The chief executive of Thames Water has claimed that targets for reducing leaks and pollution are “not realistic”, after decades in which private owners and lenders drained billions from the company while its infrastructure deteriorated.
Chris Weston told the BBC that Thames wanted “to do better” but couldn’t achieve some of the standards imposed by the regulator Ofwat.
“We want to do better when it comes to pollutions,” he said, before insisting that “the targets that the company is expected to make are not realistic.”
“[For example], we have to hit a certain level of leakage, but it is so far in excess of what we are capable of doing, I think anyone would be capable of doing, however much money you invested, that it is not going to be achievable.”
Weston also said that the chance of reaching zero pollution was “very, very slim”.
This is the voice of a private monopoly demanding that the public lower its expectations. After capital has spent nearly four decades loading Thames Water with debt, taking dividends and postponing necessary work, the company now presents leaking pipes and sewage-filled rivers as facts of nature.
They aren’t. They’re the predictable result of privatisation.
Thames loses around 570 million litres of treated drinking water through leaks every day. Last year, Ofwat fined it a record £122.7 million, mostly for breaches involving sewage treatment works and sewer networks. The company is now warning that it may run out of money by November.
Yet Weston’s own pay rose by 14 percent to £1.163 million in the year to March, while other directors received bonuses totalling £4.1 million.
The targets may be unrealistic, apparently, but seven-figure executive pay remains perfectly achievable.
Weston defended his salary by claiming Thames needs to pay “market rates” to attract sufficiently talented managers.
“We need capable people to help turn this company around. And if we’re not prepared to pay market rates, then they won’t come to us and they won’t stay with us.”
But there’s little evidence that the supposed market for executive talent has produced anything except highly paid administrators of decline. Thames Water’s managers are rewarded not because they’ve delivered safe, reliable and affordable services, but because their job is to navigate the demands of regulators, creditors and the state while protecting private financial interests.
Under capitalism, executive pay isn’t a reward for social usefulness. It reflects a manager’s position within the hierarchy of capital.
Privatisation created the crisis
When the water industry was privatised in 1989, the Thatcher government didn’t simply sell Thames Water as it stood. The state first made the water companies attractive to private investors.
Across the industry, the government cancelled £4.9 billion of public debt, injected £1.5 billion in public money and granted billions more in tax allowances. The companies were handed over with clean balance sheets and control of infrastructure that generations of workers had already paid to construct.
Private capital didn’t rescue Thames Water from public underinvestment. The public absorbed the liabilities, and then investors were invited to collect the income.
Thames was particularly valuable because it wasn’t an ordinary business. It was a regional monopoly serving millions of customers who had no choice but to pay their bills. Water revenues were predictable, the physical infrastructure could be used to support borrowing, and everyone understood that the state could never allow the company simply to collapse.
That made Thames Water an ideal financial asset.
Since privatisation, its regulated operating company has declared around £7.2 billion in dividends. Thames later claimed that only about half went directly to outside shareholders, while the remainder covered interest and other costs elsewhere in the corporate group.
That accounting distinction means little to customers. Either way, money left the operating company instead of remaining available for renewing pipes, improving sewage treatment or reducing its dependence on borrowing.
The purpose of privatisation was never to create competition. Households in London can’t shop around for a different network of reservoirs, sewers and water mains. The purpose was to create a new field for capital accumulation by placing an essential monopoly under private ownership.
Macquarie loads Thames with debt
The most destructive phase began in 2006, when a consortium led by the Australian investment bank Macquarie bought Thames Water.
The £8.5 billion takeover included around £6.2 billion in third-party debt. Most of the purchase price didn’t go towards improving the water system. It went to the previous owner in exchange for control of Thames Water’s future revenues.
The new owners then expanded a complicated financial structure in which customer bills and the company’s assets supported further borrowing.
In the year after the takeover, Thames declared a dividend of £656.3 million while taking out £1.2 billion in new loans. Between 2006 and 2008, its net debt almost doubled.
During Macquarie’s period of ownership, Thames Water’s debt rose from roughly £3.4 billion to £10.8 billion. Billions were distributed in dividends and other payments, while Macquarie-managed funds made annual returns of around 12 percent to 13 percent.
Macquarie has defended its record by pointing to billions spent on infrastructure. But this wasn’t money generously donated by private investors. Investment was financed through customer bills and borrowing secured against Thames Water.
Customers paid for the pipes. Customers paid the interest. Investors collected the returns.
This is often described as “asset stripping”, but the process went further than selling off physical property. Capital stripped Thames Water’s future income. Money that customers hadn’t even paid yet was pledged to creditors so that investors could extract returns in the present.
