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The system for regulating water companies should be overhauled and replaced with one body for England and one body for Wales, a landmark review of the sector has advised.
The much-anticipated final report from the Independent Water Commission, led by former Bank of England deputy governor Sir Jon Cunliffe, outlined 88 recommendations to the UK and Welsh governments to turn around the ailing industry.
To discuss the story, Iain Dale got together with his Cross Question panel for what he called 'the best debate he's had for months.'
Listen to the full show on the all-new LBC App: https://app.af.lbc.co.uk/btnc/thenewlbcapp
#iaindale #water #pollution #thamesriver #regulation #publicownership #regulator #debate #politics #ukpolitics #LBC
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0:00
I think I'm going to get my colleagues back at the ranch to clip that and put it up on YouTube
0:04
because I think it's a really good primer as to what the arguments are on here
0:08
So, very impressed with this panel so far. Let's go to our first caller. It's Robbie in Chelmsford. Hello, Robbie
0:15
Good evening, all. My question is, why does the government prioritise protecting privatised water over the customers who end up paying for it
0:25
Now, Sir John Cunliffe's landmark review into the governance of Britain's water providers
0:30
did not consider whether or not the sector should be re-nationalised. Now, Alex, you told me about two minutes ago that before you became an MP
0:39
you used to work for a water company. So I think we have to come to you first
0:43
I did indeed. I feel uniquely qualified here. I did. Before I was a member of parliament, I worked for Durk Cymru Welsh Water
0:50
who are a not-for-profit water company, so a unique business model. But as we've seen today with the announcement of the Cunliffe Review and over 88 recommendations, change is needed in the water sector desperately for far too long
1:05
The bonuses have gone unchecked of these privatised water companies. They are getting away, quite frankly, with pollution at an untenable scale in our rivers, in our seas, in our lakes
1:17
And bills have risen far too high compared to the quality of the service that customers are getting
1:23
So that's why I'm really pleased today to see the bold reforms announced by the government around scrapping off water as a regulator and bringing in one single fit for purpose strengthened regulator
1:34
But then also by creating this water ombudsman. So for the first time ever, customers will have that champion in order to represent them against the interests of the big water companies
1:43
whether that's via complaints or issues that they may have, as well as a whole swath of recommendations that we're yet to look up
1:49
But I think we've been very clear since we came into office as well with bringing in the Water Special Measures Act, trying to prevent those big bonuses being handed out to water company bosses that they aren't serving the interests of customers anymore
2:01
And that desperately needs to change. I've always thought that Ofwatt didn't really have enough powers to be a proper regulator
2:09
But others disagree with that. They say, no, it did have the powers. It just chose not to use them
2:13
What's your view? I think, well, coming at this from both sides or from being in the water industry and being on the receiving end of the fines that were handed down by OffWatt or the recommendations handed down by OffWatt when you're in the water sector, you do feel actually that they're quite overbearing, that they are coming down on you quite hard
2:31
But now I've seen it from the other side and being in government and also being a customer, as we all are, of water companies
2:37
I do feel like they haven't necessarily acted as swiftly or as robustly as we wanted to
2:42
which is why I'm pleased today that we have made that decision to scrap them and bring in that strengthened regulator
2:48
a proper fit-for-purpose regulator that will take them to task. One thing which I think is very odd is that Steve Reid said this morning that he didn't receive Sir John Culley's report until last night
2:58
so he read it overnight and then makes this announcement today we can't have really digested
3:04
a 456 page report overnight surely it would have been better to have sat on it for a bit and and
3:10
maybe then um introduce some further because i think he's only accepted four of the 88 recommendations
3:16
why do it so quickly well i think it's very clear that where there is a need to act quickly
3:22
and swiftly then then we will and i'm pleased to see those decisions being made of those high level
3:27
recommendations today but it is quite right as you said it's quite a lengthy document that um
3:32
sir john canliffe has produced for government or 88 recommendations it's right that we go through
3:36
them all and see what is appropriate what can be taken forward i mean there's a lot of consultation
3:40
that's going to have to be undertaken with customers on this um but i think the four that
