What is this Labour government playing at? Having steadfastly refused to abolish OFWAT until last week, they now blithely announce, as if it’s some great triumph, that sewerage dumping will halve by 2030.
Once again this pusillanimous Labour government are letting private water companies off the hook. Successive government (including it must be said the coalition government) did nothing about OFWAT and continued to allow water companies to siphon off cash in dividends, outrageous salaries and huge bonuses, instead of insisting that they deal with sewerage treatment so that dumping became a thing of the past.
Now Labour is, with extreme reluctance it seems, going to abolish OFWAT. As far as I can see any new body will not be making the water companies clean up any time soon. I was utterly staggered at the sheer complacency of the Minister responsible. Who could possibly be happy that half the dumping is to continue beyond 2030 until an indeterminate date in the future?
I do hope the LibDem Parliamentary team will be exposing this huge confidence trick and continuing to press the government for a total clean up now, not in 10-15 years’ time. Every sewerage dump pollutes our rivers, streams, lakes and seas, destroying wildlife and making use of these treasured assets even more difficult.
I had, naively I suppose, expected a Labour government to actually do some of the more difficult things they had promised like starting to turn round our vital utility services. Silly me, they never had any intention of doing anything that might ruffle feathers amongst big business and the private utilities. What a shower this government is.
* Dr Michael Taylor has been a party member since 1964. He is currently living in Greece.
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36 Comments
If the monopoly water companies can be so successful in lobbying the Labour government in one year in spite of their abject failure to justify their existence, the state of play by 2030 doesn’t bear thinking about.
@ Michael Taylor | Mon 21st July 2025 – 12:37 pm..
I have no axe to grind for Starmer; I think he’s a weak leader trying to please everyone and pleases no-one..
However, The Labour manifesto promised: “We will give regulators new powers to block the payment of bonuses to executives who pollute our waterways.”
To be fair labour are trying to tackle the problem; one of the first big laws it passed was the Water (Special Measures) Act 2025. The legislation contains provisions to ban performance-related payments to senior executives of water companies that repeatedly pollute England’s waterways with sewage. Reed, now environment secretary, described it as a means to end the “undeserved” payments…
Under the act, the government banned six water firms including Thames Water from awarding bonuses for this financial year after seven major pollution incidents.
Will it work; who knows but they have done more in a year than the coalition did in five and the Tories did in almost 10..
Well, quite.
I never quite understood why the Government didn’t adopt a four-stage programme.
1. Recruit and train a substantial number of enforcement staff at the Environment Agency.
2. Call the water companies in for a meeting without coffee.
3. Inform the water companies that they had effectively got about 18 months while the new staff got up to speed, after which the water companies could expect to spend a great deal of time in court if they hadn’t cleaned up their act, and to write out cheques for a great deal of money in fines. Which they needn’t think they were going to pass on to consumers.
4. Request the water companies’ representatives to close the door behind them as they left.
As I said in my comment on Mark Valladares’ Week End Press releases, the Water market is totally smashed to pieces and it needs much, much more than a new regulator and a few other bits of tinkering under the bonnet – It needs a comprehensive battle plan to totally undermine the venture capitalists and their corrupted and corrupting control over the entire market, and it needs it NOW!
We mustn’t allow Labour to let them off the hook by being easy going and generous to Labour. Labour need to know that while we want what they want (OK in all honesty, I’m not more than 50% sure Labour do want what we want and our country needs) we must and will be holding their feet to the fire if they don’t go far enough, and we know that if we don’t go in hard, Labour will certainly backslide as far as they can.
a puzzling post. In order to reduce the amount of sewage getting into rivers will require huge spending on additional infrastructure. How does the author think that will be financed and built more quickly?
Incidentally there is no reason to think Labour is abolishing OFWAT “with extreme reluctance ” – they commissioned an independent report and are carrying out its recommendations.
