Policy Papers


Why Thames Water is Top of Sue Gray’s Risk Register

John Davis |

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Executive Summary

  • The current condition of the Thames is abysmal. This is, though, nothing new.
  • The sewerage system designed by Joseph Bazalgette in the 1850s was a masterpiece, but had significant flaws.
  • For much of the twentieth century, Thames pollution was tolerated as long as London’s tap water was adequate and potable.
  • A ‘clean-up’ in the 1960s relieved the pollution situation temporarily, but long-term problems of supply, infrastructure and water quality emerged in the last quarter of the twentieth century.
  • Privatisation was not the sole cause of these problems, but has not proved to be the solution. 
  • Stricter regulation of water companies must now be enforced. With no public sympathy for water companies, the main obstacle to renationalisation is the cost. Thames’s current financial embarrassment might remove that barrier.

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Before the 2024 university boat race rowers were advised to cover open wounds and not to enter the water, as levels of e-coli were three times the safety limit. The losing Oxford crew apparently suffered a vomiting outbreak on the morning of the race; as one commented, ‘it would be a lot nicer if there wasn’t as much poo in the water.’

The Thames’s condition has been sporadically spotlit by such episodes over the past two centuries. In 1878 the loss of life caused by the sinking of the paddle steamer Princess Alice was compounded by sewage in the water where the collision occurred. Untreated sewage was routinely discharged by the outfall sewers created as part of London’s new main drainage system, at Beckton (Barking Creek) on the north bank, and Crossness, by present-day Thamesmead, in the south. Some bodies recovered from the river were covered in black blisters and coated in ‘a kind of slime’; many who escaped drowning supposedly died later from ingesting river water. In 1957 the dirty river made the headlines, when surveys of anglers indicated that fish were absent from the sixteen miles of tidal Thames between Richmond and Gravesend. The river was declared ‘biologically dead.’ In 2011 the comedian David Walliams, having already swum the Straits of Gibraltar and the English Channel, faced his greatest challenge in ‘Thames tummy’, as he swam from the river’s source to Westminster Bridge, afflicted by diarrhoea and vomiting from day two, and ‘feeling like my arse was going to explode.’

 

Bazalgette’s Achievement – and its Limitations

The most significant of these ‘spotlight’ moments was the ‘Great Stink’ of July/August 1858, when the smell of sewage deposits on the banks of the Thames so discombobulated MPs that they considered moving Parliament out of London. The ‘Stink’ was not the reason for the construction by the Metropolitan Board of Works (MBW) of Joseph Bazalgette’s new sewerage network, but it did expedite the project, as Parliament empowered the MBW to act without government sanction. The result was the construction of five intercepting sewers (diverting the contents of existing sewers away from the Thames in the centre), three north of the river, converging on Abbey Mills, near Stratford, and two south, leading to Crossness. At these points London’s collected sewage was pumped to surface level, stored in riverside reservoirs and released at high tide.

The 1884 Royal Commission on Metropolitan Sewage Discharge acknowledged that Bazalgette had ‘ma[de] that practical which before was theoretical only’ in realising one of Victorian Britain’s greatest engineering achievements, but the appointment of the Commission only nine years after his scheme’s completion betrayed misgivings about the finished work. The Commission noted that the need for ‘promptness of execution and economy of cost’ had led to the outfalls being placed only about twelve miles below London Bridge. This not only created a noxious stretch of river around Beckton and Crossness, but it perpetuated the danger of sewage being carried upstream by the ebb and flow of the tidal river. The Commission found that a float released at Beckton at high tide might travel as far upriver as Greenwich, while one released at low tide might almost reach Chiswick. The Pippard Committee of 1961 likewise calculated that a particle released at London Bridge might remain in the river for three months before reaching the sea. This tidal motion explained the heavy pollution of the river between Greenwich and Gravesend, described by the 1884 Commission, and largely unchanged by the early sixties. One modern study suggests that the river’s ‘biological death’ in the 1950s could have been avoided had the MBW adopted the more ambitious scheme proposed by three government-appointed referees in 1857, siting the outfalls just beyond Tilbury and Gravesend, twenty-five miles below London Bridge.

