The Guardian: Warning to ministers over privatized secret water

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The Guardian has reported that British ministers were warned about the perils of private equity taking over the water business in a briefing that has been kept secret for 20 years.

Details of the analysis are still being suppressed while sewage contamination and water providers' refusal to invest in infrastructure are being investigated on a national scale.

After more than three decades of operating under a privatized model, the water sector apologized on Thursday for failing to properly manage and invest in water, as well as for the extent of raw sewage discharges that have fueled widespread public outrage.

Read more: Target to clean UK water bodies pushed back 30 years - 2027 to 2063

It committed to quadruple financing for pipelines, treatment plants, and infrastructure to £10 billion over the next decade and apologized for contaminating beaches and waterways with untreated sewage. All of this, however, will be paid for by higher client bills.

The delayed analysis forecasted the current status of the privatized water business and advised against allowing private equity to invest in water corporations.

It was written in 2002 for the Competition Commission (now the Competition and Markets Authority, CMA) and has never been released in its entirety. It should have been made public under the 20-year rule last summer, but despite repeated attempts, it remains hidden.

Today, as private equity controls ownership of the water industry in England, bringing high levels of debt and underinvestment that result in sewage contamination, water shortages, and leaks, the report's author has urged for full disclosure of his warning from two decades ago.

Chris Goodall, who wrote the report for the Competition Commission investigation into a proposed takeover of Southern Water, stated that his real concern was "about the financial structure of the proposed deal. In my view, the transaction created an entity that would prove impossible to regulate.

“Large external private equity shareholders would load the company with debt and Ofwat inevitably would lose any regulatory control. For example, it would prove extremely difficult to ensure that water companies invested enough in sewage control.

“This report should be published in full now because it helps to show why the last 20 years of increasing private equity dominance of the water industry has proved so disastrous.”

Sarah Bentley, the CEO of Thames Water, revealed last year that high levels of pollution in waterways were the product of "decades of underinvestment" by the privatized water business.

According to new Financial Times research, the ten largest water corporations will more than quadruple their dividend payments to shareholders in 2022 to £1.4 billion, despite widespread concern over sewage contamination in rivers and a failure to invest in infrastructure.

The CMA stated that the report, which was produced in September 2002, had been approved for publishing. However, it has not been disclosed for eight months after it should have been.

The CMA has cautioned that if a request for the report is made, it will be excluded from doing so under freedom of information regulations. "Without wanting to prejudge the outcome of any request you may make under the Freedom of Information Act 2000, I wanted to refer you to the exemption at s.22 of the Freedom of Information Act 2000," the authority added.

“This exemption provides that information intended for future publication is exempt from release provided the public interest in maintaining the exemption outweighs the public interest in release.”

Dieter Helm, an economist, has cautioned that the privately held water corporations' excessive levels of debt endanger their long-term viability.

When asked why the Goodall report and the whole investigation it was a part of had not been published under the 20-year rule, the CMA said, “As the statement is now over 20 years old, it has been reviewed by our records management team in line with the above process … however, there are a significant amount of documents which make up this matter which are yet to be reviewed. Further, the CMA, consistent with normal processes, will transfer these records with other records which have reached the 20-year mark and which have also been selected for transfer. This process will be completed over the course of this year.”