Ofwat allowed the water companies to take on massive debts, the big question is WHY?

MaizieD

Katie59

“Some posters have asserted that OFWAT controls water companies' investment, but if you go on their site they say that they monitor investment plans to ensure that they are value for money... “

So it is OFWAT that decides what is “value for money” and stops water companies spending extra to improve water quality.

That's not at all how I would interpret that. l would say that OFWAT's objective would be to stop spending on measures which would do nothing to improve water quality..

The regulators are OFWAT they say who does what, how is that difficult for you to accept

Katie59

“Some posters have asserted that OFWAT controls water companies' investment, but if you go on their site they say that they monitor investment plans to ensure that they are value for money... “

So it is OFWAT that decides what is “value for money” and stops water companies spending extra to improve water quality.

That's not at all how I would interpret that. l would say that OFWAT's objective would be to stop spending on measures which would do nothing to improve water quality..

That’s assuming the water companies have investment plans, Katie59.

“Some posters have asserted that OFWAT controls water companies' investment, but if you go on their site they say that they monitor investment plans to ensure that they are value for money... “

So it is OFWAT that decides what is “value for money” and stops water companies spending extra to improve water quality.

You don't have to identify with left wing politics to believe that public monopolies like utilities - water, sewage, power, railways, state schools, libraries, museums, and hospitals and other community facilities, should be publicly owned and controlled for the benefit of the users, not for the benefit of highly paid managers and investors who are only interested in making a quick profit.

MaizieD

cc

growstuff

Correct me if I'm wrong, but my understanding is that OFWAT is a regulatory body. It doesn't actually control water companies or how much they invest.

I suspect this is true, they only get involved if the companies fail to fulfil their comittments. Which very many of them have. I doubt that they can control borrowing, even if it is to overpay their board members and top management.

Some posters have asserted that OFWAT controls water companies' investment, but if you go on their site they say that they monitor investment plans to ensure that they are value for money...

I've also seen some commentators in articles saying that OFWAT has restricted companies' investment. I haven't managed to get to the bottom of this...

Whatever the rights and wrongs of this it seems to me that the water companies' financial management has been out of control and that the obligation they seem to feel that they should pay high management salaries and dividends doesn't sit well with providing first and foremost an effective public service.

I agree. I don't think that OFWAT have done anything to control the companies' financial management.
But it's actually where our payments to water companies are going that is most concerning. At the moment they are going to massive interest payments for their borrowing, to management salaries and bonuses, and to shareholder dividends, rather than investment in the infrastructure which is undoubtedly required.

cc

growstuff

Correct me if I'm wrong, but my understanding is that OFWAT is a regulatory body. It doesn't actually control water companies or how much they invest.

I suspect this is true, they only get involved if the companies fail to fulfil their comittments. Which very many of them have. I doubt that they can control borrowing, even if it is to overpay their board members and top management.

Some posters have asserted that OFWAT controls water companies' investment, but if you go on their site they say that they monitor investment plans to ensure that they are value for money...

I've also seen some commentators in articles saying that OFWAT has restricted companies' investment. I haven't managed to get to the bottom of this...

Whatever the rights and wrongs of this it seems to me that the water companies' financial management has been out of control and that the obligation they seem to feel that they should pay high management salaries and dividends doesn't sit well with providing first and foremost an effective public service.

growstuff

Correct me if I'm wrong, but my understanding is that OFWAT is a regulatory body. It doesn't actually control water companies or how much they invest.

I suspect this is true, they only get involved if the companies fail to fulfil their comittments. Which very many of them have. I doubt that they can control borrowing, even if it is to overpay their board members and top management.

I still remember the outbreak of typhoid in Aberdeen which was traced to imported corned beef from Argentina. The large tins were cooled in the river there. One tin must have been punctured and contaminated water got in, the tin ended up in a butcher's in Scotland.

Callistemon21

^There are still problems of course with a mainly Victorian system^

I wonder what the Victorians would think of us, that we are still reliant on systems they put in a century and a half ago because they made the connection between cholera and water?

Cholera
This terrible killer first entered Britain in 1831 through the port of Sunderland, and it wasn’t long before it spread to London, killing 6536 people. It is caused by the Vibrio Cholerae bacteria and is passed between humans by water. It can only get into the human body if somebody drinks water with the bacteria in it. The bacteria only get into the water via faeces. Cholera causes terrible diarrhoea and agonising stomach cramps. The body passes fluid, nutrients and salts out of it so quickly, it rapidly dehydrates, causing death from organ failure. All within a few hours.

