Water Investment: Who’s Right ?
Doublethink
Admin, 8th Day Host
The BBC has this story.
*University of Glasgow.
Is it unreasonable to adjust for inflation in doing such an analysis, is it not normal to do that when discussing large sums of money over a long time ?
Shareholders in some of the UK's largest water companies have taken out tens of billions of pounds but failed to invest, new research claims, with firms planning to raise household bills to fund future spending.
*It said that between privatisation in 1989 and 2023, money invested by shareholders in the largest firms shrunk by £5.5bn when adjusted for inflation.
Over the same period, the amount of "retained earnings" - profits left over once things like dividends have been paid out, that can be used to invest in a business - had dropped by £6.7bn in real terms.
Meanwhile, the total amount that these firms paid out to their shareholders in dividends grew to £72.8bn, when taking inflation into account.
Ofwat said the dividend figure is "simply wrong".
It said it "does not represent the true total given it is inflation adjusted. Ofwat offers the figure since privatisation as £52bn".
*University of Glasgow.
Is it unreasonable to adjust for inflation in doing such an analysis, is it not normal to do that when discussing large sums of money over a long time ?
Comments
Talking about the figures is perhaps a distraction. The fact is they took out a lot of money and didn’t use what they needed to to keep the system working. They want to increase again. They got away with it for a while but they shouldn’t now. In fact they should give some back.
Talking about figures cannot possibly be a distraction when your very next sentence is a claim of fact about the figures.
As usual, reporters publish a headline-grabbing figure or two without bothering to include all the information. We are told that money has been withdrawn as dividends. We are told that there has been a reduction in real terms in investment over a specified time period. We are not told how much real terms investment there has been - is the reduction 0.5% of the total, 5% of the total, or 50% of the total?
We are not told how the costs of maintaining a water system have varied over the years - this may be significantly different from headline inflation.
The BBC report is half-assed and incompetent. I'll have to go and read the research it refers to to see if that's done well or not.
I own two sets of shares. One set are shares in a bank, which had been a building society when I opened my first account there and I got shares in compensation for my previous stake in the business when it converted to a bank 30 something years ago, that's a pot of shares that has slowly built because the dividends from my shares are used to by new shares. The other set of shares I have are in a solar farm co-operative, in return for the money I invested into building the solar farm I get a defined quantity of kWh from the solar farm per year (once it's operational) as a contribution to my personal domestic consumption (the scheme is capped at about 80% of expected annual electricity use), those shares can't be sold on and if no longer needed are returned to the co-op who can then re-issue them to someone else investing in the scheme.
Neither of those forms of shareholding, which both involve direct investment into the business concerned, would seem suitable for the supply of water. But, both are better than shareholding just to make profit.
Herein lies the problem. In a functioning economic model there is no conflict between these two.
I'm as woke and lefty as they come.. however I can see a decent argument that if the utilities were public, they'd be starved of investment. It seems to meet the facts that government owned utilities are often not the first and most 'sexy' thing to maintain when there is pressure on the public purse (from nuclear weapons, etc).
It is easy to claim that everything would be better if the water services were made public utilities but it is much harder to show a country where this is true.
The Welsh water utility is a non-profit and the Scottish system is (I think) public. Neither are substantially better than the private companies in the UK with regard to environmental protection.
In the Irish republic, the public water utilities are crumbling and people are protesting about water fees.
https://www.theguardian.com/business/article/2024/may/21/south-west-water-owner-service-dividend-devon
Which was what I was talking about.
The problem in the UK is mostly about weak regulation.
The point about the customer satisfaction (produced from those consumer surveys) is that it makes Scottish Water appear better to it's customers, whereas the objective data on sewage discharges etc do not indicate a significantly better performance than the better water companies south of the border.
The in and outs don’t really matter. If a company is discharging too much sewage into our waters it needs to stop. If they are paying shareholders lots of money and claiming they can’t fix things without putting prices up that is just plain greed. I work for a staff owned business. We usually get a bonus each year. The past two we haven’t due to the needs of the business. It should be the same with shareholders. Public utilities are not money making schemes. They are needed services.
Of course, the environment doesn't care how satisfied the customers are.
Public unhappiness with sewerage discharges is likely to be proportional to the number of people who use the stretch of water in to which the sewerage was discharged. People will be more unhappy if a popular beach becomes shit creek than if some unloved waterway in an industrial area is a bit shittier than normal, or if the water company crapped up a bit of coastline that few people use.
It does have a lot more water to share round, though.
I never noticed a shortage of water in the Pennines but it didn't United Utilities charging an arm and a leg.
Though there are definite shortages of water in the south of England, and locally in a few other locations, that's not directly related to sewage discharges. There may be an indirect association in that failure to invest in water distribution (eg: fix leaks to reduce demand where water is scarcer) and failure to invest in drainage and water treatment could both be the result of cutting costs to boost profits and dividends to shareholders.
Excess rainfall, especially when it happens over short periods of time, is one of the reasons often cited for sewage discharges*. So, the extra rainfall in Scotland, Pennines etc could be a reason to expect greater use of discharges of untreated sewage. Though, when it's normal to have more rain water treatment capacity could be greater as well.
* which is a consequence of surface water runoff in urban areas being directed into the same system as sewage. It would be a massive undertaking to redirect that water from existing surface water drains, though it should be possible to do that relatively easily for developments on green field sites which don't have any existing infrastructure. Also, better planning to ensure that soft surfaces (grass, flower beds etc) are maximised as these absorb and slow rain water reducing the proportion that reaches the drains, also rain water capture from roofs, which can be implemented in existing urban areas - enforcing planning requirements for permeable surfaces on driveways etc. would be a good start.
We would take the cost anyway. Water is so important that the government has to make sure it is available. We pay for bad business again. The same way we did for some rail companies
And besides, businesses operate while under administration with reasonable frequency. It's not a doomsday scenario.
Point of order Madam Chairperson (what's genderless for Madam? 'I Say', 'You There'? Ah, Comrade! Citizen?), it's Greenwich.
And it is essential to read the whole story. I regard capitalism as the worst form of economics apart from all others, as its glove puppet democracy is to politics, but.
It seems that shareholding for profit is the price one has to pay for company growth?
Unless you nationalize and set environmental improvement targets based on or regardless of national economic performance? By charging all other land'owners' more rent of course.