The puzzle is how the Victorians could build all those reservoirs and infrastructures when Gladstone & Co were preaching not just peace and reform but also candle ends and retrenchment ?
I suppose the answer is a lot of rich local entrepreneurs (and a few ex slave owners with their ‘compensation’ money) had loads of dosh which many of them were reluctant to splash out on their own workforce…. though if cholera and other disease was floating about indiscriminately it concentrated the middle class suburban mind. My hero in this is Edwin Chadwick who built most of it.
Incidentally, I’m afraid Michael over eggs the pudding when, as Simon McGrath points out, he uses the term “with great reluctance” to describe the Minister’s motivation. How do you know that, Michael ? A bug in his office ?
As a former venture capital manager I think David Evans’s comments are too general to mean anything. The company I worked for invested in new technology companies and stood to gain a lot or lose everything if the company prospered or failed.
As to financing the expenditure on new works I expect it will come in the main from profit reinvestment (which means lower dividends, no bonuses and reduced salaries) plus borrowing on the usual terms. If the government did what it should and nationalised water again then it would be government rather than private borrowing. And before you tell me that company managers need high salaries, I am confident that there are excellent managers who will do the job for a lot less than the people who don’t manage water well now!
For comparison: https://www.libdems.org.uk/news/adlib-articles/conservative-mps-vote-for-15-more-years-of-sewage-dumping
“If the government did what it should and nationalised water again it would be government rather than private borrowing”
Nationalisation of the water industry is (rightly in my view) not our party’s policy.
In 2023/24, the UK government’s net debt interest spending was £107 BILLION, representing 3.9% of GDP or 8.7% of government spending. For 25/6 interest alone is predicted by the OBR to be £111.2 BILLION. I’m not sure cutting a few executives’ salaries would make up for the additional government borrowing nationalisation would require.
Proposing Increasing borrowing against this kind of background destroyed Liz Truss and the very idea of it was probably responsible for Rachel Reeves’ tears. Any kind of policy that materially increases government borrowing is going to be judged harshly by the markets.
@ Tristan Ward, “If the government did what it should and nationalised water again it would be government rather than private borrowing”
To coin a phrase, and, almost to borrow from 2010, I agree with Mick.
Does Tristan Ward want to privatise the NHS, the armed forces, the police force , the road system, the state school system in order to please the markets ?
Way back in 1948 when the Atlee Government implemented a whole lot of state ownership, nationalisation and the Beveridge Reforms (I can just about remember it on the radio) there was no successful destructive Bear Market that undermined the government that I can recall. To coin another phrase from the late Maggie, Tristan should stop being “frightened, frightened, frit”.
@Mick “As to financing the expenditure on new works I expect it will come in the main from profit reinvestment (which means lower dividends, no bonuses and reduced salaries) plus borrowing on the usual terms.”
the cost of the required infrastructure is hunders of billions . water company profits last year were £2.5bn – salaries and bonuses of senior management a few million. If you want to borrow more then the charges for water have to go up to pay the interest.
David Raw. A bit of hyperbole never did anyone any harm. I was referring to Labour, rather than the minister. Labour have ridiculed LibDem calls to abolish OFWAT, until Labour changed its mind.
Borrowing to build infrastructure isn’t what frightens the market, it’s borrowing to finance current expenditure.
Simon Mcgrath. So, it’s OK to carry on polluting well into the future because it’s so expensive to put it right? You are of course ignoring the very real costs of the pollution and the hazards to health of allowing it to continue. You are also ignoring the tax that will be generated by the work itself, including the VAT paid on the bricks and mortar, the machines necessary to do the construction and the income tax paid on the wages and salaries of those who will be employed to design and build and carry out manual work.
Tristan Ward. It is very difficult for profit orientated private companies to do this work in a timely manner. Sometimes government intervention is needed for such major infrastructure work. Whether that’s via nationalisation or some other form of company structure, it’s clear that the public interest must come first, not private shareholders.
And yes, water bills and sewerage charges will rise, unless some other taxes are increased to pay for this.