By the time Macquarie sold its remaining stake in 2017, the old owners had taken their profits and moved on. The debt remained with the company.
From shareholder extraction to creditor extraction
Thames Water is now weighed down by more than £18 billion in debt. The shareholders who inherited the company after Macquarie have largely written the value of their investments down to nothing, and control has shifted towards its creditors.
The lenders are proposing a rescue deal that would write off about £9 billion of debt, provide new investment and give the government a so-called “golden share”, allowing ministers to veto certain major decisions.
Weston supports this arrangement over placing Thames into a special administration regime, a temporary form of nationalisation used when a water company can no longer continue under its existing structure.
He warned that special administration could leave taxpayers funding the company and disrupt investment.
But the public is already funding Thames Water. Customers fund it through rising bills. The public bears the cost of polluted rivers, wasted drinking water and failing infrastructure. The state guarantees, in practice, that water and sewage services will continue no matter how recklessly the company has been financed.
The only question is who controls the money and who receives the benefits.
The creditors’ rescue would preserve Thames Water as an investment vehicle. Existing lenders may accept losses, but new capital would enter on the expectation of future returns extracted from customer bills.
The golden share is intended to make this continued private control appear politically acceptable. It offers the state limited veto powers while leaving the underlying ownership structure intact.
That isn’t public ownership. It’s the state acting as a supervisor and guarantor for private capital.
A monopoly too essential to fail
Weston argues that the taxpayer may have to pay if Thames enters special administration. He presents this as an argument against public control.
In reality, it demonstrates why water should never have been privatised.
A water company can’t be treated like an ordinary capitalist enterprise. The state can allow a restaurant, factory or retailer to close. It can’t allow the water supply to 16 million people to stop or sewage treatment across London and southern England to cease.
Private owners therefore enjoy an enormous structural advantage. They can extract profits while times are good, knowing that the public will ultimately be forced to intervene when the financial structure collapses.
Profits are private. Risk is socialised.
Thames Water began privatised life effectively free of debt. It now owes more than £18 billion. This wasn’t caused by spending £18 billion too much on clean water. It was created by takeover financing, dividends, interest charges, complex holding companies and the conversion of an essential service into a collection of financial claims.
Now the company’s chief executive looks at the consequences and tells the public that reducing leaks may be impossible “however much money you invested”.
That claim amounts to an admission that private ownership has failed even on its own terms. If no amount of investment under the present system can deliver the required results, then there’s no justification for continuing that system.
Pollution isn’t inevitable
James Wallace, chief executive of campaign group River Action, rejected Thames Water’s attempt to lower expectations.
“Thames Water’s tactics of opacity and deflection fool no-one. Telling the public to save water while this wasteful profit-obsessed corporation leaks 570 million litres of treated drinking water every day is offensive.
“There is nothing ‘realistic’ about accepting sewage pollution as inevitable. The choice is simple: keep propping up a failed privatised financial model, or put Thames Water into special administration and rebuild it as a public utility serving customers, rivers and the public.”
The nationalisation question
That choice should be understood in class terms. Nationalising Thames Water wouldn’t turn it into a socialist institution, because it would still be run by a state whose job it is to manage society in favour of capitalist interests.
Public ownership could still bring real improvements. It could stop money being drained out through dividends, weaken the power of creditors, and make it easier to spend more on repairing pipes and sewage works. Working-class people would benefit from cleaner water and a service that actually works.
But a capitalist government would still run Thames Water within a capitalist economy. Cheap and reliable water doesn’t only help ordinary people. It also helps employers by keeping the basic cost of living down, meaning that they can reduces wages and the state can reduce benefits, and it provides businesses with the infrastructure they need.
The question, then, isn’t simply whether Thames Water is privately or publicly owned. It’s who holds power and whose interests the service is run for. Under capitalism, nationalisation can be used to rescue a failed industry and make the wider system work more smoothly. Only a government led by the working class could organise water entirely around public need rather than the needs of profit and business.
Conclusion
The present crisis isn’t the result of privatisation going wrong. It’s the result of privatisation working as intended.
Capital received a publicly built, debt-free monopoly with millions of captive customers. Successive owners extracted dividends and returns. Lenders accumulated claims over the company’s future income. Executives were paid fortunes to manage the arrangement. The infrastructure and environment absorbed the damage.
Now that the system is breaking down, the same class that pillaged Thames Water wants the public to accept leaking pipes, sewage spills and higher bills as unavoidable.
They aren’t unavoidable. What’s unrealistic is expecting a privately owned monopoly, buried beneath decades of financial extraction, to place clean water and public health above the demands of capital.
