Thames Water cannot be solved until December 19th

Thames Water, as we all know, is in something of a financial pickle. This does not worry us despite our involvement in water privatisation. More accurately, this does not worry us because of our involvement in water privatisation. That one group of capitalists fail at running a firm is not a problem with capitalism and markets - it’s the point. It’s exactly that those who run something incorrectly lose their money which produces the incentives to not run things wrongly.

Now, whether or not they have in fact run Thames Water wrongly is another and entirely different conversation. It’s possible to point out that expectations have risen rather more swiftly than reality can keep up with and so on. But leave all of that aside. The utility itself will exist even if the current corporate shell disappears and that’s exactly how capitalism and markets do work.

However, a point that we’ve not seen anyone else make. Which might mean we’re wrong about this of course - being the only head above the parapet is not always the sensible thing to be doing. But we’d strongly suggest - to the point of insistence - that Thames Water as a problem cannot be solved until December 19th. For:

2024 price review

We are currently working on the 2024 price review (PR24). This will set price controls for water and sewerage companies for 2025 to 2030.

We consulted on the way we set price controls by publishing our draft methodology in July 2022 and we announced our final methodology in December 2022. We published our draft determinations on 11 July. The for the consultation on draft determinations closed on 28 August 2024 and we expect to announce our final determinations on 19 December 2024.

That’s from OfWat, the regulator.

Until prices, therefore cashflows, for the next 5 year period are known there is no possibility of even examining, let alone solving, the financial structure. Therefore no solution is possible until that publication date. Everything said before that date is pure vapidity.

Which does give us an interesting insight into Thames Water’s problems, no? Capitalism and markets might well be able to solve this problem if it weren’t for having to wait for the bureaucracy….

For example, this in a press release from the GMB union:

“Thames needs committed long term investment just to keep operating, never mind stop the leaks and cut the sewage spills.

“Then it must be held to account and deliver for customers, with its skilled workforce central to the turnaround

“If that investment isn’t forthcoming then the Government must act fast and put Thames into special administration.

“Ministers can’t sit back and watch the car crash.”

Everyone’s got to wait until Dec 19th. It’s the bureaucracy, see?

Tim Worstall