Treatment processes adopted at Beckton and Crossness following the 1884 Commission’s report ensured that raw sewage was no longer discharged into the tidal Thames. ‘Sludge boats’ introduced in the 1890s carried the residue of the treatment to be dumped in the Thames estuary, until the EEC banned the practice in the 1990s. These measures ameliorated the river’s noxious condition in Barking, Erith and environs in the late Victorian years. From the second decade of the twentieth century, though, the Thames deteriorated as London’s population growth necessitated new sewage farms – 190 of them within twenty-five miles of Charing Cross by 1935 – adding to the problems emanating from Beckton and Crossness. The river’s ’biological death’ led the Port of London Authority to instigate a ten-year clean-up in 1961. The Beckton and Crossness treatment works were rebuilt, industrial effluents were curbed and the manufacture of the most damaging types of detergent was curbed. By 1966 the Thames’s colour had changed from ‘black as ink’ to ‘a dirty dark grey’, which the PLA considered a sign of progress. By 1974 the Metropolitan Water Board, in its final report, could declare the river free of e-coli for the first time, and a live salmon was caught at West Thurrock – the first since 1833. Salmon remained rare in central London (‘you are as likely to see a salmon there as a mermaid’, the Financial Times commented in 1992), but in the late seventies sixty-seven different fish species were caught in the filters of the West Thurrock power station.

But constant vigilance was required. The Commons Environment Committee found in 1987 that Britain’s major rivers were once again deteriorating (after twenty-five previous years of improvement). In 1993 a letter in The Lancet recounted the case of a two-year-old child, thrown into the Thames at Westminster, who ingested four types of gastrointestinal pathogen following sewage discharge during a storm in the previous November.

Storms were at the heart of the problem. By the early twenty-first century the consensus was that by the standards of urban rivers, the Thames was relatively clean – except when it wasn’t. When it wasn’t was when heavy rain overwhelmed the sewerage system, necessitating the discharge of raw sewage into the river to stop it backing up in Londoners’ houses.

The problem was rooted in the historical failure to separate rainwater and sewage in London’s domestic and local drainage systems, so that they mixed when the network was overwhelmed. Separation had been advocated in the 1850s, but, as Bazalgette explained to the 1884 Commission, the £8 million cost (perhaps £1.2 billion today) and the disruption entailed in redraining every house in London made it impracticable, particularly when the capital was embarking upon the daunting main drainage project. Londoners had to accept recurrent emergency discharges of raw sewage directly into the Thames – unremarkable when much of the river was fetid anyway, but more irksome when its normal state improved. Climate change has worsened the problem by making heavy downpours more frequent: by the 2000s there were between fifty and sixty of these ‘irregular discharges’ annually. A 2003 Greater London Assembly report noted that the system could not cope even with moderate rainfall; the ‘irregular’ was becoming regular. Today the builders of the Thames Tideway ‘super sewer’ suggest that ‘even a light drizzle of rain causes untreated sewage to spill into the River Thames.’ The Thames Tideway is the proposed solution. A seven-metre-wide tunnel running from Acton to Barking, this ‘super sewer’ is the Elizabeth Line of London’s main drainage, due to begin operations in 2025.

The Thames Tideway tunnel will, its constructors claim, ‘protect the river for at least the next 100 years.’ How a tunnel whose westerly point is Acton will counteract the routine sewage discharges further upriver – whether, indeed, future university rowers would be any safer at Mortlake than they are now – remains unclear. One wonders what lessons have been learned from experience. The company constructing the tunnel adopted the name ‘Bazalgette’, and its literature implies that the Thames’s problems can be tackled simply by heroic engineering. Bazalgette’s work was indeed heroic, but by releasing untreated sewage into the Thames only twelve miles east of London Bridge, it created the conditions described in 1884. The Royal Commission’s cajoling was required to prompt the construction of treatment works at Beckton and Crossness. Both construction and regulation were necessary, and although the 1884 Commission’s crystalline report remains one of the most powerful statements ever written on Thames pollution, Royal Commissions provide only sporadic remedies. Day-to-day regulation matters more.

 

Regulation

Several bodies have been charged with policing Thames pollution in London over the last two centuries. The City Corporation’s historic powers passed in 1857 to the Thames Conservancy, which, in turn, yielded responsibility for the tidal Thames to the Port of London Authority in 1909. Both bodies’ powers passed to the Thames Water Authority (TWA), one of the unitary regional water authorities created in 1973-4. Privatisation in 1989-90 brought the creation of a National Rivers Authority (NRA), which became part of the Environment Agency in 1996. For almost all our period, therefore, the river was managed by bodies separate from those responsible for London’s main drainage and drinking water. Main drainage was the responsibility of the MBW from the 1850s and its successors, the London County Council from 1889 and the Greater London Council from 1965, until municipal control ceased with the creation of the TWA. In 1990 main drainage powers passed to the privatised Thames Water. Drinking water was provided by private enterprise throughout the nineteenth century, eight localised companies eventually emerging as an effective cartel. A public authority, the Metropolitan Water Board (MWB), nominated by local authorities within its catchment area, replaced these companies in 1904, surviving until it, too, was absorbed into the TWA in 1974. Since 1990 drinking water has been provided by Thames (scrutinised by the Water Services Regulation Authority – OFWAT.)

