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

cc I am a bather but compromise by only having a bath every other day.

I’m afraid you’re affected by unethical investments even though you’re drawing your pension, as am I. Nothing I can do now. Just bank the money and hope things improve.

M0nica

That is an interesting question you ask GSM. I immediately turned to the box file on a shelf behind my desk for the Pensions Update booklet that my pension provider sends out each year and in the past has included a breakdown of the destination of its investments..

This time the information is not there. Everything has gone online and I haven't yet accessed the pension site online. It gives the broad brush description of sectors it is invested in - and these include infrastructure, which I would assume includes companies like Thames Water, although not TW itself.

The University Staff Pension Scheme owns about 20% of TW, although it is a much smaller proportion of their total investment funds.

I'm a USS pensioner, though I only have a small pension, and was horrified to learn this the other day. USS have had a very poor investment record in the past and I'm glad that I'm already drawing my pension as future pensioners could well be affected.

M0nica

vegansrock I think it rains far more in Ireland and presumably its geology makes it easier to access.

Setting aside those with a need for a lot of water, because their families are large, disabled or incontinent and they are on UC. At the other end of the spectrum there are those with swimming pools, or large paddling pools, emptied and refilled every day, or who spent hours everyday watering their gardens with sprinklers to keep the grass perfect.

When water is a scarce commodity that needs to be used carefully. The best way to do this is to make some charge for water. Even before water meters, many water companies put a supplement on your bill if you used a hose or sprinkler.

In the UK, where water is scarce, we are always being encouraged to economise on water, shower don't bath, only use washing machines and dishwashers when full etc etc and it is noticeable these days, when water is on meters, there are far fewer people using sprinklers every day to keep their front lawns immaculate.

M0nica
"In the UK, where water is scarce, we are always being encouraged to economise on water, shower don't bath, only use washing machines and dishwashers when full etc etc and it is noticeable these days, when water is on meters, there are far fewer people using sprinklers every day to keep their front lawns immaculate".
There's a recent article which I accesses through a SAGA newsletter, stating that many showers actually use more water than those taking baths. Apparently this is not just "power showers" but simply long showers - they suggest that 10 minutes isn't out of the ordinary.
www.exceptional.com/homes/home-improvement/bath-vs-shower/
I was surprised to read this, though pleased as I much prefer baths.

Lathyrus

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.

To clear up some of points, I hope simply:

A Profit and Loss Account (P & L) is a summary of a company's trading throughout it's accounting period - ie sales, fees, direct costs, indirect costs and expenses. It will also include depreciation.

A Balance Sheet (BS) is a snapshot of the state of the company's financial affairs as at the year end. This will include debtors (unpaid sales invoices) and creditors (unpaid purchase invoices and loans made to the company)

Purchases of capital items - equipment, property etc. are not allowable expenses. These items are depreciated annually and the depreciation is deducted in the company's accounts. Depreciation is meant to provide funds for the replacement of those assets. It is added back in the tax computations. Thus, if the profit after depreciation of £10k, is £100k then the taxable profit is £110k.

The company can claim capital allowances against the cost of their assets at varying rates. Thus, supposing the company in my example had spent £110k on equipment then they could claim the annual investment allowance of 100% and there have no tax to pay.

At 31 March 2021 TW had a net loss of £258.1 m. At 1 April 2020 they had retained earnings of £2016.3 m. If you deduct the loss from the second figure, you get £1758.2 m. If you then deducted the retained earnings as at 31 March 2021 of £1604.6 m you get a difference of £34.6 m. This will be taxation and dividends. That is how they manage to pay dividends, despite making a loss, from retained earnings brought forward from previous year.

TW has a very complicated financial set up including a company called Thames Water Utilities Holdings PLC. It has an accumulated loss of £666.7 m and on paper is insolvent. There will be a link between these two companies I think, unless it's through the 1/3 company. I don't have the expertise or the time to delve further.

I would just add that most companies operate with form of borrowing. You just have to think of the line,certainly for manufacturing companies who have to pay their workforce and their suppliers before they can sell their product and be paid.

