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A damning report should spell the end of England’s privatised water industry

The chief executive of the public regulator of private water companies in England and Wales (Ofwat) says the companies “have ‘created the perfect conditions for renationalization” as a result of their own actions. Writing in The Canary, James Aitchison says a damning report should spell the end of England's privatized water industry. “The report, by the University of Greenwich Public Services International Research Unit, compared the privatised English water industry with the public Scottish industry. It provides compelling proof that the privatized water industry in England is inefficient, unnecessarily overpriced, and benefits shareholders at the expense of consumers.” [The Privatised Water Industry in the UK: An ATM for Investors, by Karol Yearwood, September 2018]

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The Privatised Water Industry in the UK. An ATM for investors

This paper aims to critically evaluate the privatised water & sewage industry in England. We find that the public-owned sector in Scotland delivers the service just as efficiently, albeit at a lower cost to consumers. Our econometric analysis suggests that the 40% increase in real household bills since privatisation was mainly driven by continuously growing interest payments on debt, contrary to the regulator attributing them to growing costs and investments. Finally, we show that the accelerating debt levels are primarily the result of disproportionate dividend pay-outs, which exceeded the privatised companies’ cash balances in all but one year since 1989. We conclude that the way the industry operates may no longer be sustainable and seems to disadvantage consumers greatly without their knowledge, as there is a fog of misleading statements by the companies and the regulator.

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Nationalising'Special'Purpose'Vehicles'to'end'PFI:'a'discussion'of'the' costs'and'benefits

A new paper by Dr Helen Mercer and Professor Dexter Whitfield "Nationalising Special Purpose Vehicles to end PFI: A discussion of the costs and benefits" provides an initial set of costings relating to the proposal to end PFIs in the UK through nationalising the Special Purpose Vehicles. The article uses book value to estimate that the cost of compensating the shareholders of the SPVs on HM Treasury database would be between £2.3bn and £2.5bn. It further analyses the potential savings to public authorities. The article proposes that service contracts are renegotiated so that the public authorities contract directly with the providers, not via the SPV. This secures significant annual savings from the elimination of operating profits, of £1.4bn, indicating that nationalisation will pay for itself within two years. Further the article proposes to honour all outstanding liabilities but to secure substantial refinancing through a new body in which ownership of the SPVs will be vested. Finally, the article suggests that as service contracts are ended, either through break clauses or other reasons, the public authorities must bring provision ‘in-house’, ending outsourcing and also providing further savings from more rational and integrated provision. The approach has been developed on the basis of significant research into how PFIs operate and consideration of the range of alternative solutions to the PFI problem that have been put forward so far. These issues are also explained and developed in the article.