Until recently relations between these bodies and those responsible for the condition of the Thames have been – put charitably – unconfrontational. Indeed, the Heath Government was so enamoured by the concept of the all-purpose authority that it entrusted pollution control, main drainage and water supply to the TWA and the other regional water authorities in 1974. Privatisation ended this arrangement: tellingly, the Environment Secretary Nicholas Ridley was ‘increasingly concerned by the role of the water authorities as both poachers and gamekeepers.’ Initially the NRA and its successor the Environment Agency attempted to provide the muscular regulation that is supposed to accompany the privatisation of public utilities, but the Agency’s emasculation under the Cameron Government’s austerity programme has seemingly clipped its wings (Thames Water carried out 110 illegal ‘dry spills’ – sewage discharges not prompted by heavy rain – in 2022.)

For much of our period this light touch regulatory régime prevailed because water was uncontroversial. Only recently has the fusion of environmentalist concerns about the state of the river and consumerist concerns about the cost and adequacy of tap water pushed water up the political agenda. The earlier separation of these two issues stemmed from what might be called the Victorian sanitary settlement. In 1852, before Bazalgette and before cholera was accepted as water-borne, the Metropolis Water Act prevented the private water companies from drawing their supplies from below Teddington Lock, i.e. from the tidal Thames. Thereafter, both the toxic state of the tidal river and the purity of the water coming from Londoners’ taps came to be taken for granted. In 1866, admittedly, the East London Water Company’s negligence meant that almost all the London victims of Britain’s last cholera epidemic died from drinking that company’s water, but otherwise since the mid-nineteenth century London’s tap water was safe to drink. The Metropolitan Water Board abolished its post of Water Examiner in 1921.

The price of water had been contentious under the private companies, but this controversy ended when municipalisation in 1904 imposed a cap – first 5% then 8.5% of rateable value – upon MWB charges. With bills based on rateable value, domestic consumers were effectively cross-subsidised by commercial and industrial ratepayers with higher assessments. Once the high debt charges loaded upon the MWB to pay off the private companies in 1904 had diminished, the Board’s demands on the consumer were modest: between 1955 and 1960, for instance, although the general price level rose by 18%, London’s water rate remained unchanged. Adequacy of supply was secured by a programme of reservoir construction, as recommended by the Royal Commission on the Water Supply of the Metropolis in 1893: twelve reservoirs were constructed during the Board’s seventy years, increasing capacity from 8,000 to 45,000 million gallons. Inevitably some of this supply leaked onto the streets, with cast-iron pipes breaking as the London clay shifted under the capital’s traffic, but even in 1974 the Board could dismiss this as a fact of life: ‘there must always be some loss from any distribution system and there is a stage beyond which it is not economical to pursue waste detection and prevention.’ Redraining London was as daunting in the 1970s as it had been for Bazalgette.

 

The Water Problem in the Late Twentieth Century

The MWB would receive no more than twenty-five consumer complaints a year, generally minor in nature. By the time of its abolition, though, this state of peace was threatened. The last quarter of the twentieth century – before and after privatisation – brought many of the problems which have been prominent since 2000. The MWB’s final report noted that demand for water had doubled since 1904, despite a 12% fall in its catchment area’s population. Its successor, the Thames Water Authority, was required under the 1973 Water Act to survey water use by different types of household – apparently the first time that such an exercise had been undertaken. It revealed the spread of water-consuming durables that had been rare or non-existent a quarter of a century earlier – washing machines, dishwashers, even power showers – along with the effect of wider ownership of cars and gardens: cars needed washing and gardens needed watering, especially during the drought summer of 1976. In this context it was likely that steps would be taken to relate domestic water charges to actual household consumption, even if domestic meters remained unpopular.

The 1973 Act prevented water authorities from practising ‘undue discrimination’ between types of customer, ending the subsidising of residential users by commercial ones. By 1980, as the Evening Standard put it, the water bill ‘is no longer a trifling sum to be paid out of the pennies…in the family piggy bank.’ Higher charges reflected not only a redistribution from commercial to residential users but also infrastructural investment to meet rising demand. This included most obviously the London Water Ring Main, a deep-level main initiated by the TWA in 1988 to convey drinking water around London from the Thames and Lea treatment works. The efficient distribution that the Ring Main brought was offset, though, by worsening leakages as the Victorian system aged: the Greater London Authority estimated in 2003 that half of London’s drainage network was over a hundred years old and a third over a hundred and fifty years old. By 1997 the privatised Thames Water was losing 38% of its water in leaks. It floated the familiar remedy of new reservoir-building, but proposals for a massive reservoir near Abingdon have encountered determined local resistance. Thames currently predicts a one billion litre daily shortfall by 2050, while leaks now in 2024 waste fully a quarter of its supply.