Typhoid can be passed on through contaminated water too.

I think they would think we’ve lost the plot - and they would be right.

There are still problems of course with a mainly Victorian system

I wonder what the Victorians would think of us, that we are still reliant on systems they put in a century and a half ago because they made the connection between cholera and water?

Cholera
This terrible killer first entered Britain in 1831 through the port of Sunderland, and it wasn’t long before it spread to London, killing 6536 people. It is caused by the Vibrio Cholerae bacteria and is passed between humans by water. It can only get into the human body if somebody drinks water with the bacteria in it. The bacteria only get into the water via faeces. Cholera causes terrible diarrhoea and agonising stomach cramps. The body passes fluid, nutrients and salts out of it so quickly, it rapidly dehydrates, causing death from organ failure. All within a few hours.

Typhoid can be passed on through contaminated water too.

paddyann54

Someone upthread suggested Scottish water,publicly owned,was just as bad.
I can deny that.Scottish water is top of the league of the 4 nations for
1 Quality of water
2 Service
3 price,its cheaper by far than England and Wales
4 They spend much more on infrasctucture,around
£72 per head of population.
There are still problems of course with a mainly Victorian system ,but it is being upgraded and when there are burst pipes they tend to be fixed quite quickly .
Our water is chlorinated as it comes from lochs and will have bacteria in it ,but it certainly doesn't have sewage or commercial waste

It’s your final paragraph that’s most important paddyann54. None of the water companies, including Scottish Water is actually doing well - because there is a massive water infrastructure investment required to bring the system up to standard. Scottish Government are reliant on funding from Westminster to carry out such works, which hasn’t been any kind of priority for 40 years. Increased charges to users ultimately will be the only way we can get services up to speed again, and it will take many years - I read somewhere that if they started the work today it would take over 25 years.

Someone upthread suggested Scottish water,publicly owned,was just as bad.
I can deny that.Scottish water is top of the league of the 4 nations for
1 Quality of water
2 Service
3 price,its cheaper by far than England and Wales
4 They spend much more on infrasctucture,around
£72 per head of population.
There are still problems of course with a mainly Victorian system ,but it is being upgraded and when there are burst pipes they tend to be fixed quite quickly .
Our water is chlorinated as it comes from lochs and will have bacteria in it ,but it certainly doesn't have sewage or commercial waste

Thames water 'kindly' repaired the supply pipe in my garden, disturbed by the massive roots of a tree next door (and very close). I was warned that next time I would have to pay. Luckily, I persuaded the owner/landlord to remove the tree.

Next, we had new smart meters installed in the pavement - a huge predicted bill - but there was only one meter for both houses - then more drilling and digging to remedy that.

I'm really not impressed, I'm not thrilled about paying their shareholders. I don't think they should be a private company. We all need water, so can't just choose to opt out - or find a better deal. They have the monopoly - aren't there rules about that?

That's shocking ayse. I hope that your daughter's recovery continues but I am appalled at the news about the Wye. I'm sure that most people are unaware of this.

I am a Thames Water customer and went two days without water supply. They are supposed to give compensation but they denied any cut off of water supply despite all the neighbours complaining. The local leisure centre helped with bottled water but according to Thames Water, there was never any problem.

Katie59

There is too much waste of water and too much pollution but get this straight it’s not going to be improve without a great deal more investment that has got to come either from higher bills or taxation.

Furthermore, inland freshwater is never going to be “safe” because natural bacteria, fungus, algae, viruses thrive, particularly in warm weather, which is why water we drink and swim in is chlorinated. You would probably be safe in a cold mountain stream but not in lowland rivers in summer.

The River Wye is polluted so why havn’t the Environment Agency stopped chicken manure spreading?. Chicken litter is a dry product easy to transport and use as fertiliser where it won’t pollute.
Why?.

My daughter was taken to hospital in Bristol last night suffering from acute sickness and diarrhoea. Food poisoning was ruled out. She had taken her two boys canoeing in the river Wye on Friday afternoon. She spent all night Friday together with her younger son vomiting etc. Fortunately her son got over it quite quickly. She, on the other hand ended up with a fluid drip, taking up a side ward with the nurses and consultant time. Apparently there is blue algae in the Wye. The canoe company did not mention it.

