Water privatisation in England and Wales

Water privatisation was undertaken in 1989 by the government of Margaret Thatcher which partly privatised the ten previously public regional water authorities (RWAs) in England and Wales through the sale of assets. The regulatory arm of the RWAs, including pollution control and water resource management, was hived off to the newly created National Rivers Authority.

At the same time the economic regulatory agency Ofwat was created, following the model of infrastructure regulatory agencies set up in other sectors such as telecommunications and energy. The Drinking Water Inspectorate (DWI) was set up in 1990 to monitor water safety and quality.^[1]

There are sixteen mostly smaller water only companies in England and Wales that have been privately owned since the 19th century. In Scotland and Northern Ireland water and sewerage services have remained in public ownership.

Criticism

Water privatization in England and Wales remains controversial. A 2001 study by the Public Services International Research Unit stated that

• tariffs increased by 46% in real terms during the first nine years,
• operating profits have more than doubled (+142%) in eight years,
• investments were reduced and
• public health was jeopardised through cut-offs for non-payment, however, this was made illegal in 1998 along with prepayment meters and 'trickle valves'.^[2]

At privatisation the industry's £4.95 billion debt was written off. Privatisation critics argued in 1997 that infrastructure—particularly sewers—was not adequately maintained and that Ofwat implicitly "gave (its) approval to running down the underground network". Furthermore, Ofwat was accused of not comparing company performance with targets, not relating performance standards with past or projected levels of investment, failing to "publish information in a consistent form" and not requesting that levels of service indicators become mandatory. Instead company licenses were renegotiated to address performance issues. The critics concluded that in the "conflict between making profits and providing a certain level of services" the legislation "resolves it in favor of profit".^[3]

It was alleged that the consequences of the 1988 Camelford water pollution incident were covered up partly because prosecution would "render the whole of the water industry unattractive to the City".

Support

A World Bank paper argues that until 1995 the reforms

• increased investment (in the six years after privatisation the companies invested £17bn, compared to £9.3bn in the six years before privatisation),
• brought about compliance with stringent drinking water standards and
• led to a higher quality of river water.^[4]

According to data from Ofwat, service quality and efficiency has improved from the early 1990s until 2010 in the following ways:

• Drinking water quality, as measured by the compliance with iron levels and coliform bacteria in service reservoirs, has improved substantially from 1996 to 2010.^[5]
• Network pressure has improved substantially: The share or "properties at risk of low pressure" declined from 1.33% in 1990-95 0.01% in 2009-10.^[6]
• Supply interruptions have declined: The share of properties subject to unplanned supply interruptions of 12 hours or more declined from 0.33% to 0.06% during the same period.^[6]
• The number of written complaints not responded to within ten working days has declined from 21% to less than 1%.^[6]
• leakage has been reduced from 5,112 megaliters per day in 1994-95 to less than 3,281 megaliters per day in 2009-10 (the measuring method of two companies has changed over the period, so the actual reduction is even higher)^[7]

See also

• Water supply and sanitation in England and Wales

References

1. Drinking Water Inspectorate website accessed 8 April 2010
2. Hall, David and Emanuele Lobina (PSIRU):UK Water privatisation - a briefing, February 2001
3. Schofield, Richard and Jean Shaoul: Regulating the water industry. Swimming against the tide or going through the motions?, The Ecologist, Vol. 27, No. 1, January/February 1997 p. 7
4. Water privatisation and regulation in England and Wales, by Caroline van den Berg 1997
5. OFWAT:Service and delivery – performance of the water companies in England and Wales 2009-10 report Supporting information, p. 82 and 83, retrieved on 16 June 2011
6. OFWAT:Service and delivery – performance of the water companies in England and Wales 2009-10, p. 21, retrieved on 16 June 2011
7. OFWAT:Service and delivery – performance of the water companies in England and Wales 2009-10, p. 40, retrieved on 16 June 2011

Further reading

• Jenkinson, T. & Mayer, C. (1994) The Costs of Privatization in the UK and France, in Bishop, M., Kay, J. & Mayer, C. (eds.) Privatization & Economic Performance, pp. 290–298 (New York, Oxford University Press)