3:46
we have accepted are we're right to do so and it's right that we get on with delivering for the public
3:50
who have quite frankly been fed up of poor service and pollution spills now hillary wainwright i'm
3:55
suspecting that you might want to use the n here and sort of nationalization before anyone else thinks that i going down a different path um is the government taking the right approach No and the question is right It puzzling why it not thinking about public ownership
4:13
I'd say public ownership rather than, I mean, nationalisation, fine, but the emphasis must be on serving the public
4:20
I mean, that's what's gross about the water, what's happening now. You know, these chief executives getting like nearly a million a year
4:28
when they're meant to be public servants. serving the public and and are not and the regulator i mean firstly the the um uh cunliffe
4:38
wasn't allowed to consider nationalization or public ownership which is really bizarre not
4:43
very democratic i mean you thought when when 80 percent of the public want public ownership
4:48
that surely should be on the agenda of anybody 80 percent of the public might want to bring back
4:54
hanging that doesn't make it right no but the it still makes it something that needs to be
4:58
considered and the fact that you know this is the result not of just prejudice it's the result of
5:04
experience and debate and argument and you know the the experience of of the sewage is the ultimate
5:12
sort of but but sir john said i saw him do an interview uh this morning where he was saying
5:18
it doesn't really it's not the structure of the industry that matters here whether it's in the
5:22
public or private sector because you have scottish water is in the public sector scottish water has
5:26
problems with sewage as well. I mean, it doesn't make it right just to bring it back into the
5:32
public sector. So it's a bit of a red herring, isn't it? Because it would cost so much
5:36
It isn't a red herring, because one of the key things that problems that face the regulator
5:40
is getting the information. And that's partly because of all the commercial protection of
5:44
private companies, as far as information is concerned. The people who've exposed a lot of
5:49
the sewage problems is the public, is people like Ilkley Clean Water or Ilkley Clean River
5:55
You know, people are swimming and face all the shit, literally. And they're, you know, driven to find out what's really going on
6:03
And if you had a public body, then just to finish, the point about the public ownership is not structure
6:10
It's like bringing the public back in so they can investigate what's going on
6:15
because it would mean that the executives and so on were accountable to the public
6:21
who could ask questions and drive investigations. But the only reason, apart from if people are swimming, as you say, in the whatever, in the river, they notice it
6:30
But the only reason we know that our rivers are so polluted now is because the last government brought in legislation
6:35
to make it compulsory for the water companies to measure the amount of pollution, which we didn't before
6:41
and they still don't in Scotland, I understand, under public ownership. So we do have more information than we used to put pressure on them
6:51
Yes, but not enough because you can't really control, in my opinion, what you don't own
6:56
I mean, I think ownership would mean there was a more direct line of accountability
7:01
and bringing the water companies to account and getting them to change
7:07
because it would be subject to parliamentary debate, be public debate, like here we have it on the media and so on
7:16
That would all be part of what was driving the companies. the companies. Whereas now, you know
7:21
the companies are behoven to the shareholders. They have to meet their interests. So
7:27
massive dividends, massive profits is what's driving their policies. Mark? Well, so
7:33
there's a whole load of stuff that's come out of that. So, I think the most important point is, Ian, you're absolutely
7:37
right to mention that point, that back in 2013 we legislated in order to make sure
7:41
that these companies were being monitored in terms of the output of sewage
7:47
We've also legislated in order to make or that if any company breaks any laws or whatever
7:53
the senior people can't get a bonus at all. So we have intervened at a certain level on all of this type of stuff
7:59
But they continue to get these massive salaries. Sure, but you've got to get people to come and run these businesses
8:04
Even if it's in the state sector, you going to still have a lot of highly paid people to come and run them because they got to get some reward for it Yes but other countries in Europe they have way more reasonable salary But one of the interesting things which I think the government could have looked at is the idea of having mutual ownership
8:22
So rather like a building society where the customers own it and they can take more interest in it
8:27
