High water bills, filthy rivers – and now drought. This is England’s great artificial water crisis of 2025

In its refusal to renationalise water, it’s clear the government operates in the interests of private capital and not of the country

For a rich and fairly stable country, we are staggeringly ill-prepared for climate shocks. We respond to predictable crises as if we had had no warning. Lessons from previous disasters go unlearned, mistakes are recycled, failures lodged so deeply that they come to define the system.

This is not because of a deficiency in the national character, but because of a deficiency in the ideology of government: an elite belief, shared by scarcely any citizens, that public intervention should be used only when all other measures have failed. Until that point, our problems should be addressed by the private sector. As drought rolls across the country once again, England’s privatised water system guarantees an irrational response.

Nothing undermines climate resilience in this country as much as the private ownership of our water system, and nothing reveals the drought of political ambition like the refusal to renationalise it. Once again we find ourselves confronting simultaneously both the climate crisis and the political crisis.

Climate breakdown is the result of a global failure to address the power of private capital. Labour’s response to its impacts reflects the same timidity. As successive governments have stood and watched, we have been comprehensively rinsed by the water companies. The current administration seems prepared to go to any lengths not to break this pattern.

Margaret Thatcher promised that water privatisation would deliver higher investment. But a detailed analysis by the public service union Unison found that, between 1990 and 2023, there was no net investment at all. “Investors” spent £3.6bn buying shares in 1989 and 1990, but by March 2023 total shareholder equity across the water sector amounted to £3.4bn. In real terms (taking inflation into account), that means a 60% reduction in shareholder capital.

Over that period, shareholders managed to extract £77.6bn (in 2023 prices) in dividends from the water companies. Add this to the withdrawal of equity, and you discover that they have squeezed £82.4bn out of public assets. Much of this money was obtained through loading the companies with debt. Instead of borrowing to pay for infrastructure improvement, water companies borrowed to pay for dividends. They knew that if the enterprise one day became insolvent as a result, it would be someone else’s problem. Ultimately, as we now discover in the case of Thames Water, it becomes our problem. Just as the water companies dump their sewage in the rivers, they have also dumped their liabilities on the public. The country becomes their dustbin.

For 36 years, these companies have acted as dispensers of free money to their owners, most of which are foreign, some of which are foreign states. In fact, the only government not permitted to own England’s water supply is the UK’s. They must see us as total suckers, giving away our national infrastructure, land and assets … for less than nothing.

Any investments have been funded not by shareholders but by their customers, through our water bills. These rose in the same period by 360%, more than twice the general rate of inflation. The rise has since accelerated. Every year, we pay £2.3bn more for our water and sewerage bills than we would if the suppliers were publicly owned, according to research by the University of Greenwich. High bills, impossible debts, filthy rivers, minimal investment and no resilience: that is the gift of privatisation.

One of the results of this asset-stripping model is that leakage rates remain disgracefully high. While the hosepipe bans now being introduced around the nation are likely to save between 3% and 7% of the water we would otherwise use, 19% of the water piped through the network is lost through leakage. Compare this with the publicly owned Dutch system, which loses 4%. For the same reason, no major reservoir has been completed here since 1992.

Demand management has been just as hopeless, with the result that, without further action, water demand will exceed supply by 2034. Given that their profits from metered customers depend on the amount we use, the water companies have a powerful incentive not to address the problem. Instead, as supplies become critically low, they insist that they must be allowed to extract even more from our rivers and aquifers, with dire impacts on wildlife and water quality.

For similar reasons, they resist imposing hosepipe bans until the last possible moment. It seems crazy that this decision should be left to the water companies, with their perverse incentives and conflicts of interest, rather than being taken by public bodies; but this is yet another outcome of the public-bad, private-good elite ideology. Even senior Tory MPs expressed frustration that government could not simply decide what needed to be done; but that’s the system they built, working as designed.

As for the regulators, they too are useless by design. Ofwat, which is meant to protect the public interest, has succumbed to full-scale regulatory capture, as senior staff circulate between the water companies and the agency supposed to hold them to account. The Environment Agency, chronically underfunded and demotivated, almost halved its water use inspections in the five years to 2023: a classic example of deregulation by stealth. The rules might remain on the statute book, but without monitoring and enforcement they might as well have been deleted.

Throughout its history, water privatisation in the UK has been deeply unpopular. In 1986, a year after Thatcher proposed the policy, a poll showed 71% opposed and only 21% in favour. Since then, opposition has only hardened: a poll a year ago revealed that only 8% of people believed water should still be run by the private sector, while 82% wanted to see it renationalised. But two months later, the government ruled this out. Why? Because, according to the environment secretary, Steve Reed, it would cost too much.

Really? A series of analyses show that the government could renationalise these companies for next to nothing, not least because their real value is less than zero. There would be some administrative costs, but these are likely to be far smaller than the annual expense of sustaining the current system.

It’s a simple test: does the government operate in the interests of the country, or in the interests of private capital? This shouldn’t be a difficult choice for Labour to make, yet, as with so many such tests, it flunks it. Why? Because it is terrified of any measure that might alienate even the most parasitic and extractive forms of capital. Strangely, however, it seems to have no qualms about alienating the rest of us.

Cover photo:  Ben Jennings/The Guardian