The Guardian view on England’s water companies: a badly broken system | Editorial

Ministers were warned about the risks of private equity entering the sector but did nothing. Now we’re paying the price

The revelation should anger all who care about England’s rivers and beaches. Two decades ago, ministers were warned about private equity firms buying up water companies. In a briefing prepared for Britain’s competition regulator prior to the takeover of Southern Water, researchers raised the alarm that private equity-owned water companies would become “impossible” to regulate. Despite the 20-year transparency rule, the Competition and Markets Authority (CMA) has not released the briefing. Its existence was uncovered by this newspaper. Though its full contents remain secret, its implications are clear: ministers were alerted to the devastating impact that this industry could have on England’s water supply, but they chose not to act.

Since then, a tide of effluent has polluted England’s rivers. Following the privatisation of water companies in 1989, owners have enriched themselves while neglecting infrastructure and dumping vast quantities of untreated sewage. As investors have loaded water companies with debt, they have continued to pay dividends to their shareholders, which totalled £1.4bn last year. The public, meanwhile, have shouldered the costs. Water bills have risen. Last week, the industry apologised for these sewage spills and pledged to invest £10bn in infrastructure – to be paid for by increases in customer bills. Ruth Kelly, the former Labour cabinet minister who is head of the industry’s trade body, Water UK, said more should have been done to address the spillages. She was silent on the subject of dividend payments.