For me, being a representative of people in Worcestershire where we have 7Trent, 7Trent is relatively good
8:33
the idea that my constituents were going to have to find £16.4 billion
8:38
to bail out Thames Water is pretty horrific but look I think the other thing that has come out of this is
8:43
I think the government has announced £104 billion worth of investment into the
8:47
sector, big tick we like that, there's going to be a whole load of money
8:51
going into the infrastructure but where's it going to come from? Ultimately it's going to come out of the pockets
8:56
actually right now of shareholders who in many cases Hilary are people like you who've got pension funds
9:02
so the pension schemes are investing into this if it doesn't come out of the pension scheme is
9:06
going to have to come out of taxation or it's going to have to come out of bills or it's going to come out have to come out of borrowing but collectively we are all going to have to pay
9:13
find 104 billion pounds out of our state wealth in order to build up this infrastructure well
9:18
this is coming out of private sector investment for the vast majority of it and to fix the issue
9:22
that is causing the pollution in the first place so it's fixing those pipes it's fixing the sewage
9:26
system it's preventing the you know sewage over spilled pipes into the sea into the rivers and i
9:31
I also, you know, as well as also coming from the sector originally, I also represent one of the constituencies that suffers from extreme flooding
9:38
and weather events that is only getting worse. It's not getting better. So we need to be able to deal with this as well as building new reservoirs
9:44
We haven't built any for decades in this country. We need to think about where our clean drinking water is coming from
9:48
All of this that the water companies should have been investing in instead of paying their bosses and their shareholders, you know
9:54
immense salaries whilst not fixing the infrastructure. Ali, I'm a little bit confused about this conversation so far
10:00
because fundamentally you've got Sir John Cunliffe saying that they're going to have to be
10:05
inflation-busting increases in water bills on the one hand, just saying this today
10:11
and on the other hand you've got Steve Reid saying that there's going to be a water revolution
10:15
and that customers are not going to have to pay the gargantuan increase in bills that they've had to face in the past
10:20
So I'm totally confused by this. This is going to be yet again kicking the can down the road
10:24
Look, someone's got to level with the public and say that if you want to have a water industry that works
10:29
you're going to have to stump up more cash. Now, that's unfashionable, but it's the fact
10:34
Now, the way this works is, if you want to go nationalise everything, as Hillary does
10:38
there are two things to bear in mind. She hasn't said that. Well, I'm talking about public ownership
10:43
because we've got to think about other models. I mean, just very quickly, so we can correct that sort of myth
10:47
of nationalisation being state, or public ownership being state-controlled. I mean, my idea, and not just mine
10:53
lots of people's idea of public ownership, it would be, you know, the public being on the boards
10:59
I mean, mutual is one thing, but I think that if you have a public body, then you can have a debate about how it should be run and involve the people locally in running those bodies
11:10
I understand the point, but a lot of people still talk about nationalisation, particularly on the left and particularly within the Labour Party
11:17
Now, this is a very seductive idea, but unfortunately it bears no relation to reality at all
11:23
It bears no relation to reality for two reasons. One, who's going to stump up the cash to compensate the owners of these companies that are in the private sector to the tune of billions, right
11:33
Number one. Number two, if you actually go down the road of public ownership, nationalization, whatever it is, which investor internationally, and we're talking about international pension funds, private equity, whatever, who's going to come and invest in this country
11:47
Who's going to invest in the battery energy storage? Who's going to invest in the carbon capture and storage
11:51
Who's going to invest in the onshore and offshore renewables that we need? The answer is no one
11:55
Because once you have a situation where people don't have faith in your ability to actually earn a decent return
12:02
they're not going to invest. And one of the things that, and I speak to investors all the time
12:06
one of the things that they have when it comes to water is a regulator that they felt was not really working very well So I think it welcome that the government has done some reforms there But the other thing investors want is stability They want stability in terms of the outlook and there are five regulatory periods and they want stability of returns Now Alex talks
12:24
about the fact that water company bosses shouldn't be paid these massive bonuses. Fair enough. But
