Time to admit that privatisation of national utilities isn’t working?

I do get the idea that the right wing want privatised profits and nationalised debts.

You’re right Monica, but investment in the infrastructure and building new reservoirs, desalination plants, or whatever else it’s going to take has to happen. The solutions are there, we just need the money, the plans, and the action to sort it out.

Casdon Every UK nation has its pinchpoints in water supply, either because of sudden large growths in populations or areas dependent on old and decaying infrastructure that cannot meet local needs.

Overall England is in water deficit and the aquifers have run very low.

However the question is how much water will cost, desalination is a very very expensive way to produce fresh water and the energy requirement is high, so while some may be built, they will be used intermittently rather than all the time because of the cost.

I live somewhere where Thames Water wants to build a reservoir, one of the largest in Europe, that would virtually eliminate the parish. It is a huge embanked reservoir and the tecchnical and safety issues are frightening.

The reason Thames Water wants to build it is because it will require the company to borrow the money needed to build it, which will, of course provide a steady stream of tax free income to those lending the money. I wonder who they will be?

Another viable scheme that would meet the need the reservvoir would serve, has been put forward to transfer water from the river Severn, but this of course is a much cheaper, simpler option, and not what Thames Water wants, I wonder why?

M0nica

Casdon I meant Ireland. It was reference to vegansrock saying water in Ireland was free and not charged to each consumer.

I was referring to the bit where you said ‘In the UK, where water is scarce’ Monica not about Ireland. My point was that not all of the UK is short of water, but we need to build more reservoirs to cope with the demand as the climate changes.
I have family in WA, and all their water supply for the whole state comes from desalination plants. I don’t know if any of the water companies in the UK are looking at that yet, but as an island nation we are never going to be short of water one way or another provided the investment is made.

Lathyrus

How it works is based on the nature of how Thames Water, and other utilities are owned

Thames Water has only huge sovereign funds and very large pension schemes investing in it. There are no small or diverse share holders. You will find its investor profile in my email on page 2. You may find it enlightening.

The entities lending money to TW are its main shareholders. Now given nearly all of the owners are organisations who want income, almost more than capital growth, no tax is charged on debt interest, where it will be charged on dividends. So it is much better to get your income from debt. Debt interst also has to be paid, whether the ocmpany is profitable or not, so it is a good steady income, largely unaffected by the ups and downs of the company itself.

Obviously, if the company reaches a stage where it cannot operate profitably long term, and short term debt (to banks etc) is building up, then, of course, the debt holders are in trouble.

But in most cases this isn't the case. But generally, the aim of the kind of entities that own companies likeThames Water, like debt interest because it is a steady amount coming in every year, that they do not pay tax on - and if you are a pension fund with pensions to pay out, month on month, year on year, that has a lot to recommend it.

Mmm, I think I get what you’re saying about debts don’t count on the balance sheet for tax purposes.

I don’t think I really see how it works in terms of payouts to shareholders though. I mean they get money that isn’t really there, I think.

Surely it means that it’s very easy for a Board to borrow enormous sums to make it look as if a business is really profitable when, in reality, it is insolvent. Then they make big dividend and bonus payments and go bust.

That’s tough on their suppliers who are at the bottom of the insolvency queue.

let me post a cliche

Why should rich people with swimming pools, jaccuzzis, huge gardens to water get their water free?

This is the result of not charging for water. Indeed, I would suggest that if water was free there would be an immense waste of water, the idea that everyone in this country would be altruistic and self sacrificing and always use as little water as possible. Even among those on low incomes, taps would be left on, gardens watered, leaks not repaired.

On the other hand, it would be possible to allow every conumer a certain allowance of water that is not charged and there could be extra allowances for those on a disability benefit, but after that we should all pay.

Casdon I meant Ireland. It was reference to vegansrock saying water in Ireland was free and not charged to each consumer.

Debts do show on balance sheets unless they are of the ‘off balance sheet’ variety. As I said, profit is excess of income over expenditure. Debts are not relevant to the calculation. Very simply, a company has income of £1m and has spent £500k. It has to pay tax of £100k. It therefore has made a profit of £400k. It has debts of £500k but is up to date with the agreed repayment schedule. Applying your argument would render it insolvent so it would have to cease trading. Tough on the employees.

