in front of you.

[another-dave]

> Taken together, the fall in shareholders' investment and retained earnings - or profit - and rising dividend payments mean that, according to the University of Greenwich, owners have withdrawn £85.2bn. > > — BBC (https://www.bbc.co.uk/news/articles/cw4478wnjdpo)

It might be a rounding error vs the scale of investment needed for water, but that investment is needed regardless of public or private ownership.

It's not a rounding error in terms of gov investment elsewhere — imagine an extra £85bn invested in, say, social housing? Even as a single one-off

[GJR]

So where has the profit, paid as bonuses to executives and shareholders, come from? The UK water companies were paid extra to fix the infrastructure and the cash paid by the public has increased.

[mattmanser]

That's according to the water companies though, you've taken those figures directly from water UK, an industry run company:

https://www.water.org.uk/about-us/our-board

We must look at the reality more critically.

We already know that the investment is open to profit extraction, the companies doing the work are owned by the same investors and there's low oversight, they have occasionally been caught using inflated prices. We don't know the extent though as OFWAT has been criticized for only really catching the really obvious ones.

All that investment is our own money, it's now apparent they've not taken on debt to pay for that investment. They claim they have, but it's now turned out that they've taken on that debt simply to pay for dividends to shareholders. Debt is around £60 billion, while share holder dividends over the years are about £80 billion (this figure varies depending on who you believe, but it's always higher than the debt). And that's without accounting for the inflated cost of "investment".

And that debt is now apparently tax-payer guaranteed because it's all to people who are too big to fail.

So they've basically made off with £20 billion in 35 years, plus however untold billions in profits from related companies in "investment", and we've got a water crisis developing, constant sewage discharge into rivers, etc.

[pbhjpbhj]

>Cumulative capital investment

Now divide that by C-suite wages + monies paid as profits.

Well the estimated industry profits of ~£20B pa over the last 30+ years would have got us some way to replacing the worst of the sewage system. Instead that money went to yachts and pushing up rental costs, or whatever.

[anthonypasq]

isnt the cost of not fixing it > trillions of dollars?

[master_crab]

And yet we are still in this position in the UK. Flip the question: What were the dividends paid out by the companies over the same time period? Assuming they gave out $100bn in dividend, then we wasted money that should have been spent on more infrastructure.

[bethekidyouwant]

This assumes a parity in government efficiency. A bit laughable innit?

[juuular]

That says more about the British people than it does about the ability of a government to be efficient.

[KoolKat23]

So basically that £250bn is a bullshit figure, how long is a piece of string? It sounds big but it's meaningless.