An independent commission into the English and Welsh water sector would have been an excellent idea about 20 years ago. It is hard to pinpoint precisely when the industry went seriously off the rails but Ofwat’s infamous price review of 2004 is one starting point. That is when the undoubted gains from higher investment in the decade after privatisation in 1989 started to evaporate and the story turned into one of financial engineering and grossly inadequate regulation.
The 2004 settlement was wildly generous to the companies and kickstarted the disastrous take-private buyout boom by private equity and global infrastructure funds. Dividend extraction and “whole business securitisations” followed, tolerated by an economic regulator that, absurdly, took the view that sky-high debt levels and Cayman Islands financing vehicles were not its job to worry about.