In Greece, where I live, water and sewerage are dealt with by local authorities and bills are much lower than in the UK. Something to consider?
Might the article below be of interest/use?
https://anotherangryvoice.substack.com/p/the-464-page-water-commission-report
@David Raw: It would be interesting to find out how that Attlee Government paid for all the nationalisations it did. But I would strongly suspect a big part of the answer is, with all the war damage etc., most of those industries were largely already bankrupt, so the cost of buying them even at fair market rates wouldn’t have been huge. Also the NHS was far, far, smaller than today when it first came into existence, so creating it may not have been as expensive as you’d think if you are imagining today’s NHS (Through the late 40s and early 50s, the UK Government was spending more than twice as much on defence as on the NHS for example). And of course in those days, moving currency between countries was much harder and most of Europe was even more bankrupt than the UK anyway, so there were fewer worries about businesses/the wealthy taking themselves and their money abroad, which would have impacted how much the Government could get away with financially.
Mick Taylor 22nd Jul ’25 – 7:09am… A bit of hyperbole never did anyone any harm…
Perhaps, but your article deteriorated into an anti Labour rant with any concern about water pollution being lost in the noise..
As for your assertion that a “decade long improvement is a betrayal”?? The last reservoir was opened in 1992 and it’s planning started in the 1960’s and construction started in 1979.. Apart from the urgent need for new reservoirs any new sewage treatment plants will have to overcome local resistance, appeals, etc. before the first ‘spade’ digs the ground
Even Greenpeace didn’t call for the abolition of OFWAT, they demanded strengthening it’s powers which is what Labour proposed as far back as 2020.. Don’t forget, that for decade their have been year on year reductions in environmental funding to OFWAT and other agencies ( As Environment Secretary, Liz Truss alone oversaw £235 million in cuts to environmental funding. That included a £24 million cut to monitoring services to ensure water companies don’t dump more sewage. Raw sewage dumps have almost trebled since those cuts.)
As for.. “They now blithely announce, as if it’s some great triumph, that sewerage dumping will halve by 2030.”
If it happens it will be a great triumph, considering that, until now, the pollution has increased at an ever faster rate year on year…
Hi Mick,
Thanks for your reply, and your insight into venture capital management is something many of us could benefit from, but I have to say that I don’t see anything that you have said in your reply that rebuts what I have posted.
When you say “As a former venture capital manager I think David Evans’s comments are too general to mean anything.” I would simply reply that “As a Liberal Democrat, I think Mick Taylor’s response is far too general to mean anything at all”.
Then you mention that “The company I worked for invested in new technology companies and stood to gain a lot or lose everything if the company prospered or failed.” and this is doubtless true, but apparently what your company invested in has nothing in common with the exploitation of our water industry by (presumably) different venture capital firms who use it to extract as much money out of the public purse as possible.
Overall, it seems your venture capital firm didn’t invest in companies providing an essential commodity of life with financial structure designed to enable the backers to extract huge sums by placing ever increasing amounts of debt on the balance sheet, with the failsafe that it can always back government into a corner by threats (unspoken but still present) of the company going bust and potentially leaving burst water mains unrepaired, sewage works unoperational due to sudden failure of equipment etc.
It really is a fundamentally different scenario.
and the it the word limit prevented me including
In summary Mick, I really would appreciate your response to my points using your expertise in the industry, as I might be wrong in some parts or not expressing things as clearly as you think necessary, but I don’t think at the moment that your comment to me so far gets us anywhere further forward at all.
Thanks again,
David
I note that Tim Farron is claiming the announcement of the abolition of OFWAT as a LibDem win as it is something we have been calling for for some time although I hope he will also be saying that the ambition to reduce spills by 50% in 5 years is woefully inadequate. On the whole the recommendations on tightening regulation are good in the context of a continued privately run system, however, my heart agrees with Mick Taylor that the sensible approach is renationalisation. It is scandalous that the government refused to allow the review to even look at this option. There are large sums being tossed about as the costs of this, but there are very good arguments disputing these figures from River Action, and in the case of Thames Water it is clear that the market value of the company is zilch. Perhaps the best approach would be to take Thames Water into public ownership immediately, to test the water (sorry!).
