England’s rivers and beaches are being polluted. Some of that pollution comes from farms, industrial outlets and other sources. But the issue of greatest concern is the sheer volume of human waste reaching our rivers and beaches, making them dangerous for human use and threatening wildlife.
The source of this problem is easy to identify. England’s sewers are old, worn out, too small and unable to handle current volumes of sewage output. Solving this problem requires three things. Firstly, money. Secondly, assessment of the scales of the issues that the required amount of money to solve the problem gives rise to. Thirdly, political will to deliver clean water – a basic human right – to the people of England.
The plans are inadequate
We have reviewed the available evidence, and our report argues that the House of Lords is correct: it will cost at least £260 billion to solve the problem of storm overflow sourced pollution which lies at the core of the issue. Given the urgency and scale of this issue, the water industry’s current proposal to invest £10 billion over seven years is inadequate. The Department of the Environment’s plan to invest £56 billion over 27 years is likewise inadequate: we estimate is that it would only eliminate sixty-five per cent of pollution, at best.
The water companies have invested almost nothing
What seems clear is that the official response to this crisis is primarily intended to guarantee the continued solvency of the nine companies that manage sewage in England. As our accounting analysis of their financial statements for the last twenty years shows, these companies have made no net investment of shareholder’s funds in the water industry over this period. Investment has been funded by borrowing. All profits (amounting to £24.8 billion over that period) have been withdrawn from the industry by way of dividends. Less than £4.6 billion a year has been invested in the water sector on average over a twenty-year period. We suggest that £26 billion a year is required.
The companies are insolvent
We analysed the evidence, using an accounting methodology known as sustainable cost accounting. This shows that all of England’s water companies are environmentally insolvent. In other words, they are unable to raise the required financial capital to continue in operation and meet the requirement that they deliver clean water to people in England while avoiding pollution of waterways, rivers and beaches from untreated storm overflows. Such is the scale of their deficiency that we suggest that they be nationalised.
Nationalisation: funding recovery
This proposal does not, by itself, solve the problem of the additional funding that this industry requires. So we recommend that once the industry has been nationalised, the government should offer savings bonds to the public. The bonds would pay competitive rates of interest, tax free like ISA accounts, with the funds used to finance the necessary investment in the water industry.
£700 billion is saved in ISA accounts. There is £7,500 billion of financial wealth in the UK. Finding the £260 billion required to deliver safe water to the people of England should be perfectly feasible.
Even so, a subsidy might be required to prevent household water bills increasing for all customers, some of whom, will undoubtedly be unable to bear that burden. If this subsidy is to be avoided, a form of progressive charging for water, with rates per litre increasing as consumption does, would be a fairer way of increasing revenues. This would also provide a valuable incentive to save water.
We demonstrate that there are ways to solve England’s water pollution problems. What is lacking is the political will to adopt the necessary solutions.
Read the report here.
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