Tory privatisation economics: try the London sewer, the mother of all scandals

As an illustration of what the Thatcherite privatisations of the 1980s now mean, you could not have a better example than the London super sewer.   It costs £4.2bn, and you might expect that Thames Water, the privatised company that controls the whole of its length, should obviously be expected to pay for it.   Not a bit of it.   They will fund just a third of it only, and the rest will be met by a team of investors which will own, manage and finance the projedt during construction and then supply sewerage services to Thames Water on a 125-year concession!   But that’s just the start.   Unusually for a construction project, the investors will receive an income from the first day, paid for by Thames Water’s 15 million customers.   The surcharge on London water bills is likely to be £80 a year in perpetuity.

But here’s the main point.   The risks of construction, including cost overruns, accidents or any other incidents at the project’s 42 sites, as well as any financial risks – such as another global collapse in credit – will be borne by taxpayers because the government is acting as guarantor.   This is common for infrastructure projects where traditional insurers won’t cover the risk, so once again the privatisers take the gains and the public take the potential losses which could be billions of pounds, and Thames Water walks off all the way to the banks.   There are two enormous scandals here.   One is that if Thames Water were a publicly owned company or part of a national water company, the sewer could be built far more cheaply because governments can borrow money more cheaply than anyone else.   Second, why shouldn’t Thames Water be made to pay for the project themselves when they have paid out dividends of £1.1bn over the past 5 years?

Then there are the tax implications.   Thames Water is owned by a Luxembourg-domiciled consortium which includes the (Australian) Macquarie European Infrastructure Fund as well as Abu Dhabi and Chinese sovereign wealth funds.   So Thames Water is racking up huge debts using EU-blacklisted tax havens to pay out massive dividends and executive fees, at the same time as expecting household consumers to pay a big chunk more themselves.   Alongside a one-third increase in billing to its consumers, Thames Water have seen fit to grant a 60% pay increase to £2 millions a year to its chief executive – what for exactly?    The mother and father of all financial skulduggery?

 

4 thoughts on “Tory privatisation economics: try the London sewer, the mother of all scandals

  1. Australia’s Macquarie Bank, a spin-off of London merchant bank Hill Samuel, played a leading role in Australia’s adoption of Thatcherism, often writing specific policy proposals for privatisation and deregulation, which Macquarie’s famous business model then turned into massive profits. To guarantee success, Macquarie went out of its way to employ, after they left office , the government officials with whom they made their business deals.

  2. Thatcher brought us greed tony blair just built it up but we the peasants had our silver sold off by our politicians who got greedier and greedier which allowed these so called companies to pay monies to the top tier beyound whot they should even had councils jumping on this band wagon gettingpaid eye watering wages yet the peasants get less in their wages and the price of services gone beyound A joke yet we have one member whose taking back control talking sense to us peasants will we see a rather old proper labour party with whot these idiots blair babies call maxist ways its called caring for all making sure everyone pays their share yet he has to overcome these bb to take us there perhaps we have a proper mp who will take away this greed jeff3

  3. The fourth message from the Independent Review by Jon Cruddas says people were asked about privatisation :

    “On public services, 57 per cent of the 2015 electorate agree with the statement, ‘I don’t care whether a service is publicly or privately run, as long as it works well’, 24 per cent disagree. Amongst 2005 Labour voters, 44 per cent agree with this statement, against 38 per cent who disagree. Amongst 2015 Labour voters only 35 per cent agree with a larger proportion 42 per cent disagreeing.”

    Obviously people have absolutely no idea whatsoever of what the actual costs and implications are! (If it wasn’t for you Mr Meacher, neither would I, so many thanks).

    They also had little idea on a great number of other issues (eg benefits). People need to be educated, especially before a General Elections!

    PS I liked your response to Blair in the Guardian, about Jeremy Corbyn. Excellent.

  4. You only have to google these companies and find that in the usa they get taking to court for overcharging the government yet we got the same ones here you only need to google I wonder if the peasants were told it costs more going private than having the government run one ops thachers way was wrong its now proved wrong but took our mps on that gravy train jeff3

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