Today’s water problem – in respect of both river quality and water supply – is deep-seated, deriving from the progressive inadequacy of the infrastructure as London has grown, the increase in the demand for water and the ageing of the Victorian system. That these problems have become conspicuous under privatisation does not mean that privatisation is their sole cause. It has, though, become increasingly doubtful that privatisation offers an adequate means of addressing them.

 

Privatisation

Water privatisation was not primarily intended to benefit the consumer. So far as Thames is concerned, the background was provided by the Treasury’s attempts in the 1980s to impose above-inflation increases in charges upon the TWA in order to reduce public borrowing. Fearful that the Authority would incur public odium for higher charges while being forced to pass that money to the Treasury, Roy Watts, the TWA’s Chairman, became an enthusiastic advocate of privatisation. Margaret Thatcher herself was cautious about privatising a natural monopoly in an indispensable commodity, but the prospect of a return of £7.6 billions from the sale of all the water authorities reconciled the Treasury to losing the TWA milch cow.

Two principal arguments were advanced for privatising nationalised industries in the eighties: that market competition would increase efficiency and that private companies could more easily raise capital for new investment. The first was irrelevant to water: there has never been any prospect of competition in water supply comparable to that in energy or telecommunications. Thames Water’s corporate motto in the 2000s – ‘if customers had a choice, they would choose us’ – makes that point, even as it suggests a lack of self-awareness. By 2000 Thames’s average household bill had risen by 40% in real terms since privatisation, following earlier increases under the ‘fattening up’ process preceding the 1980s sell-offs. By 2012 bills had risen by a further 27% in real terms, and another 23% increase was scheduled to fund the Thames Tideway. Far from choosing Thames, its customers put up considerable resistance to the Tideway itself, portrayed as the company’s ‘vanity project’, once it became clear that they would be required to fund it.

The second argument for privatisation – the ability of a privatised company to raise capital – was only valid, as the Financial Times argued in 1986, because the government not only placed tight borrowing restrictions on public sector undertakings, but also used the water authorities as surrogate tax collectors: ‘illogical supervision of publicly-owned businesses is not in itself an argument for privatisation.’ In fact, as was suggested when the sell-off occurred, companies providing a commodity for which demand, though rising, was unlikely to be directly stimulated by investment, and operating under a regulated price régime, might encounter difficulties raising capital. The greatest magnet for investors would be dividend growth, which is why Thames’s investment expenditure has always been accompanied by substantial payments to shareholders. In the eleven years – 2006-17 – in which Thames Water was owned by the Australian financial services group Macquarie, £11 billion was spent on infrastructure, largely funded from customers’ bills, and £2.7 billion paid out in dividends, largely funded by borrowing. While the strategy made sense for Macquarie, the view of the water-consuming public was voiced by Liberal Democrat MP Sarah Olney: ‘Thames Water pumped millions of litres of disgusting sewage into British rivers while racking up billions of pounds of debt, that was then paid out to shareholders. Water giants have failed in their responsibilities to the public while lining their own pockets.’

‘It is not to be expected that trading companies will display more patriotism or public spirit than is consonant with their own interests’, the municipal reformer Joseph Firth wrote of London’s water companies in 1876. Likewise, a century and a quarter later, a Thames Water spokesman told a London Assembly Committee: ‘We are not a public utility, we are a private business and as such there is a balance to be struck between return to the shareholder and the investment that we make.’ The Committee inferred that the interests of London’s water consumers were not uppermost in Thames’s thoughts (at that point, in 2003, Thames was halfway through a six-year run in which it missed the regulator’s target for reducing leaks.) The Macquarie years would be characterised by opaque exercises in financial engineering so little connected with water provision that they were largely beyond OFWAT’s purview. £7 billion of debt was loaded upon Thames and an array of associated shell companies, to shrink the company’s tax liability, since borrowing for investment entitled the borrower to defer tax payments. The requirement to pay the tax eventually, combined with the onset of higher interest payments on a debt which swelled to £18 billion, has left the current owners of Thames so encumbered that the company’s immediate future appears very uncertain.