I used to work (in the dim and distant past) for one of the top 3 accountancy practices in the UK. They ran on an overdraft and each December they did not partners' quarterly profit shares and delayed suppliers payments until 1 January or a little bit late. The reason being is that they had show their bank that on one day a year the bank account balance was a debit (ie was not overdrawn)

If you want to see TW's accounts for 2020/21 here's the links

www.thameswater.co.uk/media-library/home/about-us/investors/our-results/previous-reports/2020-21/annual-report.pdf

ttps://www.thameswater.co.uk/media-library/home/about-us/investors/debt-investors/thames-water-utilities/thames-water-utilities-holdings/annual-report-2021-22.pdf

By the way, in regards to water usage, pools can be easily cleaned daily with a scrubber on a pole (window apparatus) sachets added, covered. No need to wastefully empty whatsoever.

Once you have bought a private pension or converted AVCs into an additional pension then it cannot be changed.

That is an interesting question you ask GSM. I immediately turned to the box file on a shelf behind my desk for the Pensions Update booklet that my pension provider sends out each year and in the past has included a breakdown of the destination of its investments..

This time the information is not there. Everything has gone online and I haven't yet accessed the pension site online. It gives the broad brush description of sectors it is invested in - and these include infrastructure, which I would assume includes companies like Thames Water, although not TW itself.

The University Staff Pension Scheme owns about 20% of TW, although it is a much smaller proportion of their total investment funds.

Quite a lot of info and policy of funds available to me, GSM. just been googling at length.

Wyllow3

Well - there's something called ethical investment, and they need - to use an appropriate term for the subject - to clean their acts up.

I agree this is a massive discussion but much needed.

Yes, I had an ethical ISA

But do people know what, for example, their pension funds invest in and do they have any say in this?
Or a general ISA? Or an endowment policy?

Indeed.

Thank you, noted comma.

We cover the dog pool, the very large children's paddling pool. We maintain daily and don't empty, except end of season.

I attempted saying that.

Real pools? Proper maintenance required, years between emptying.

Where’s your pension invested? Do you know?

Well - there's something called ethical investment, and they need - to use an appropriate term for the subject - to clean their acts up.

I agree this is a massive discussion but much needed.

Norah. Note the comma. 'emptied and refilled' refers only to paddling pools, and one of the water companies was on the news and in the papers telling parents that you did not need to empty the paddling pool at the end of each day it is used. If it has a cover put over it, it can be used for several days before it needs to be emptied and refilled.

Absolutely right Callistemon.

M0nica Setting aside those with a need for a lot of water, because their families are large, disabled or incontinent and they are on UC. At the other end of the spectrum there are those with swimming pools, or large paddling pools, emptied and refilled every day, or who spent hours everyday watering their gardens with sprinklers to keep the grass perfect.

When water is a scarce commodity that needs to be used carefully. The best way to do this is to make some charge for water.

Of course we should pay for water, pay proportionate to cover use.

However "swimming pools, or large paddling pools, emptied and refilled every day" -- really, not emptied, in my world, except once seasonally for large paddling pools, every few years for swimming pools.

Daily maintenance required.

Missed out have invested in - endowments, stocks and shares ISAs

Germanshepherdsmum

Lathyrus

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.

I own shares. The companies in question have debt or they wouldn’t be in business, just as you wouldn’t be able to buy a house without a mortgage unless you were filthy rich. The companies make profits and pay me dividends (if you like, interest on the money I have invested in them) out of those profits - real money. I hope the value of the shares will increase but there is no guarantee of that, and I will have to pay tax on any increase in value if I sell them. I really don’t understand your problem with this.

Lenders will scrutinise balance sheets and business plans before lending. None of the familiar big high street shops would exist without external finance - debt.

Actually shareholders are at the bottom of the heap if a company goes under and may not have recouped their original investment through dividends. Lenders have means of securing their positions. Suppliers will often have a retention of title clause in their contracts, enabling them to get supplies returned.

Many people may be in receipt of private pensions, endowments, stocks and shares ISAs, all of which are invested in shares, not directly owned but run by Fund Managers. All those people are receiving money from dividends in one way or another.

