The water companies and environmental insolvency

Another day and there’s another Professor Richard Murphy report. This one is “Cut the Crap” and it suffers from the usual problem, it’s by Professor Richard Murphy. The claim that it’s by the Corporate Accountability Network shouldn’t be taken seriously - other than Professor Murphy there’s no input from anyone other than the Fat Controller figurine on the model railway set.

The claim, as laid out by The Guardian:

England’s water companies are “environmentally insolvent” because they do not have the financial means to raise the £260bn needed to deal with their sewage spillages, academic research has found.

The report, by Prof Richard Murphy of the Corporate Accountability Network and Sheffield University, recommends nationalisation without compensation and raising the necessary funds through government ISAs for the public and higher charges for heavy water users.

Even in just that brief summation we can see the usual Professor Murphy problem - as the report has been written entirely solo no external checks on basic logic have been made. The claim is made that the current system cannot finance the required charges. Therefore the system must be done away with. Then the suggestion is that more finance be made available. But if more finance must be made available then doesn’t that mean that the current system could manage the finance - after all, more finance is to be made available?

In more detail the report - sorry, Professor Murphy - looks at England and shrieks in horror at what is found. Without then doing the most basic of logical checks - OK, so what about other, similar systems? Like, say, Scotland where exactly the same problems of Victorian infrastructure and rising population are to be found? With that interesting difference that the water there is done by an already nationalised company.

Well, the informed will know why Professor Murphy doesn’t make that comparison. Because the situation in Scotland with sewage overflow is worse - they’re even worse at monitoring it let alone preventing it. Given that state owned is worse than capitalist therefore it cannot be true that nationalisation is the answer - despite that being the preconceived conclusion that Professor Murphy desires to work toward.

The muttering about capital, borrowings and dividends is an irrelevance. As Murphy says “ total investment exceeding £91.5 billion had taken place over this period.” which does seem like a fairly large amount. Given that the suggested new financing method is more borrowings (however tax privileged through ISAs) it cannot be that borrowing to invest is a problem. We cannot solve a problem of people borrowing to invest by then insisting that people borrow to invest.

But here’s the great gaping hole in the logic being used. Apparently, to make sure that the rivers are as clean as some campaigners would like would cost £260 billion. At which point everyone’s insolvent because they can’t raise £260 billion. But the correct response to £260 billion is that the rivers aren’t going to become as clean as some campaigners would like. As we’ve said about Feargal Sharkey and Surfers Against Sewage. The costings of the demands - whoever pays for them, however - are such that they’re a frivolous waste of societal resources.

There are, close enough, 25 million households in England. Rounding a bit both ways, this makes £260 billion a charge of £10,000 per household. The only people to pay this £10,000 are households - whether through tax or water charges makes no difference. In order to clean up sewage overflows enough that folk may swim in the river at Hebden Bridge every household must pay £500 a year for 20 years (before any finance charges, recall). The rational answer from households is that the Hebdenites can go use a swimming pool like everyone else.

This is not entirely frivolous either. Sure we’d all like a cleaner environment and we’d all, possibly, be willing to pay something to get it. But that much? For that little difference? Double everyone’s water bill, at least, to make a marginal improvement in the rivers?

Do note that not even Murphy claims this will solve all storm overflows. We already deal with 95%, perhaps 98%, of the crud and this £260 billion will only take that to perhaps 99%. There will still be sewage overflows even after this spending. So, will people be happy to be charged this much to make Feargal happy?

No, no they won’t and that’s nothing, at all, to do with the ownership structure of the industry. It’s that the target is wrong in and of itself.

Then there is this issue of nationalisation which is political posturing at best. The claim is that water companies currently constrained by how much they may charge cannot solve this problem. Therefore nationalise them and then lift the control on what may be charged. But if the amount to be charged is to rise - as Professor Murphy insists it will have to - then the water companies are not environmentally insolvent, the basis of his claim that they must be nationalised. Further, the nationalisation doesn’t change the basic fact that to meet the - too strict - targets then households must pay more. And to repeat, if charging more is the solution anyway then where’s the insolvency?

At which point we can become rational again rather than following the lacunae in Professor Murphy’s logic. Take the occasional sight of reality rather than remain inside the ideological blinkers.

We have two suggested systems here. Capitalist companies and a state owned water company. Either of those will, in order to meet those desired by some water standards, have to charge very much more than the current costs. OK. So, which of those two organisational structures should we use to deploy those greater funds to improve the water standards?

Presumably we should use whichever system is more efficient at deploying funds to cleaning up the water. Which means using the English system of capitalist companies. Because the English companies have cleaned up the water more than the Scottish state owned company since the reorganisation at the time of the English privatisation. At lower cost too. In fact, we have four organisational models to look to. England capitalist, Wales a cooperative, Scotland state owned corporate and NI remaining with local councils. In terms of the three interesting measures, price, water quality in the taps, water quality in the rivers, the greatest improvements have come in England, followed in this order by Wales, Scotland and NI.

The further away from a vibrant capitalism it gets the worse it gets that is. The solution therefore cannot be to abandon the vibrant capitalism, can it?

The conspiratorially minded will now start asking why Professor Murphy does not do that comparison with the other water systems of the Home Nations and we’d have to say no, don’t do that. There is no conspiracy here. Just the obvious reason. Comparisons across ownership structures are not made because everyone, even Professor Murphy, knows that such a comparison would hole the desired argument below the waterline. The Enmglish water companies are more efficient in the deployment of funds which is why they must never be compared with mutuals and state owned companies because that would destroy the argument to make them mutuals or state owned.

But then as we said at the beginning, we’ve another Professor Richard Murphy report here, the problem being that it’s a report by Professor Richard Murphy. Cut the crap, really.