@David Raw
I merely pointed out that renationalization of water is not our party’s policy, that funding record breaking levels of public debt is extremely expensive, and that increasing public borrowing beyond what the markets think is sustainable destroys governments (It may destroy Trump’s as well.) These are facts.
As Simon McGrath points out the cost of infrastructure required to clean up our water way is going to be billions. It’s also worth remembering that this is 2025 and not 1948 (see Simon R’s post); and that the Orpington by election is closer to the end of WW1 than it is to today.
Can we please discuss realistic solutions to 21st century problems?
@ Mick Taylor
It is very difficult for profit orientated private companies to do this work in a timely manner. Sometimes government intervention is needed for such major infrastructure work. Whether that’s via nationalization or some other form of company structure, it’s clear that the public interest must come first, not private shareholders.”
Obviously, and it is absolutely clear that the current model has failed. What also seems clear to me is that funding the necessary infrastructure is highly unlikely to be easily achievable out of public borrowing let alone general taxation.
The consequence is that the only source for the capital required is private capital, especially in a world where there are so many other demands for capital to make our infrastructure.
@ Simon R. “It would be interesting to find out how that Attlee Government paid for all the nationalisations it did”.
Simon, to give an example. In 1947, the nationalization of coal mines in the UK involved a total compensation of nearly £310 million to colliery owners. This compensation was primarily paid in government bonds. The National Coal Board acquired 958 collieries, previously owned by approximately 800 companies. The compensation was for the collieries themselves, as well as for other assets like coke ovens, brickworks, and smokeless fuel plants.
Colliery Compensation : The main component was the compensation for the collieries themselves, which amounted to £164,660,000.
Other Assets:
Compensation was also paid for former owners and other assets, including 55 coke ovens, 85 brickworks, and 20 smokeless fuel plants. The total compensation for these was £78,457,000.
Government Bonds:
The compensation was predominantly paid in government bonds.
To put it in perspective, just after WW1, a number of Liberals were in favour of coal nationalisation. Especially in 1921 (Black Friday) and the 1926 General Strike many of the mine owners were unpleasant greedy characters – some were even Liberal MPs. (e.g. the Guest family).
@Simon McGrath – “the cost of the required infrastructure is hunders of billions . water company profits last year were £2.5bn – salaries and bonuses of senior management a few million. If you want to borrow more then the charges for water have to go up to pay the interest.”
We do need to be careful, firstly we should remember those profits are after servicing existing commercial loans – some of which were taken out purely to pay “investors” ahead of shareholders and some to pay dividends and not to fund investment. Thus I suggest increased borrowing at bond rates may not necessarily cause customer charges to increase.
I agree with Mick Taylor, the need to pay executives excessively high salaries and bonuses to attract “talent” is a lie. I suggest paying excessively high salaries and bonuses, without any meaningful accountability, is actually contributing to the decline of professional senior management and thus in turn the decline of businesses. Remember a sub-theme of Tom Peter’s work (late 1980’s early 1990s) was that practically anyone could be an executive of an established business, as what executives did wasn’t rocket science.
>“They now blithely announce, as if it’s some great triumph, that sewerage dumping will halve by 2030.”
Well, I’m not close enough to matters, but we should be careful not to dismiss the effect some large in progress infrastructure projects may have. For example the Thames Water “Thames Tideway Tunnel” which first became operational in February 2025. Which should have an impact on the overall volume of sewage being dumped, even though outside of London things may not have improved.
Another thing that can be done to address the problem is to empower OFWAT to decline new connections: so no new housing and no “AI” datacentres (known to be both a large consumer of fresh water and a source of contaminated waste water). This enabling the water companies to focus on infrastructure renewal and improvement rather than being diverted to handle increased consumption and waste.