Germanshepherdsmum

I don’t need a lecture on the British constitution Grantanow. You know full well how difficult it is to get a controversial Bill passed. The Parliament Act has been used only four times - its use is the British equivalent of ‘doing a Macron’. That didn’t end well, did it?

On the contrary, the use of the Parliament Act was effective in each case. Macron is quite irrelevant. There have been many controversial Bills passed by Parliament. Whether it's difficult or not is beside the point - it can be done.

dying =saying😬

I’m not dying the money should be in a suspense account but shouldn’t the debt appear on the debit side of the final accounts.

Surely the calculation of profit can’t be true if there is unpaid debt.

Final accounts should show assets and debts surely to give a true picture of profits.

I could liken it to someone telling you that you mustn’t spend any money at all until you have repaid your mortgage - you’d very quickly die from starvation.

Profit is excess of income over expenditure. Whether a company has taken on debt is irrelevant. If debts had to be paid off before profits could be declared, or the money required to pay off debts had to be held in a suspense account, you do realise that businesses who take on debt would never make a profit and would quickly cease to exist, don’t you? I don’t think you realise just how vital external finance is to the running of any sizeable business - from the humble bank loan to sale of shares to very sophisticated arrangements involving huge sums of money.

Germanshepherdsmum

You can make profits whilst having large debts Nandalot. Many profitable companies are highly geared.

I genuinely don’t understand that GSM.

Can anybody explain it to me. Not politically but economically.

Shouldn’t dents be paid off before assessing profi or at least held in a balancing account?

Because they haven’t made that profit if there is money owing?🤔

You can make profits whilst having large debts Nandalot. Many profitable companies are highly geared.

What "we" say is, (well, this gransnetter) as long as benefits and others at the bottom of the pile can't afford other than cheap food, then we won't get change until they are paid enough to buy food at realistic prices.

I know. We have for instance had cheap food for far too long. But you just know what GN posters will say.

Germanshepherdsmum, if dividends can only be paid out of profits, and Thames Water was paying out large dividends, how come it is in such debt and trouble now?

Germanshepherdsmum

And the higher the wages paid, the more expensive the goods produced. That isn’t necessarily a brilliant idea.

But it's not a bad idea. At some point we are going to have to come to terms with goods costing more than we are used to paying.

And the higher the wages paid, the more expensive the goods produced. That isn’t necessarily a brilliant idea.

This is the problem with so many companies....profits for the share holders takes priority over efficiency. If private businesses were willing to pay decent wages instead of looking for the cheapest labour, British companies would employ British workers and keep their factories in this country.

Shareholders receive dividends, not bonuses, and loans were not taken out in order to pay dividends. Dividends can only be paid out of profits after tax.

cc

OurKid1

I've always thought that water, as a minimum, should be in public ownership and also should be provided free at the point of use, being essential to life. I think it should be funded, as the NHS is, from taxes. I'm aware that increasing taxes is opening a whole can of worms, but I've never understood why it is not part of that system.

Surely it makes sense to provide it at cost to those who use it, so there is little or no funding from taxation. Providing anything free at the point of use is far more likely to lead to wastage. And it takes no account of heavy users such as those with pools, large gardens, agriculture or industry - they should be paying the same per unit as domestic users but I don't know if they get a lower rate now?
For those who are really hard up it makes sense to increase their benefits, rather than provide water free for everyone,

Yes, that's a fair point. I wonder if there's a way of providing an essential amount of water from taxation, then charging for any usage on top of that. I appreciate that would be difficult (maybe even impossible) to administer though. I guess the main problems are the massive wastage through lack of maintenance and the massive bonuses given to shareholders. Someone said above that they actually had to take out a loan to pay those bonuses!! Words fail me on that one.

I don’t need a lecture on the British constitution Grantanow. You know full well how difficult it is to get a controversial Bill passed. The Parliament Act has been used only four times - its use is the British equivalent of ‘doing a Macron’. That didn’t end well, did it?