Watered down morality – Has the penny finally dropped on water privatisation?

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Thatcher’s privatisation programme of the eighties: energy, water and transport was marketed as progress – many bought into her idea that publicly funded services cannot function, and believed that privatisation meant improved services for consumers. Today, looking back it doesn’t seem that way at all. There was a naive assumption that profits would be ploughed back. It hasn’t turned out that way.  Has the penny finally dropped on privatisation?

How did we get into this desperate situation  where our essential services –  for example our basic need of water to drink are held in companies abroad? Why is the ninth richest person in the world made richer every time you turn on the tap? Every time the toilet is flushed, billionaires are benefitting – so “spending a penny” takes on a whole new meaning.

Brass_water_tap

As we see our water bills rise, it is reported in the Independent that several British water companies have been taking out loans from owners’ off-shore subsidiaries. Rather than investment in infrastructure, we are seeing blatant exploitation. Furthermore,  the owners pay no tax on such profits, because of use of offshore companies in the Channel Islands or the Cayman Islands so a third of our water bills goes towards paying off such debts, while very rich people in the world pay no tax at all as they rake in huge profits like the winner of a giant game of Monopoly.

It is this corruption and greed which is without morals, potentially driving individuals to criminal activity such as reported recently as horse meat has been used fraudulently in food products labelled as containing beef. What can have happened to result in a broken society where money for individuals becomes more important than food and water for the world’s people?

Today those private water companies supply England and Wales with water. Some also supply both water and sewage services. Yet in Northern Ireland and Scotland state owned companies act as the major providers of water and sewage services. Northern Ireland Water is the sole water and sewage provider in Northern Ireland while Scottish Water carries out similar functions in Scotland. A comparison shows that the privatised companies of England and Wales charge roughly twice as much as the public sector water authorities of Scotland.

During the late 19th Century water services were taken over by local authorities in England and Wales. Individual authorities ran some of these, inter-municipal authorities ran others and a few private companies remained. A simple cap of a maximum return of 5% strictly regulated their profits.

While Labour were in power in 1974, there was a Control of Pollution Act. Water supplies were reorganised into ten unitary regional water authorities and each responsible for quality, supply and sanitation. The government appointed these.

Board meetings from these, which had previously been public, were made secret by the Thatcher government in 1983. Clearly the plan for privatisation had been hatched. During this time the number of employees was cut from 80,000 to 50,000.

Various arguments were used in favour of privatization, including claims that

1. the private sector would be more efficient;

2. private companies would be better able to finance the large investments needed; and

3. privatization would create competition.

These claims were not supported by evidence from comparative studies or international reviews of the actual performance of public and private sector water companies.

The fundamental motive for privatising water companies was Margaret Thatcher’s government’s neo-liberal economic policy. The aim of this was to reduce the size of the state and minimize public borrowing. All of this was used as a further justification for privatization. The plan was to privatize water in 1983, but so unpopular was the policy that it was shelved until after the next General Election.

English: Margaret Thatcher, former UK PM. Fran...

English: Margaret Thatcher, former UK PM. (Photo credit: Wikipedia)

By 1988, the Regional Water Authorities in England and Wales were ripe for privatization. The sell-off was almost unquestioned as the submission of the public was achieved as they were lured by offerings of the shares in newly privatized companies.

There was a feeling of “something for nothing”, a sign of the times you could say – with little attention given to the consequences and even less of the morality. This is nothing less than sheer greed. The privatization was a give-away. The resulting companies were protected from needing to compete for business at all – not even once – they held monopolies in their regions for 25 years.

What followed were more lies. The expected expenditure was deliberately over–estimated in order to maximize profits. OFWAT was asked to set a price formula for investments that were never made.

One example of this included Southern water submitting plans for a series of sewage treatment plants which were not installed. Another example was Yorkshire Water expecting to avoid £50m expenditure on sewage treatment because the Conservative government promised to redefine coastal waters near the city of Hull as sea – where untreated sewage could be dumped – instead of estuary – where sewage would have to have been treated.

A number of companies deliberately cut their investment programmes and used the ‘savings’ to maintain or increase their dividends. The companies, which did this, include Thames Water, North West water, and Yorkshire Water.

The capital expenditure and maintenance of sewers was been a particular cause for concern. Underinvestment led to neglect of the sewerage network, with obvious negative effects on public health. All this was to boost profits. Following privatization there was a sharp rise in disconnections.

