7 ms·

> I think the neglect and failure to invest in infrastructure is the worst Cumulative capital investment by water companies in England and Wales since privatis

• another-dave 1y ago
  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?
  • krona 1y ago
    My point is the differences you're postulating are a rounding error in the scale of the problem in front of you.
    • another-dave 1y ago
      > 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earnings - or profit - and rising dividend payments mean that, according to the University of Greenwich, owners have withdrawn £85.2bn.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 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
  • lazide 1y ago
    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 1y ago
      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 1y ago
        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.
  • qcnguy 1y ago
    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 1y ago
      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 1y ago
      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.
• master_crab 1y ago
  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 1y ago
    This assumes a parity in government efficiency. A bit laughable innit?
    • juuular 1y ago
      That says more about the British people than it does about the ability of a government to be efficient.
• michaelt 1y ago
  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.
  • krona 1y ago
    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 1y ago
      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-use-up-to-28-percent-of-bill-payments-to-service-debt-in-areas-of-england https://www.theguardian.com/money/2023/dec/18/water-firms-us... https://www.bbc.co.uk/news/uk-england-london-67357566 https://www.bbc.co.uk/news/uk-england-london-67357566
      • krona 1y ago
        > 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 1y ago
          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.
• jdietrich 1y ago
  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/687dfcc4312ee8a5f0806be6/Independent_Water_Commission_-_Final_Report_-_21_July.pdf https://assets.publishing.service.gov.uk/media/687dfcc4312ee...
  • lazide 1y ago
    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.
• mattmanser 1y ago
  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 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.
• bluecheese452 1y ago
  These systems were built at a time when the country was much poorer. It can afford to replace it.
  • physicsguy 1y ago
    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 https://en.wikipedia.org/wiki/Elan_Valley_Reservoirs
  • fredrikholm 1y ago
    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 1y ago
      << 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 https://en.m.wikipedia.org/wiki/Window_tax
    • kccqzy 1y ago
      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.
• arichard123 1y ago
  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.
• KoolKat23 1y ago
  So basically that £250bn is a bullshit figure, how long is a piece of string? It sounds big but it's meaningless.
• runako 1y ago
  > 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 1y ago
    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 1y ago
    They placed a bet on the government allowing water prices to rise to match the level of investment needed, and lost that bet.
• anthonypasq 1y ago
  isnt the cost of not fixing it > trillions of dollars?
• FromOmelas 1y ago
  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.
• GJR 1y ago
  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.
• pbhjpbhj 1y ago
  >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.
• autoexec 1y ago
  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.