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Gove: Water firms must clean up their act

Image copyright Severn Trent Water
Image caption Schools and 3,500 houses in Shropshire were struck in 2015 when a Severn Trent water pipe burst

Environment Secretary Michael Gove has actually cautioned public utility he is prepared to provide their regulator brand-new powers if they can not attend to public issues over rates, leakages, executive pay and payments to investors.

Mr Gove has actually composed to Ofwat, the water regulator, asking it to examine each of the locations.

He informed the BBC that he was prepared to offer Ofwat brand-new powers.

Mr Gove stated issues were “not a chimaera” and would be taken seriously.

The privatised public utility have actually come under attack over the last few years after research studies exposed they had actually increased their levels of financial obligation and paid huge dividends to investors.

Water costs set to fall from 2020

Bank left Thames Water with £ 2bn financial obligation

Thames Water fined £ 8.5 m for leakages

A research study by the University of Greenwich discovered the business had actually made about £ 18bn in pre-tax earnings over the previous years, and paid about the very same quantity in investors.

Water rates have actually overtaken inflation by 36% given that privatisation, Ofwat figures reveal.

Image copyright Getty Images
Image caption Michael Gove informed the BBC public issues will be taken seriously

Sir Ian Byatt, the very first president of Ofwat, stated if he were still in the task he would demand an instant 10% cut in costs.

He stated the regulator likewise had to generate a type of dividend cap, where if payments to investors ended up being undue, costs would be cut appropriately.

That would make sure the advantages of privatisation were “shown consumers, not simply investors,” he stated.

At the exact same time there has actually been issue over action on leaks and contamination, especially at Thames Water, which serves one-quarter of the population.

Image copyright Environment Agency
Image caption Thames Water was fined £ 20m in 2015 after pumping unattended sewage into the River Thames

It has actually been handed a heavy fine for contaminating the Thames, and been criticised for providing almost £ 2bn worth of dividends in the previous years, the payment of little corporation tax and making use of subsidiaries in the Cayman Islands, a tax sanctuary.

Thames Water has actually just recently cancelled its dividend and stated it would ditch the Caymans’ business.

Steve Robertson, the president, stated criticism of the payments ignored the market’s strong record of financial investment, with, he declared had actually led to £ 10 of financial investment in facilities for each £ 1 paid to investors.

“The dispute around nationalisation is getting slowed down in dogma, ideology, and not concentrating on results,” he stated.

What does Ofwat desire?

Mr Gove’s pledge of more powers for the regulator counts on Ofwat requesting them.

Rachel Fletcher, Ofwat’s president, stated a dividend cap was not in its existing thinking, nor direct action on executive pay or tax structures. Rather, she stated, Ofwat would need public utility to offer more public info on each of the locations of issue.

You can download the podcast of Dominic’s complete report on the Today program here

Read more: http://www.bbc.co.uk/news/business-43139857

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