“The water companies say that they disconnect only the “won’t payers”–those who can afford to pay, but refuse to do so. I shall bring to the attention of the House some recent examples of people I know who have been disconnected : in Southampton a lady with seven children, one aged three who suffers from a heart condition ; a family of five, in which the mother suffers from a medical condition which requires a constant supply of water and whose neighbours provided that water via a hose pipe ;and a severely disabled elderly lady, whose neighbours brought her water in a variety of containers.

In south Staffordshire, a single parent on unemployment benefit was threatened with disconnection for arrears of £60.73. When the local citizens advice bureau contacted the water company to say that there was a child in the house, the company said, “So what? –We’ll still disconnect.”

It is clear the rich have satisfied their immoral  greed by creaming off profits, and not fulfilled responsibility by investment in services. It seems obvious in retrospect that self regulation does not work where the motive is personal profit. The privatisation of our basic needs in order to provide  profits for a few was foolish, destructive and dangerous. It is time to engender mutual responsibility. We must not tolerate suffering caused by selfish profits, and it is time to bring back utilities and essential services back into democratic control, and to renationalise.

And it’s happening elsewhere Tax Research UK reports :

Cities worldwide are taking back control of their collective water systems. The outcome of two years of research, this new book by Corporate Europe Observatory, Transnational Institute and the Municipal Services Project, the first ever published on the issue, examines the new trend for water ‘remunicipalisation’, analysing the causes of this new phenomenon and assessing its outcomes from a progressive public water management perspective. Case studies analyse the transition from private to public water provision in Paris, Dar es Salaam, Buenos Aires and Hamilton, and look at a national-level experiment in Malaysia. Showing the benefits and challenges of putting these systems back into municipal ownership, the book is a must-read for anyone interested in collective water management today.

While Labour is talking of redistribution of wealth through a fairer tax system , nationalisation of utilities must also be on the agenda at the next General Election.

REFERENCES on WATER PRIVATISATION

The Independent: Now water companies are caught avoiding Tax

Tax Research Network: Remunicipilisation  Putting Water back in public hands

The Environment Agency: Privatisation of Water Industry

Lib Com: Water Privatisation

Uk Rivers Network

Dustin van Overbeke Water conflicts

Red Pepper Blog: The Last Drop

Stockhouse: Canadian News Capstone Acquires Bristol Water 5th Oct 2011

Action for Rail – No to McNulty. Yes to Renationalisation.

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ACTION FOR RAIL – NO TO MCNULTY

The Action for Rail (3) Campaign presents the arguments on the day of Action from the TUC and union leaders of RMT, ASLEF and TSSA outside Euston Station.

PLEASE CLICK IMAGE FOR VIDEO CLIP

The Department for Transport has launched a consultation document 1) on the proposed mega-franchise for railways in the South East

  • TWENTY THOUSAND JOBS WILL BE LOST.
  • PASSENGERS FACE MASSIVE RISES IN FARES.
  • SAFETY WILL BE UNDERMINED.

The privatisation of Railways by John Major’s government has been the most unpopular transport policy for a generation. Opinion polls point to over three quarters of the electorate supporting re-nationalisation of Railways. New Labour missed an opportunity to bring back railways and other public transport back into democratic ownership. As a consequence, users are now facing the highest fares in Europe and face further massive increases if the McNulty plans go ahead. 
As part of its plans for the future of the rail industry, the government is asking train operating companies and Network Rail to outline how they will make cost reductions in line with the recommendations of the Rail Value for Money review led by Sir Roy McNulty.

  • More than a quarter of these savings – £260m a year – will come through staffing cuts.
  • According to the McNulty Review, this could lead to around 20,800 job losses, including rail guards, staff in ticket offices and on station platforms, catering staff and workers in maintenance and signalling.
  • However, the unions say surveys consistently suggest that a lack of staffing is one of the key concerns of rail passengers, and more than 10,000 commuters and train users have so far registered their opposition to staff cuts in response to union campaigns.


  • The McNulty Review calls for the closure of 750 Category E (or small-staffed) station booking offices around the UK.
  • Leaked Department for Transport emails indicate that agreement has already been reached with one train operator, London Midland, to completely close or severely reduce opening hours at ticket offices at 86 of its 90 stations, leaving many deserted at all hours and leading to the loss of around 100 staff.

  • These cuts will go ahead in the face of opposition from 18,000 London Midland passengers who responded to a public consultation petition against the closures, as well as the West Midlands integrated transport authority, Centro. 2)

We strongly urge you to respond arguing for nationalisation not this supra-franchise. Think Left supports Action for Rail (3) and renationalisation of the railways (8) and public transport. Privatisation of rail was the last privatisation of the Thatcher/Major Conservative years, yet sadly we are now witnessing wholescale privatisation of public services including health and education – despite very clear evidence that putting profit before people by privatisation of utilities and public services costs lives, jobs, and does not provide improved services.