I don’t think preventing new housing (from being connected to water, therefore from being built) will reduce waste, since you’ll still have the same number of people living in the country and so producing the same amount of waste. It’ll just mean people will be living in more crowded conditions.
Preventing new datacentres is likely to reduce waste (or likely, cause the datacentres to be built in another country, thereby making the waste someone else’s problem)
@Simon R – It’s more to do with resources. Whilst developers will build infrastructure within their development, the utilities are responsible for enlarging their infrastructure to handle the demands the new development places on it. Hence the problem is do they assign engineering teams etc. to new connections or to renewing the existing infrastructure.
I suggest if the utilities infrastructure is as bad as many portray it as being, the overwhelming priority is to fix it before increasing the load on it, as fixing something once it has broken is typically more expensive and disruptive.
Also we don’t really need any more houses, we just need the politicians to take action to implement a more sustainable population policy, something they have been kicking down the road since the mid 1990s because it requires some hard decisions…
Hi Roland,
I think CIL monies could be used to support enlarging utilities’ infrastructure, but there’s probably not enough of that and also it’s not a good idea until the bigger issue of the water companies’ business practices are sorted out.
As for repair or upgrade, upgrade can be the better option in circumstances where existing, failing mains can be upgraded to fit in with development needs.
David
@ Mick Taylor
“Sometimes government intervention is needed for such major infrastructure work. Whether that’s via nationalisation or some other form of company structure, it’s clear that the public interest must come first, not private shareholders.”
Of course the public interest must come first, and notwithstanding an attempt to characterise me as a red in tooth and claw Thatcherite for merely pointing out the facts about (i) our party’s policy (ii) the costs of actual public borrowing, and (iii) that any government’s attempts to borrow money are constrained by the financial markets, I have not suggested otherwise. Obviously the current system has failed.
The question remains though – how is the money for new/improved infrastructure to be raised? I suggest the only realistic answer is by borrowing by a public interest company that owns the assets with interest being met out of customers’ bills.
What about the cost of doing it? Depending on the level of perfection required estimates vary between £600billion plus and £18 billion (in 2022) depending on how much sewerage discharge is tolerated and how fast the process. Clearly £18billion puts far less of a burden on bills in a cost of living squeeze.
(see https://www.gov.uk/government/publications/storm-overflows-evidence-project
The last time the Labour Party was in power they renationalised Dwr Cymru Welsh Water. The company was replaced by a not for profit company wholly owned subsidiary of Glas Cymru, a company limited by guarantee. The model is similar to the nationalised water companies which existed before 1994 . It has substantially reduced the company’s indebtedness but has failed in the same way as the other water companies to reduce pollution. Cynically the former First Minister Mark Drakeford blamed housing development and diffuse pollution from farms rather than address the real problem. In itself nationalisation is not a magic wand. It is the structure of these unnecessarily large companies that is the problem.
If new large scale reservoirs are planned as in the South of England then the companies must be retained as they have the tax base to service the vast sums needed to be borrowed. In many parts of the country such as mine they are not and the companies should be broken up into their constituent parts. If the private sector does not want to be involved then in some places the Water industry should be returned to local government. As it is by the time of the next General Election the sewage issue will not be solved. Ed Davey should keep his wetsuit handy.
The government is saying it’s too expensive to nationalise water. Nonsense. The existing shareholders have had £28 billion since privatisation. The government should just take it over without compensation or give the existing shareholders undated government stock. (and yes I know that will increase the national debt but the government will not have to find money up front.)
@ Mick,
You’re right in pointing out the nonsense in claiming that it’s going to be too expensive to nationalise water. I agree that there is case for nationalisation without compensation but this would be setting an awkward precedent. It wouldn’t just affect those who can well afford to lose out. It would affect the pension funds of those who cannot.
