Monday, 12 February 2018

Big scary numbers!

From City AM:

Water companies have hit out at Labour after the shadow chancellor John McDonnell described the industry as a "national scandal". Labour attacked the water industry today, saying the private sector was handing out "scandalous" amounts in dividends, which have totalled £13.5bn since 2010...

Divide £13.5 bn by eight years and by 27 million households and (say) 3 million businesses, that's an average of about £50 a year, one-third of the cost of the TV licence. I can't get too upset about that.

But compared to my annual water bill (rates not meter) of about £500, that seems quite a chunky dividend. Most competitive businesses pay about £1 or £2 in dividends for every £100 of turnover, not £10. If Labour were really worried about this, instead of making token gestures, they could simply cap prices at a few per cent below current levels, dividend halved, perceived problem solved.

And in the blue corner:

Michael Roberts, chief executive of industry organisation Water UK, has condemned McDonnell's attack on the sector, saying that private companies have invested heavily in water networks and have brought down costs for consumers.

Roberts said: "It's wrong for Labour to suggest that our water system is broken. Water companies secure capital provided by lenders and shareholders, who need water companies to make a return in order to finance significant improvements to the industry. He said that the water sector was "starved of cash" under public ownership, and that private firms have invested in reducing leakages, and have improved water quality.

Change the record, mate. Water companies were privatised nearly thirty years ago, you've had plenty of time to sort it out. Dividends are paid after deducting interest costs, so that's double counting. Further, borrowing money ("to fund investment") while continuing to pay big dividends is Carillion territory. Re-invest your current profits first, if there's nothing left to pay dividends, then so be it.
Also from City AM:

Renters in the UK paid out £51.6bn to landlords last year, the highest rent bill on record.

The UK's rental bill rose by £1.8bn in 2017, according to research published today by Countrywide. The estate agency group said the rise was driven by an increase in the number of renters, and rising rents; the average cost of a new let rose 2.4 per cent year-on-year to £958.

Two-thirds of that is location rent and that IS a "national scandal", not so much that tenants are paying it, but the fact that private landlords are collecting it.

Either way, we're not talking about £50 a year from every household, but £6,000 a year being channelled from every "asset poor" househol to a small minority of "asset rich" households.

And what does Labour have to say about this? They dared mention LVT briefly in their manifesto but beat a hasty retreat once the Homeys co-ordinated their strategy and started mis-describing it as The Garden Tax.


DBC Reed said...

Living in Northampton, which has families (with children) paying £800 a month private rents , we also have the latest development of the long-running attack by the private sector on the British State in the form of the grand Northants County Council fuck-up, true blue and pursuing all the latest ideological fads and trends. From "True blue Tories route to disaster" today's Guardian.
"What's more , it has crashed after rigid adherence to the Tory ideological rule book for local government reform. Northamptonshire embarked on a grand 'Next Generation' reform plan in 2014.Services would be outsourced , or turned into profitmaking companies . The council would drastically shrink in size and be run like a business"
A few days ago this paper was making much of the council's pursuit of "digitisation??"another trendy buzzword, losing money.
The water companies (above) make much of the lack of repairs under public ownership; they don't say right wing fundamentalists were keeping such state spending to the minimum to show how "inefficient" the State system was and so crying out for private sector spending which they neglected to mention would be charged for to the max.
Meanwhile Larry Elliott looks at the ultimate market, the Stock Market and shows the latest downturns as being caused by the American economy prospering and creating jobs. Cue Investor Panic!! This must mean high interest rates are on the way to head off overheating!!.
It is merely prudential to isolate the public sector from such shit.

Graeme said...

Do you have shares in your local water company, Mark? I don't recall being offered shares in mine but then I was living in an area supplied by a private company-the East Surrey Water Company. Now that I am subject to Thames Water, I know that private companies demanded less in the way of payment and service was much better

Steven_L said...

A few days ago this paper was making much of the council's pursuit of "digitisation??"

The council where I work is undergoing a digital transformation to a target operating model. Apparently this means I can get £22k to quit. Would almost pay the Jag off.

Mark Wadsworth said...

DBC:"families (with children) paying £800 a month private rents". Charge their landlords £600 LVT and recycle the money back to the families.

"right wing fundamentalists were keeping such state spending to the minimum to show how "inefficient" the State system is" There's an element of that, I suppose.

G, no I do not own shares in anything or anybody. I agree that Thames Water et al are overcharging slighlty, maybe by as much as ten per cent. I can't really complain about the "service" though. I open the taps and get drinking water, what more can I wish for?

SL, sweet, but how easy will it be to get another job to pay for the running costs?

paulc156 said...

In the spirit of anecdotals and water companies, last year I was informed that my new waste water services would be transferred from Thames water to Castle Water (Penrith). Charges remained broadly the same until I enquired into a £3.00 a month increase in direct debit for which I had not received any notification as well as a double charge in one month.
Castle Water eventually 'discovered' that Thames had been under charging me to the tune of about £16 per month so that my debits would need to increase by somewhat more than that in order to claw back money owed. Each time I called it was 'you are 45 in the queue...' and frankly the only impression one could get from Thames, Castle and the whole lot is one of general incompetence and the feeling that you were back in the 70's. That really is the brief version. It's difficult to avoid the conclusion that these are monopoly providers just like the previous regime with the added 'bonus' they can pay out dividends to shareholders rather than return value to taxpayers.

Lola said...

My water and sewage bills is low. Mind you I have my own treatment works and well point if the water co. gets arsy...:-)

Re para 3 er???

Mark Wadsworth said...

PC, as I have painfully explained many a time, privatising a monopoly is an opportunity for rent seeking, so the government has to impose standards, cap prices etc. I have painfully explained that those dividends are far "too high" by any objective measure etc.

L, aha, I have amended.