WRITE TO YOUR MP, SUPPORT THIS CAMPAIGN

1. Government Consultation Document

2. Union News UK: Action for Rail -joint Campaign against McNulty Closures.

3.Action For Rail

4. ASLEF Action for Rail

5. ASLEF: Save our Railways: Briefing

6. URL for video Clip from Action for Rail: http://www.rmtv.org.uk/video/video151/index.html

7. Guardian: Privatisation failed our Railways

8. Think Left: Renationalisation of Railways

9. Pride’s Purge: Virgin Rail set to Improve children’s health by exorbitant prices and Overcrowding

10. Guardian: Privatisation of rail has failed and the NHS is hurtling down the same route

Re-Nationalise our Water!

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Morality of Profiteering from Thirst, Warmth and Shelter

By Pam

WHAT DO WE NEED?

All people need shelter, food, warmth and water.

Most would want also comfort and love – friendship and peace, to have a mate, love perhaps and a family. Add to that a job, or a purpose in life in which to build self worth and life is in balance.

If all of that were shared around equally, most of us would live happily.

But it’s not, is it? So many don’t have access to basic human needs or rights. There is a nasty taste left behind by making massive profits from water and energy. How does the world discern the haves and the have-nots, the greedy and the needy or the parasites and their hosts? Profiteering from the basics which are denied to others is immoral – whatever your philosophy.

To know that there are people hungry, without clean water – cold and in poverty quite avoidably and yet, to continue to pursue actions which target financial profits which have a direct effect on the welfare of others seems beyond morality – whatever that means to you.

The whole point of a country having a government at all is to protect the safety, the security and the health of its citizens. During the last thirty years there has been a fundamental change from governments protecting citizens and ensuring they are provided with life’s essentials, to regarding those citizens as a source of profit and like a parasite which eats away at its host and deprives it of sustenance, so too the profiteers take all they can and leave decay behind.

WATER FACTS

(See: Lib Com: Water Privatisation)

Private water companies supply England and Wales with water. Some also supply both water and sewage services. In Northern Ireland and Scotland state owned companies act as the major providers of water and sewage services. Northern Ireland Water is the sole water and sewage provider in Northern Ireland while Scottish Water carries out similar functions in Scotland. A comparison shows that the privatised companies of England and Wales charge roughly twice as much as the public sector water authorities of Scotland.

During the late 19th Century water services were taken over by local authorities in England and Wales. Individual authorities ran some of these, inter-municipal authorities ran others and a few private companies remained. A simple cap of a maximum return of 5% strictly regulated their profits.

While Labour were in power in 1974, there was a Control of Pollution Act. Water supplies were reorganised into ten unitary regional water authorities and each responsible for quality, supply and sanitation. The government appointed these.

Board meetings from these, which had previously been public, were made secret by the Thatcher government in 1983. Clearly the plan for privatisation had been hatched. During this time the number of employees was cut from 80,000 to 50,000.

Various arguments were used in favour of privatization, including claims that

1. the private sector would be more efficient;

2. private companies would be better able to finance the large investments needed; and

3. privatization would create competition.

These claims were not supported by evidence from comparative studies or international reviews of the actual performance of public and private sector water companies.

The more fundamental motive was Margaret Thatcher’s government’s neo-liberal economic policy. The aim of this was to reduce the size of the state and minimize public borrowing. All of this was used as a further justification for privatization. The plan was to privatize water in 1983, but so unpopular was the policy that it was shelved until after the next General Election.

By 1988, the Regional Water Authorities in England and Wales were ripe for privatization. The sell-off was almost unquestioned as the submission of the public was achieved as they were lured by offerings of the shares in newly privatized companies.

There was a feeling of “something for nothing”, a sign of the times you could say – with little attention given to the consequences and even less of the morality. This is nothing less than sheer greed. The privatization was a give-away. The resulting companies were protected from needing to compete for business at all – not even once – they held monopolies in their regions for 25 years.

What followed were more lies. The expected expenditure was deliberately over–estimated in order to maximize profits. OFWAT was asked to set a price formula for investments that were never made.