PS and the company would mention the loan from the bank on its balance sheet just as you would have to disclose your mortgage or bank loan if you applied to borrow more money. 😊

I probably haven’t done a good job Lathyrus. Very simply, if you have a mortgage or a bank loan for a car or home improvements, so long as you make your repayments on time over whatever period was agreed you are fine and can spend the rest of your money as you wish. So is a company which has borrowed money, let’s say from a bank. It makes the repayments to the bank when they fail due,just like your mortgage or bank loan repayments, and if after making those payments it makes more money from whatever it does (making and selling widgets for example) than it is spending, that money is its profit. It has to make provision for tax but after that if there is money left over it can pay shareholders a dividend out of it. It might not be much depending on how good the profits are - some years I haven’t had dividends. And the shareholders hope that over time their shares are worth more than they paid for them (sometimes they’re not).

I hope that isn’t patronising. That isn’t my intention. There are things I don’t understand and people can try to explain them to me till the cows come home but I have some sort of mental block that stops it getting through - mainly anything involving maths and maps (I have no sense of direction, thank goodness for the satnav)! 😊

M0nica

Cadon The point I am making is not that investment shouldn't take place, but often the companies are deliberately choosing expensive projects over cheaper just as effective ones because they can put the money into the company and then draw their income as debt interest that is untaxed and pays out whether the company is profitable or not.

Companies like TW just have a handful of big shareholders, who manipulate the finances of the company to benefit them with scant regard to its customers.

As I said, they are at the moment planning a huge and potentially dangerous reservoir in my area because it costs a lot of money and they can load the company with debt and draw the interest, rather than a better scheme, that can be implemented more quickly, but will cost much less.

I do take your point Monica. Villages in Wales have been lost in the past to make way for reservoirs, and I’m sympathetic to the impact it has on communities. I would have guessed that the alternative of drawing water from the Severn would impact on the Severn Barrage proposals, which would potentially affect the viability of the tidal power scheme?
Whatever happens has impacts, but I think we’re in agreement that there needs to be a clear plan to get us out of the growing hole. I have read today that other water companies are not far off the same position as Thames Water either.

Thank you GSM and Monica for taking the time to explain to me.

I fear it is beyond me😬 Especially the bit about income from debt and lending to yourself.

I’d still have the row of cocoa tins on the mantelpiece if it was up to me😬 But thank you once again💐

Cadon The point I am making is not that investment shouldn't take place, but often the companies are deliberately choosing expensive projects over cheaper just as effective ones because they can put the money into the company and then draw their income as debt interest that is untaxed and pays out whether the company is profitable or not.

Companies like TW just have a handful of big shareholders, who manipulate the finances of the company to benefit them with scant regard to its customers.

As I said, they are at the moment planning a huge and potentially dangerous reservoir in my area because it costs a lot of money and they can load the company with debt and draw the interest, rather than a better scheme, that can be implemented more quickly, but will cost much less.

M0nica

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.

I agree in part MOnica, and would add businesses to that list. I would however remove jacuzzis because they are simply baths which use no more water than a normal bath - I have one.

Giving all consumers a basic free amount of water would require every property to be metered. An extra allowance for disabled people would mean an additional level of administration and therefore cost - imagine monitoring people who become disabled, disabled people who move or die - why add such additional expense? Totally unnecessary. And to my mind if you allow anyone any water free of charge it would encourage waste. We should all pay for what we use.

Lathyrus

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.

I own shares. The companies in question have debt or they wouldn’t be in business, just as you wouldn’t be able to buy a house without a mortgage unless you were filthy rich. The companies make profits and pay me dividends (if you like, interest on the money I have invested in them) out of those profits - real money. I hope the value of the shares will increase but there is no guarantee of that, and I will have to pay tax on any increase in value if I sell them. I really don’t understand your problem with this.

Lenders will scrutinise balance sheets and business plans before lending. None of the familiar big high street shops would exist without external finance - debt.

Actually shareholders are at the bottom of the heap if a company goes under and may not have recouped their original investment through dividends. Lenders have means of securing their positions. Suppliers will often have a retention of title clause in their contracts, enabling them to get supplies returned.