Thames Water is making the taxpayer cough up twice

Thames Water, the largest water and sewage business in Britain, used to have a slogan: “Running water for you”. Then someone pointed out how much of the water was running away in leaks rather than in baths and loos. What was running away even faster was the money, into the pockets of Macquarie, the investment bank once dubbed Australia’s Goldman Sachs. It was not meant to be a compliment.

That was then, and under relentless bombardment from the media, new-look Thames, along with the other water and sewage businesses in Britain, has decided to come clean. Here’s the plan: almost no dumping of sewage into waterways and beaches, almost no horrid chemicals escaping, and more reservoirs to avoid tomorrow’s hosepipe bans (or worse).

It all adds up, the water companies’ trade body claimed this week, to a curiously-precise £96 billion of investment by 2030 to fix these problems. The current shareholders are proposing to contribute just a few billion to this HS2-sized sum. It’s unlikely that the companies anticipated the thanks of a grateful nation, since we are expected to pay the rest.

Fair enough, since we are the beneficiaries, except that we seem to have paid once already. From privatisation to 2021, the companies awarded themselves £72 billion of dividends, racking up £60 billion of debt on their previously-debt-free balance sheets. Some of that debt was money from the shareholders, at attractive (to the lenders) rates, so the total gain is probably not far short of the £96 billion now being promised.

The companies are commercial businesses, with shareholders’ capital employed, and the rules allowed the dividends and the debt, supervised by the friendly hand of Ofwat, the industry’s regulator. Rather too friendly, it turned out. To be fair to Ofwat, when four of the companies objected to its last price proposals and appealed to the Competition and Markets Authority, they won, effectively emasculating the regulator.

Now the regulator is starting the arduous process of examining the companies’ proposals behind that £96 billion figure. Reflecting the obsession with process that characterises modern Britain, this will mean millions of billable hours from the finest lawyers, bankers and executives in the land. We have already been softened up with projections of an extra £156 a year on the average water bill by 2030. Thames, at least, should navigate these rapids well enough, since the joint chief executive, new into the post after the sudden exit of her predecessor, used to run Ofwat.

It is possible that by 2030 we will all live happily ever after, with clean rivers and beaches, and those exciting new reservoirs. It is a racing certainty that the bills will rise to pay for it all. The harder question is who pays for the inevitable delays, cost overruns and assorted setbacks? See above.

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