Thirsty for Profit

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How water turns to gold for the city corporations.

Jollied along by city pundits, a not very convincing raggle-taggle of New Labour goons has recently been finding itself thrust in front of a totally unconvinced public to have another go at privatisation of the water industry in Scotland and Northern Ireland. Like the Tories before them, this government have already had a number of tries at doing this, only to be rebuffed by an impressive combination of dogged resistance from the unions and public outrage. If the early signs are anything to go by, resistance is likely to be every bit as fierce this time round.

All of this is no doubt tremendously exasperating for the advocates of privatisation who like to make out that the experience in England and Wales has worked out to be an unvarnished triumph. Leading the latest foray against the last bastions of state ownership, recent issues of the Economist have even resorted to fairy stories hinting that there might be a few shillings in it for the shrewder Jocks, if only they would be a bit more reasonable.

Among the more fanciful of these tales is the one claiming that, while household water bills in Scotland have gone up by 94 percent in real terms over the past ten years, they have only gone up by 22 percent in England over the same period. Och aye, the noo. So how come privatisation was rejected in Scotland and Northern Ireland in the first place, if it was such an attractive proposition? The answer is, of course, that people up there could see only too clearly what had already been going on in England and Wales.

Margaret Thatcher originally proposed privatisation of the entire water industry in 1984, but such was the public outcry against it that these plans were swiftly abandoned - until after the 1987 general election, that is - at which point the dastardly plot was immediately resurrected. The water and sewerage industry in England and Wales was divided up according to its ten main regions and parcelled off accordingly. In no time at all directors of the new water companies had entered popular renown for their unusual technique for improving the quality of the water supply which seemed to mainly involve stuffing their trousers with fists full of notes.

In less than two years water bills in England had rocketed to 70 percent higher than anywhere else. And, when Strathclyde council ran a referendum in 1994 on privatisation of the water industry, 97 percent voted against. Apparently, the locals still harboured the quaint notion that something which fell out of the sky (in such seemingly endless quantities) should not become the property of a handful of individuals.

The other thing which had became rapidly apparent very soon after privatisation in England and Wales was that profits started to go through the roof. According to the Public Services International Research Unit at the University of Greenwich, the pre-tax profits of the ten water and sewerage companies increased by 147 percent between 1990-91 and 1997-98 at the same time as customers faced continued price rises and levels of investment went on hold.

Despite the removal of some obstacles in the path of wealth production, the new bosses of the water industry (most of whom had actually been the old bosses as well) longed to get rid of other hindrances - especially the regulation which stipulated that none of the regional operators could join forces with a neighbouring firm. The original (and not very profound) thinking behind this had been to prevent the creation of new monopolies within the industry and to encourage competition. In the event, all that happened was that none of the individual companies had sufficient economic weight to either gain enough critical momentum or genuinely expand their activities. The result was that, in the absence of any serious contenders from inside Britain, some of the industry's real giants began to take over. Most of these were from the US, Germany and - for important historical reasons - France.

Unlike the water industries in most other parts of the globe (which are still mainly run by public sector bodies) the water concessions in France came to be owned and operated by three private companies on behalf of a number of local authorities. Today these firms are known as Suez-Lyonnaise, Vivendi and SAUR. When the fashion for privatisation started in the early 1990s, it turned out that they were the only ones with either the size, capital resources or experience of working with local authorities to take full advantage.

Between them, Vivendi, SAUR and Suez-Lyonnaise own ten of the 14 'water-only' companies in Britain - in places like Bristol, Essex & Suffolk, Mid-Kent, North Surrey, South Staffordshire and Three Valleys. In a list published by the Environment Agency in 1998, Vivendi, Suez-Lyonnaise and Enron subsidiaries were ranked as the second, third and fourth worst polluters in Britain.

According to the website Corporate Watch, the vast majority of private water concessions in the world are either run by Vivendi or Suez-Lyonnaise, with a smaller number, mostly in Africa, run by SAUR. The dominance of these two firms is such that even some of the world's biggest multinationals find it hard to crack into the same market - unless, that is, they can go into partnership with one or other of them. There are no big water multinationals in the US, but firms like Bechtel have made billions on the back of government contracts for the construction of reservoirs and dams.

All of these firms are paying increasing attention to what they can make out of water. Bechtel is one of three firms (the other two are Edison and United Utilities) involved in a new consortium called International Water which - following pressure from the World Bank - was granted the franchise to privatise the water industry in the Bolivian city of Cochamba in 1999. Mass protests and a people's coalition kicked out the multinational consortium. Let's hope the same happens in Northern Ireland and Scotland as well. The water bandits need to watch out for the kelpie and each uisge, the underwater sprites which inhabit Scottish rivers and lochs and which appear to unsuspecting strangers in the shape of a horse. They have an insatiable appetite for humans and, after being dragged off to a watery grave, the victims will normally be devoured completely, apart from the liver, which will float ashore - a sure sign that the water-horse has claimed another victim.