When any of us first buy a house we are likely to acquire a debt which goes onto one side of our balance sheet. But, we have acquired an asset which goes onto the other side. So, providing we haven’t overpaid we are still in the same net balance. We could be even better off if we factor in that future payments of rent are going to be unnecessary.
We don’t usually need anyone to explain all this to us. But it obviously does explaining to those in the present Labour government. I heard Steve Reed spouting the same nonsense on Sunday. Laura Kuenssberg also didn’t seem to be aware that there is no increase in net debt if the accounts are done correctly and so failed to challenge him!
@Mick: That doesn’t sound like you hold much respect for property rights 🙁 Whatever money has been paid out as dividends doesn’t entitle the Government to just confiscate people’s property that has been legally acquired – which is what nationalization without compensation means. That seems to me totally incompatible with liberal principles, as well as ethically wrong. Besides, shareholders change over time: What makes you think the shareholders who received most of that money over the last 30 years are the same people who currently own water companies. In the particular case of Thames Water, my understanding is that the financial problems and questionable financial practices and massive dividends happened when it was owned by Macquerie, who subsequently sold the company. The impression I have is that the current owners are trying in very difficult circumstances to pick up the mess Macquerie left, but are not themselves the main culprits. So if you just nationalize without compensation in order to punish them – you’ll be punishing the wrong people.
And what makes you think that nationalization will help? Nationalized Scottish Water doesn’t exactly seem a shining example of good practice when it comes to sewage etc.
Here’s an interesting graph about historic UK debt as a % of GDP. It peaks at about 250% in 1945 and is now around 100%. On the face of it that suggests that there could be space for more public borrowing.
However look at the sharp fall in debt as a % of GDP down to (say) 1990. Is that debt being repaid, or is it growth increasing the size of GDP? I suspect the latter but am very happy to be shown to be wrong.
Note also the higher debt following WW1 through the great depression (certainly limited growth there until the new deal and rearmament kicks in.
All of which pretty well every economist’s and politician’s obsession with growth and Britain’s low productivity economy.
https://www.statista.com/statistics/282841/debt-as-gdp-uk/
Hello Mick,
I’m not normally one to chase up for a response to a post if someone chooses not to reply, but to me, the state of the water industry is in the top three issues facing our country – the lack of real growth in the economy and how do we ensure we can afford the services we need and the apparently inexorable growth in the welfare bill being the other two.
Honestly, I really would appreciate a reasoned response from you, explaining the reasoning behind your reply to me on 21st Jul ’25 – 4:45pm.
As i said before,
In summary Mick, I really would appreciate your response to my points using your expertise in the industry, as I might be wrong in some parts or not expressing things as clearly as you think necessary, but I don’t think at the moment that your comment to me so far gets us anywhere further forward at all.
Thanks again,
David
David Evans. My point was that you can’t judge all venture capitalists by the bad apples. Most venture capitalists put their capital at risk by investing in companies and they get a return by the company doing well, the value of their investment growing and eventually disinvesting and doing the same again. These companies are not normally in the business of bleeding companies dry because that would mess up their investments. I think that the term venture capital has been misused in the contaxt of water authorities. Get rich quick merchants might be a better description.
Mick,
Thanks for your reply, which has made things clear. Sadly I mistakenly described the dodgy financial practices of the water company owners, particularly the leveraged buyouts followed by dumping the debt on the books of the target as venture capitalists and not vulture capitalists.
Just two letters different, but still,
Mea culpa,
All the best and thanks again,
David
The job of government is not just to provide public services through taxing wealth and goods. It must also provide a framework where its citizens understand the implications of and are accountable for their actions. Whether it is running a business, raising a family or taking a holiday we tend to focus on the activity and not its implications. So business owners need to understand that there is a moral and ethical dimension to their work from before they start. The desire for reward should be balanced with a knowledge of how our society works and what is acceptable in law and as a concerned citizen.
Vampire capitalists?