Why Thames Water is the pariah of post-privatisation capitalism

‘It would have been ideal not to have so much poo in the water,’ said Oxford captain Leonard Jenkins after losing the university boat race to Cambridge last Saturday. Thames Water blamed high groundwater levels after weeks of rain for sewage discharges that are a less unpleasant alternative than ‘letting it back up into people’s homes’. But no one’s listening to the excuses – for the failing utility, that is, not the dark-blue crew. Thames Water is the pariah of post-privatisation capitalism, facing a charge sheet of poor service and financial opportunism of which rising tides of river filth are merely pungent symbols.

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The argument that water should never have been privatised at all simply does not hold water: the state would never have maintained necessary levels of infrastructure renewal. But let’s agree that it went wrong when most of the industry passed from public shareholders to foreign and private-equity owners: between 2006 and 2017, a consortium led by Macquarie of Australia extracted fat dividends from Thames, loaded it with debt and generally outwitted the regulator Ofwat. The current owners – including pension funds for municipal employees in Ontario and staff of UK universities, acting in their pensioners’ interest – are refusing to inject more funds unless Ofwat allows 40 per cent price rises and eases debt limits.

Almost certainly the company will now fall into administration and temporary nationalisation. Cue choruses of ‘I told you so’ – but it didn’t have to be this way if the regulator had stayed two steps ahead of the financial alchemists. Now, for utilities as for railways, it’s a matter of keeping private-sector capital engaged while undoing the errors of privatisation – and letting the floaters, as it were, drift downstream.