 

The Future

The thirtieth anniversary of the privatisation legislation, in 2019, prompted a bullish endorsement of the companies’ record from Michael Roberts, Chief Executive of the industry body Water UK: ‘It’s easy to forget how bad things were. After decades of government underinvestment, water quality was poor, rivers were polluted, and our beaches badly affected by sewage.’ Five years on, water executives are far less likely to raise the state of rivers and beaches in polite company. England (not Wales or Scotland or Northern Ireland) is almost the only country in the world to have privatised its water supply entirely, and after thirty-five years the experiment has hardly provided an appealing example to follow. The casual discharge of sewage into rivers and onto beaches, the slow progress in tackling leakages, the inadequate deterrent provided by fines for discharges and leakages, the lavish rewards for executives and shareholders, all raised public disenchantment with the privatised system, making water a prominent issue in the 2024 general election.

Consequently it appears impossible for government to maintain its habitually indulgent stance towards water companies, but there is a solidity to the structure created in 1989 which makes simple re-nationalisation difficult. Of the English political parties, only the Greens, with no chance of forming a government, pledged to return water to public ownership. The Liberal Democrats proposed converting the water companies into ‘public benefit companies’ without explaining what that meant for ownership. Labour, though committed to railway renationalisation, merely advocated sanctions for failing companies and rapacious bosses. The deterrent is the cost of buying out the companies: whereas fixed-term rail franchises can be returned to public control when they expire, no such ‘break clauses’ exist with the water industry.

If privatisation is unattainable but the status quo is unacceptable, all that remains is to strengthen the regulatory system.

Tighter control over profits, bonuses and dividends is overdue, along with a move away from reliance on company self-reporting of sewage discharges and leakages.

More vigorous use of the criminal law should also be facilitated: it is unclear why somebody pouring cyanide into a reservoir can expect prison but somebody illegally pouring raw sewage into a river cannot.

Public impatience with the water industry in England invites a more determined approach to the practice of regulation than has prevailed since 1989.

It is possible that the Supreme Court ruling in July 2024, holding United Utilities liable for the consequences of sewage discharges into the Manchester Ship Canal, could leave all water companies open to repeated civil actions for damages, hitting both their profits and their share price. In a political climate already hostile to water companies, re-nationalisation might become more feasible than it has previously appeared.

At the moment, Thames’s financial situation presents uniquely severe problems, which led Sue Gray, Labour’s chief of staff, to place the company’s potential collapse first on her ‘risk register’ – appropriately dubbed the ‘shit list’ – of dangers facing an incoming Labour government. The company cannot realistically expect the 59% hike in bills, coupled with a relaxation of pollution standards, that it says it needs to service its debt.

Plans have already been drawn up within government for de facto re-nationalisation of the company, placing the debt on the government’s books and entrusting day-to-day management to an arm’s-length public corporation – not unlike the pre-1989 Thames Water Authority, it might be observed. This would doubtless be presented as a temporary measure, but Thames’s recent record makes it hard to imagine any public appetite for returning London’s water to unfettered private ownership. The position of Thames would resemble that of a railway company which fails to meet the terms of its franchise – a situation in which Labour would, according to its 2024 manifesto, take that company into permanent public ownership. Any opportunity to restore public control of a commodity as vital as water is surely to be welcomed, even if it is confined to the Thames region. For the foreseeable future, though, it might be wiser not to swim in the river.

 


Further Reading


J.Graham-Leigh, London’s Water Wars. The Competition for London’s Water Supply in the Nineteenth Century (London, 2000)

Greater London Authority, London’s Water Supply. A Report by the Greater London Assembly’s Public Services Committee (London, 2003)

S.Halliday, The Great Stink of London. Joseph Bazalgette and the Cleansing of the Victorian Metropolis (Stroud, 1999)

N.Higham, Mercenary River. Private Greed, Public Good. A History of London’s Water (London, 2022)

W.Luckin, Pollution and Control: a Social History of the Thames in the Nineteenth Century (Bristol, 1986)

Metropolitan Water Board, Seventy-First Annual Report, with a Review of the Undertaking, 1903-74 (London, 1974)

A.K.Mukhopadhyay, ‘The Administration of London’s Water Supply. A Case Study of the Metropolitan Water Board’, Indian Journal of Political Science, 37(3), July-September 1976.

J.H.Potter, ‘Pollution and its Control in the Tidal Thames’, Community Health, 3(3),  November-December 1971

Royal Commission on Metropolitan Sewage Discharge, First Report of the Commissioners, C-3842 (1884) 

Tideway London, https://www.tideway.london/the-tunnel/the-story/ (accessed 19 June 2024)

A.Wheeler, ‘Fish-Life and Pollution in the Lower Thames: a Review and Preliminary Report’, Biological Conservation, 2(1), October 1969

L.B.Wood, The Restoration of the Tidal Thames (Bristol, 1982)

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