David Craig, on December 7th, 2015Most readers probably know that we have a huge bureaucracy, Ofwat, that supposedly regulates the water companies so they provide us with water and sewage services at a reasonable cost.
So, how well have the bureaucrats at Ofwat been doing their job? Well, when it comes to spending ever more of our money on themselves, Ofwat have done splendidly. In 2006/7 (the year before the financial crisis) Ofwat spent £11.5m of our money on itself. By 2010/11, Ofwat’s appetite for our money had risen to £17.4m. By 2013/14, it leapt again to £27.9m. And in the last financial year, 2014/15, Ofwat gorged on an amazing £33.8m of our money:
In just ten years, at a time of supposed austerity, the amount of our money Ofwat spent on itself tripled.
And what have we got for our many millions? Some of the highest water prices in Europe:
It’s more than astonishing that in wet, dreary, rain-soaked, island Britain, we pay around twice as much for our water and sewage as much drier Club Med countries – Spain, Italy, Greece – and four times as much as our neighbour – the Republic of Ireland.
It gets worse
Not only has Ofwat allowed the water companies to fleece us on prices, but Ofwat has also turned a blind eye to another massive multi-billion pound scam. About 15 years ago, the average debt level of our water companies was around 20%. Now it’s over 80%. Why is this important? Let me explain.
Most of our water companies are owned by foreigners – investment firms from Australia, China, Malaysia and so on. What these investment firms have done is to set up holding companies in offshore tax havens like Jersey and the Cayman Islands. They have then loaned billions to the water companies they own at interest rates that are much higher than they could have got on the open market. This allows them to do four things:
1. Make massive tax-free profits on their loans to themselves
2. Pay virtually no corporation tax in Britain as their interest payments to themselves wipe out most of their operating profits in the UK
3. Many millions of these loans are not spent on improving the infrastructure in Britain. Instead they go to paying the investment companies massive special dividends
4. Our water companies are so deeply in debt (to their offshore holding companies) that this debt serves as a ‘poison pill’ meaning no government could ever afford to nationalise them
It seems rather amazing to me that an ordinary person like myself, who earns less than £3,000 for each book I write, can know all this while the overpaid, over-pensioned bureaucrats at Ofwat seem to be totally unaware of how the water companies are taking us all to the cleaners.
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The bureaucrats are paid well to ensure we continue to pay for all those that don’t… Same with the Council Tax . Next Question ?
Very interesting. I hadn’t realised this particular ‘business model’ was prevalent in the water industry. It sounds very similar to the sort of thing foreign owners of football clubs engage in but rather more damaging as water is somewhat of a necessity.
Any thoughts on why the UK seems to attract foreign spivs so much worse than elsewhere? Is it just due to our inept regulators or is it that other countries get around the problem by nationalising the whole industry?
Here’s a thought. The only politician who just MIGHT address the situation is probably Jeremy Corbyn. God help us!
Are Railways are the most expensive in Europe. Many of them are foreign owned. Again its a monopoly service where competing service is not practical. The so called regulators are easily bribed.
Ironic given the floods at the moment.
As the masses who pay tax at source become scarcer, whatever government is elected will eventually run out of money running endless quangos more interested in themselves than the public they serve. The gravy train would have run out of gravy. Would the EU bail us out as the Greeks?? I fear we are on our own, in or out of the EU.
Yes they are very clever, perhaps the best way forward would be some unreasonable / demanding regulation from OFWAT (negative price increases coupled with demanding infrastructure obligations)whilst at the same time a deaf ear to all pleading about “THEIR” Corporate debts, plus corporate taxation based upon turnover derived from the UK home market – I’m sure we could do a rough estimate of tax revenue due each quarter with no allowance made for “domicile tax planning” – sort of PAYE for Corporates!
A Couple of years in the real world and there would be no need to re Nationalise – I think they might drop the keys back through the letter box one evening and be gone for good?
Nice one Tony, it just might work, however, our leaders know this is going on and do nothing to stop it, if anything they have made it easy for the greedy buggers!