Lecturer in Accounting, Co-Director Accounting & Accountability Research Group (AARG)
Experts in accounting, industrial relations and pensions met with policy makers and activists at a special roundtable discussion, hosted by Queen Mary’s School of Business and Management’s Accounting and Accountability Research Group, to investigate the impacts of the failure of Thames Water, and discuss how the service could be rebuilt to better serve consumers.
Britain’s biggest water company, Thames Water, is reported to have a growing debt of £15bn, despite paying out billions of pounds of dividends. Re-nationalisation is one solution, but it’s unclear what that would mean for shareholders, including the Universities Superannuation Scheme.
Alongside other utilities, the water and sewerage industry was privatised in England and Wales in the 1980s, and Thames Water may not be the only British infrastructure at risk.
To consider how this situation arose and what should be done now to address it, Dr Claudine Grisard, Co-Director of the Accounting and Accountability Research Group, and Professor Sukhdev Johal convened an expert roundtable on ‘the sustainable management of water’.
Chaired by Professor Johal, the panel consisted of: Labour peer Lord Sikka; Mary Onafalujo, National Officer leading on the Water Industry for UNISON; Dooley Harte a pensions official at the University and College Union; Professor Richard Murphy from the University of Sheffield and co-founder of the Tax Justice Network; and Colin Haslam, Emeritus Professor of Accounting and Finance at Queen Mary’s School of Business and Management. The panel also held discussion with an audience combining academics, policy makers, union activists and community organisers.
Fixing the pipes
Mary Onafalujo (UNISON) provided the roundtable with the industrial relations perspective. “Towards the end of last year, Thames Water made over 170 people redundant, just for cost savings, but that hasn't really achieved anything,” she explained.
“We’re talking about Thames today, but all the water companies are cash strapped. So, how do we get change but protect jobs as well? The profit made from customers’ bills could be pumped into renewing infrastructure, because some of these companies don’t even know where their pipes are.”
Dooley Harte (UCU) called for more transparency, accountability and engagement with customers so they can understand where their money is going. He said: “Government could move under the current format and say that water companies should not be paying dividends to shareholders until there are significant improvements. We can't have a situation where dividends are being paid while leaks increase, while discharges continue. A system of fining companies years afterwards isn’t good enough.”
Lord Sikka (Labour party) added: “We also need to create personal criminal responsibility for water company executives for sewage pollution.”
He told the roundtable that we need an ‘endgame’ for Thames Water, and this can only be done with alternative forms of public ownership, such as a non-profit organisation. He explained: “We have legislation such that the Secretary of State and Ofwat can petition the High Court for special administration if a company is ‘likely to be unable to pay its debt’ or breach of principal duty that is serious enough to make it inappropriate for the company to keep going. Well, there's no denying that they have breached their public duty.”
Raising money with fairer pricing
Professor Colin Haslam (QMUL) explained the likely impact of the regulator Ofwat’s five-year plan, which envisages a 50% increase in consumer bills. He said: “If you're a low-income household, your total water bill will be 5.5% of your disposable income; if you're top of the income scale, it'll just be 0.6%. So, we really need to think of how we're going to change the pricing structure using a progressive charging system. And we're going to have to do that because we have to raise money to clean up the system and maintain an environmentally sustainable system of water supply.”
Professor Richard Murphy (University of Sheffield) highlighted the fact that clean water is a human right and that if Thames Water “went bust, people in the Thames Water area would still need water”. He then discussed his ideas for buying in the company’s debt covered by offering the public dedicated ISAs (tax-free individual savings accounts).
He explained: “We could provide the funding with an implicit government guarantee, which will come through the ISA guarantee. The result will be public ownership of a national asset for public benefit. Surely when something is so important to our wellbeing, that is what we should be aiming for.”
Professor Sukhdev Johal (QMUL) concluded: “There has to be viable alternatives. Can we have a resilient water system, publicly owned and accountable to the community? And is it possible to translate that into viable policy where the vast majority of households actually have lower bills? I think we’ve reached that point where we can say it’s possible, but the work still has to be done. We’ve got people who are analysing this with costed models. And if you can do the numbers, you can translate it into policy and into grassroots politics.”
Fostering public dialogue
Dr Claudine Grisard (QMUL) reflected: “By hosting this event, our Accounting and Accountability Research Group provided a space for critical reflection and public dialogue about the limits of the current corporate and financial model of Thames Water. These broader questions about the justice and effectiveness of the ‘shareholder democracy’ are pertinent to other companies managing common goods. We hope to continue the dialogue with businesses, policymakers, unions and civil society in this space.”