One example of this included Southern water submitting plans for a series of sewage treatment plants which were not installed. Another example was Yorkshire Water expecting to avoid £50m expenditure on sewage treatment because the Conservative government promised to redefine coastal waters near the city of Hull as sea – where untreated sewage could be dumped – instead of estuary – where sewage would have to have been treated.

A number of companies deliberately cut their investment programmes and used the ‘savings’ to maintain or increase their dividends. The companies, which did this, include Thames Water, North West water, and Yorkshire Water.

The capital expenditure and maintenance of sewers was been a particular cause for concern. Underinvestment led to neglect of the sewerage network, with obvious negative effects on public health. All this was to boost profits. Following privatization there was a sharp rise in disconnections.

“The water companies say that they disconnect only the “won’t payers”–those who can afford to pay, but refuse to do so. I shall bring to the attention of the House some recent examples of people I know who have been disconnected : in Southampton a lady with seven children, one aged three who suffers from a heart condition ; a family of five, in which the mother suffers from a medical condition which requires a constant supply of water and whose neighbours provided that water via a hose pipe ;and a severely disabled elderly lady, whose neighbours brought her water in a variety of containers.

In south Staffordshire, a single parent on unemployment benefit was threatened with disconnection for arrears of £60.73. When the local citizens advice bureau contacted the water company to say that there was a child in the house, the company said, “So what? –We’ll still disconnect.”

Bristol Water sold to Capstone Corporation 5/10/11

Water has ceased become a local resource, monitored and controlled locally. Owners of companies are no longer regional; they are unknown investors from unknown localities somewhere around the world. How can it be moral to risk the life of people, by turning the essence of life into a commodity? Why have we allowed corporations to buy and sell and profit from the basic fundamental needs of our people?

Do any of us really know who owns the water which comes from our taps. How confident can we be that our health is in safe hands?

Today, as I write , I have discovered that the water coming from my tap has changed ownership to a Canadian Company.

  • On October 5th 2011 Capstone Infrastructure Corporation CSE have announced it has acquired a 70% interest in Bristol water. Numerous North American, European and Australian pension funds and other institutional investors have emerged in recent years as significant investors in the water infrastructure sector, seeking the stable, long-term cash flow and growth potential offered by water utilities.

Capstone states the deal:

  • Transforms Capstone into a diversified infrastructure company, adding a growing business in a new core infrastructure category and geographic region to the portfolio
  • Rate-regulated, inflation-linked business featuring sustainable cash flow and a strong growth profile
  • Purchase price represents an attractive value and return profile for a regulated water utility
  • Creates a strong partnership for Capstone in the water infrastructure sector where there are significant investment opportunities globally

With the assumption of Bristol Water’s approximately $440 million in long-term debt and reflecting the impact of the transaction financing, the Capstone Corporation’s debt to capitalization ratio is expected to increase from 39.3% as at June 30, 2011 to approximately 60%, an amount consistent with the low risk profile of the Corporation’s business.

In 2012, approximately 18% of the Corporation’s Adjusted Funds from Operations (“AFFO”) is anticipated to be generated by Bristol Water. This acquisition will significantly increase the size, value and diversity of the Corporation’s portfolio and is expected to deliver stable cash flow to shareholders:

Can we be certain that they will maintain the infra-structure, ensure safe quality water supplies and invest for the future? Of course not!

HOME COMFORTS

If we consider the consequences of Thatcher’s Housing Policy, of the ‘Right to Buy” policy of council houses, it is easy to see why the UK is in the midst of a housing crisis. Of course, the nation fell for the love affair with home-ownership. No longer was it about nest-building, of home comforts. It was about house-owning, selling and mortgages. The belief that house-prices would go forever upwards, that they could be a source of income, of funding an old age or children’s education. The truth is that owning a home is speculative as is doing the lottery, playing the stock market or playing poker. Maybe the odds look good one day, but one bad day, and you might find yourself in negative equity, unable to pay the mortgage, and fearing repossession and homelessness.

Tax subsidies were given to people to take out mortgages as “Buy-to-Let” because they were regarded as businesses. But for the young couple struggling to afford a home there was no subsidy, and the prices shooting upwards caused by the competition from aspiring “Buy-to-Letters” who priced their prospective tenants out of buying their own homes themselves. All this served to profit the bankers. Where there had been mutual building societies who would reinvest, there were now demutualised banks and mortgage repayments haemorrhaged from our country into off shore centres and hedge funds.

BRIGHT SPARKS

And what of the bright, clever idea to privatize our energy? The urgency of break up of the coal mining industry, the rush to gas, and privatization of electricity resources. The beginning of privatization from 1990 broke up the CEGB into three new companies. The justification was, – that like other utilities they just were not making money.

