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Normally for private businesses the profit motive acts as a spur to efficiency and keeping down costs. But when it comes to Thames Water's proposed Super Sewer, current estimate £3.6 billion and rising, this does not apply. As a monopoly they would be allowed to pass the bill on to their customers. This would imply they were neutral, indifferent, about the financing. But actually it is worth than that. They would actually make money by being able to charge those of us who are their customers more than the cost. This is because they would be paying 2% interest on the loans raised but charging 4.5%. (I was interviewed about this by the BBC last week.)

The River Thames is actually getting cleaner – according to the Environment Agency it is one of the cleanest metropolitan rivers in Europe. The real stink is the financing rules. More expensive the scheme the more profit Thames Water make.

Three councils have sponsored a Thames Tunnel Commission to look into the matter. Two of the councils are Conservative (Hammersmith and Fulham and Kensington and Chelsea) one is Labour (Southwark.) The Commission was chaired by Lord Selbourne and in its report concluded that  a smarter, cheaper option of a shorter tunnel would still meet the requirements of the EU directives and make the River Thames cleaner.

The three Council leaders response is as follows:

The authorities note:

  • The escalating costs of the Thames Tideway Tunnel and the fact that £1.3 billion is set to fix over 50% of the problem (reducing the average annual overflow by 21million cubic metres) yet this scheme costs more than three times that amount to deal with 18 million cubic metres. This represents very poor value for money for Thames Water customers. 
  • The evidence of Professor Chris Binnie, Chairman of the Thames Tunnel Strategic Study Group, makes the point that the whole basis for the project is out of date and that only a minuscule proportion (£12,000) of the £5 million invested in the Thames Tunnel strategy looked at sustainable drainage solutions (SuDs).
  • Professor Green's evidence that Thames Water is set to make £162 million a year in additional revenue from the 20 mile super sewer due to a perverse incentive in the way the water industry is financed.

We, the undersigned, call on the Minister of State, Richard Benyon MP, to carry out the following:

1. An independent cost benefit analysis of the Thames Tunnel given the escalating costs relative to
benefit.

2. A thorough review of the alternative proposals to the full tunnel scheme by water industry experts
Professor Binnie and Professor Green.

3. A full investigation of Thames Water's apparent conflict of interest in promoting a scheme which
would increase their regulatory capital value (RCV) by 40 per cent and failure to research adequately or promote any solutions that do not increase their RCV, such as green infrastructure.

Cllr Stephen Greenhalgh
Leader
Hammersmith & Fulham Council

Cllr Merrick Cockell
Leader
Royal Borough of Kensington and Chelsea

Cllr Peter John
Leader
Southwark Council

 

8 comments for: Call for rethink on £3.6 billion Thames Water Super Sewer

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