Apologies for not putting this out here earlier. I’ve been very worried about her all night. She is now at home and still recovering.

I 100% support renationalising public services. We have little or no control over private companies and our so called regulators sit on their hands! Where is the Environment Agency? Surely they should also be taking action.

As Katie59 says if TW goes into liquidation the shareholders will probably lose the lot hence TW can press shareholders for a cash injection to keep going which seems to be happening.

Did you not read what I posted earlier, Grantanow?

TW were required to raise £1.5billion this year. So far they have managed £0.5billion. Shareholders don't seem very willing to be 'soaked' , nor do people appear to want to lend anything to them.

Unlike a government, companies can't extract money out of thin air.

I don't think there is a 'long run' involved here.

As far as I know there is no obligation for companies to pay their shareholders' dividends solely out of profits. They could pay them out of borrowing. But its hard to track the money through accounts, I think. As Katie59 says if TW goes into liquidation the shareholders will probably lose the lot hence TW can press shareholders for a cash injection to keep going which seems to be happening. They can also soak (!) the customers. I doubt this will turn out well in the long run and TW will eventually need restructuring as a not-for-profit company or simply nationalising, in both cases implying a taxpayer cost.

Isn't the main reason for all this mess the fact that we cannot CHOOSE our Water supplier, as we do our Energy providers. We don't even have access to our water meters so cannot check that the readings taken are accurate,

Hence none of these suppliers have any competition and can sit there smugly and let the public's money roll in.

When the water companies were sold off , the directors salaries went up x 10 at least but there was no money to increase the wages of the workers. I have my own personal water supply company fortunately.

^Perhaps if the odd, exploitative, parasitic Capitalist suffered a similar fate, it might give a few others pause for thought. )

Well, they don't, do they? Look at Philip Green & BHS.

Company law is structured to avoid any penalty for business failure because it's the business owners and financiers who have the ear of government (all those 'donations') and lobby to have the law made to their advantage.. Which is fair enough in some ways, but when a company has had the maximum amount of money taken out of it and is then loaded with debt' one wonders why the owners get away scot free when creditors, employees and shareholders suffer.

MaizieD

NanaDana

Am I missing something here? Surely executive salaries and shareholder premiums should be funded by profits? How does that sit with the Companies carrying billions in debt? I'm also staggered by the way in which Banks have loaned such vast sums to an organisation which clearly has such a toxic balance sheet. What happened to credit checks? On a personal level, my credit score would be the first thing my Bank would check if I asked for a loan. Is it so different in the Corporate world? If so, why is that?

According to Murphy (and I have no reason to believe him to be wrong) the debts are not bank loans, they are index linked bonds (which he explains).

Company finances are no more like household finances (where one would expect one's debt to be repaid either asap, in the case of a credit card, or over an arranged period in the case of a mortgage, than they are like a national economy. In theory, it seems, companies borrow to invest to grow the business; the cost of the borrowing is a business expense and comes out of operating profit but the loan itself doesn't.

The current shenanigans with the water companies don't give one a great deal of confidence that capitalists (for want of a better collective term) are particularly responsible people who have the interests of their consumers at heart. Entrusting our public utilities to them hasn't turned out to be a spectacular success.

I'm not an Economist, MaizieD, so thanks for that explanation of how Company Finances work. Nevertheless, I'm still persuaded to sympathise with Dickens' Mister Micawber, who said: “‘My other piece of advice, Copperfield ... you know. Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” Mind you, I'm also aware that Micawber ended up in Debtor's Prison. Perhaps if the odd, exploitative, parasitic Capitalist suffered a similar fate, it might give a few others pause for thought.

Katie59 I doubt if the 2021/22 figure is typical because the railways were badly hit by lockdown and people working at home.

I wonder what is meant by the "face value" of a ticket. As a fairly frequent rail user, they vary enormously in price for the same journey.

Maisie

www.gov.uk/government/statistics/rail-factsheet-2022/rail-factsheet-2022

Under rail finance.

2019/20 £12bn subsidy 12bn revenue
2021/22 £20bn subsidy 6.5bn revenue