The Conservative Manifesto for the 1997 General Election included this pledge:

Introduce competition in the water industry, starting with large users.

Already, by then, we could switch supplier for gas and electricity, so why not do the same to reduce our water bills? The news this morning that the Government proposes to “do something” about excessive water bills, and excess profits for the monopoly water suppliers, offers some hope that this policy will be revived.

The Times this morning reports(£) that Sir Ian Wyatt, the former head of Ofwat, favours this approach:

He added that England and Wales should follow the example set by the Scottish government, where some business customers are able to switch water suppliers. “What happened in Scotland was that competition was introduced at the retail end,” he said. “That has turned out to be really very useful because companies think about how customers would like to be looked after — quite a new concept in some of these utilities.”

The water is bought wholesale from Scottish Water – so that aspect is a nationalised monopoly – but there is competition for the retail part of the business.

Why hasn’t water competition been applied elsewhere? I suspect politicians find it convenient to force utility companies to carry out public spending on their behalf. For example, the astonishingly extravagant £3.6 billion super sewer project by Thames Water. If the Government was to pay for it via tax increases, there would be political pressure to abandon it or scale it back to something more cost effective. However, as it is, the hope is that customers will blame Thames Water for the resulting higher water bills. Thames Water are also happy as it allows their bills to increase and their profits to increase – it is easy money. The recent attention paid to the “green” levies on energy bills gives politicians a warning that we are starting to notice what is happening.


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