Why anyone should ever consider that provision for citizen’s fundamental needs should ever be about profit making is incomprehensible to me, yet the public fell again for the promise of a share or two, believing they would be better off.

In the event, most savings to the government came from job losses. Unemployment soared. And it was the ordinary people who the ones suffered financially. A study by the World Bank showed that it was the ordinary consumers who were the real losers in privatization, no matter how it had been sold to them. At the end of the 1990s, consumers had lost between £1.3 and £4.4 billion, a staggering figure, largely due to costs falling much faster than prices. Utility Charges: Privatisation of Utilities

By contrast, the government gained up to £1.2 billion, and those who had shares in electricity companies saw profits ranging up to £9.7 billion. There were examples of price-rigging in the past, and there are still frequent accusations of energy prices being set too high.

Ofgem: UK cannot trust energy companies to keep the lights on

Rhod on Public Affairs Thatcher: Energy Privatisation

Regulator says free market approach will leave UK short of energy supplies by 2015

The regulator’s most radical proposal was to set up a central energy buyer, on similar lines to the old Central Electricity Generating Board, which was abolished after privatisation. At present, the “Big Six” energy companies – Centrica, E.ON, npower, Scottish and Southern, Scottish Power and EDF – own most of the UK’s power plants, which they use to supply most of the country’s consumers.

Critics have argued that the current system is not transparent and guarantees the companies excessive profits. A central government-controlled body would smash this dominance, by requiring power plants to sell it electricity at fixed rates, which it would sell on to customers.

The main concern against privatization of utilities is about the priorities of the companies. The secrecy surrounding these companies is significant. What is the price of silence? It is the vehicle for corruption; it is the potential for a lack of investment. Decisions can be made which increase risks to service quality. Priorities are to the shareholders. Decisions are made in order to maximize profits. Justification given by Margaret Thatcher for the privatization of the utilities is exposed as a sham. The taxpayer has to dig deeper, the consumers struggle pay bills, while the rich continue to profit at our expense. We must say, “No More!” Furthermore we are not facing up to the imminent Oil Crunch, having under invested in renewables as it was not a priority for the financial institutions.

Reflecting on all of this, and to contemplate on Thatcher’s statement, “There’s no such thing as society”, only deserves the response that in her Neo-Liberal politics there was no morality, no sense of right or wrong, and how that is still true today.

Why did the Labour Party not reverse privatization policies when given the opportunity? Why was there not a renationalization of utilities. The media had branded socialism and public ownership unpopular and politically dangerous. Tackling the press became insurmountable. There was further fear of more defeat. All this pressed Labour to desert their roots, to turn their back on socialism.

It is a shameful history, which Labour must now take on board, which Ed Miliband has offered apologies for. But there can be no forgiveness for the resultant poverty, hypothermia, homelessness, deaths, and disease. Labour must finally turn its back on neo-liberalism, and reject selfishness and greed.

The time is well overdue. Our Labour Party must protect the people of this country and sweep aside the greedy immoral profiteers. These utilities are not luxuries, they are needs fundamental to life, and we must ensure that the organizations who provide them are accountable, that clean water and sewage, energy and homes are affordable and available to all. There must be controls over further scientific developments, assurances for public safety and pollution control.

Labour must take back into public control and public ownership providers of the basics of life.

  • Water Authorities
  • Electricity Companies
  • Energy Producers
  • Public Transport

Labour must develop, monitor and control:

  • Food Production
  • Green Energy Production
  • Socially Owned and Shared-Ownership Housing

REFERENCES AND FURTHER READING:

Re-Municipalisation -Putting Water Back in Public Hands : Richard Murphy

PUBLIC SERVICE OR PRIVATE PROFIT, Think Left

Renationalise the Railways, Think Left

Clean Coal: Another Financial Device for The City, Think Left

Red Labour must address the elephant in the room , Think Left

WATER

The Environment Agency: Privatisation of Water Industry

Lib Com: Water Privatisation

Uk Rivers Network

Dustin van Overbeke Water conflicts

Red Pepper Blog: The Last Drop

Stockhouse: Canadian News Capstone Acquires Bristol Water 5th Oct 2011

ENERGY

21st Century Socialism The Privatisation Scam

Utility Charges: Privatisation of Utilities

Rhod on Public Affairs Thatcher: Energy Privatisation

HOUSING

Politics : The Right to Buy

Guardian Oct 2011: Why reviving Right to buy won’t work