12:29
then why is Steve saying, Steve Reid saying, that he's not going to interfere in bonuses? I'll tell
12:34
you why. Because they're private companies, many of them, and it's not for the government to
12:38
interfere in the remuneration policies of private companies? That is a question
12:42
for shareholders. We have intervened in bonuses though. We took special action
12:46
Steve Reeves said yesterday he doesn't want to intervene. That's in the salaries. I think that's very different
12:50
But we have taken action to prevent these bonuses from being paid out
12:54
to these water company bosses. And we've also added prison sanctions to them
12:58
when they don't comply with this. But they're now apparently suggesting that the bonuses should be turned into
13:02
salary. Yes, exactly. Which is the problem. And I think I'd echo the comments
13:06
of the water minister this morning, my good friend Emma Hardy, and she said that they need to read the room
13:11
Look at this, what's happening. I know a lot of my colleagues today have written to the boss here
13:15
and asking him not to accept this, to look at what is being done to you in your name
13:19
and how customers are having to front the bills for this. Alex, I understand this
13:23
and this is all very emotive, and I understand why, because people obviously don't want sewage in their rivers
13:27
and I understand. I don't want sewage in my basement, which got flooded as well, by the way, which cost me the best part of 30 grand
13:32
Which is the other part of the hand. So my insurance premium has gone through the roof. So I understand all this. But fundamentally, we need to level with the public and say you're going to have to pay a lot more money for your water because there's Victorian pipeage in this country that is completely unfit for purpose
13:47
We need to invest massively. And also, Ali, you know, if it was public, then the value that's created that now goes to the shareholders would go into investment
13:55
You see, I think, you know, making it public isn't going to cost millions. I mean, you know, it can be bought at the value, the current value, market value of these companies
14:04
Now, the market value of Thames water is virtually zilt. I understand, Hilary, but you've got Sir John Cunliffe, right
14:09
who's an ex-deputy governor of the Bank of England, exactly. You know, these people, he's an experienced guy
14:14
He was talking about the fact that he lived through public ownership of water companies and he called it the dirty man of Europe
14:22
So, I mean, this is the guy who's just written the report that you've been given to the government. It's not inherent in public ownership. It was badly managed
14:28
but you know if you look at 90% of public of water across the world is publicly owned
14:36
and there are some good companies in France and Germany apparently they have bigger problems with
14:40
sewage than than we do and they're publicly owned do we not I mean we need to wrap this up in a
14:45
second but should we not um put all of the water companies in the same basket because we hear about
14:51
Thames Water one or two of the others who've clearly got massive problems and have performed
14:55
very badly but there are actually in the rest some of the rest of the country some decent
15:00
water companies we shouldn't lock them all in the same basket there is an issue about the way the
15:05
way this so i'm a big fan of privatization i've been a kind of saw this during the 1980s and i
15:09
saw things improve immeasurably as a result of privatization but the one thing that the water
15:13
companies don't have is competition and that competition piece is incredibly important to
15:17
get efficiency so you need to have a a hybrid form of of sort of dynamic market dynamics going
15:23
on within it but i think but you're absolutely right i mean i think you know at the end of the
15:28
day we'd be better off keeping it in in one form of private ownership or another even if that is a
15:32
mutualization which i do think should be looked at because of that but there are a lot of i really
15:37
want to challenge this idea that the market equals um efficiency because you need some kind of dynamic
15:43
but democracy can also be a force it doesn't work come on let's be serious right you're an advocate
15:50
of privatisation, that's fine. The reason why you have a regulator in the water sector is because they are
15:56
effectively monopolies. You don't have competition. That's the point, because they're covering regions, and that's why you have
16:02
a monopoly to protect the interests of consumers. And they represent the public good
16:06
So the investors can earn a regulated return that is reasonable, and the regulator does their job by
16:12
holding them to account. That's how it works. Well, I reckon that this has been the best discussion on water
16:16
that I've heard in the last few weeks on the media. so congratulations to you all for that
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