Severn Trent boss defends private sector record as public demands change

The chief executive of Severn Trent is here to inspect progress being made as part of a £60m investment over the next four years to protect 400 homes and businesses from flooding.

Between now and 2020, the water company’s 160-tonne boring machine will burrow 2.5 kilometres beneath the East Midlands town, creating a 2.8 metre diameter tunnel that would be large enough to drive a Transit van through.

When the work is done, Newark will have 15 miles of new or improved water and sewage pipes running underneath it, while the building site will be turned back into a farmer’s field.

It’s one of a number of major developments on which Severn Trent is embarking during the current five-year regulatory cycle, totalling £10bn, of which the largest single one is a £300m project to maintain and modernise the Elan Valley Aqueduct, built more than a century ago, which brings fresh water from Wales to more than one million households in Birmingham every day.

Yet Ms Garfield is concerned that this investment could be jeopardised.

Recent opinion polls show a majority of the public favours renationalisation of the water and sewerage companies that were privatised by Margaret Thatcher’s government in 1989 – a policy that Jeremy Corbyn has pledged to enact if he gets the keys to 10 Downing Street.

One of the main reasons why the water companies were privatised was because the Thatcher government could see there was a huge need for more investment in the sector to comply with higher environmental standards both for drinking water and for Britain’s beaches and rivers – as well as modernising and replacing sewers, reservoirs and water pipes that were laid down by the Victorians up to 150 years ago.

The argument was that, with numerous other demands on the public purse, for example, from the NHS, the private sector would find it easier to raise the money and put it to work.

By and large, Ms Garfield argues, that has been achieved, with some £150bn invested since privatisation.

She told Sky News: “You’ve constantly got to invest.

“During the 25 years prior to privatisation, you saw about half as much invested in the sector as you did in the 25 years after privatisation.

“Private money has brought in more funds, more resources. The fact of the matter for this sector is that it is an investment sector.”

Moreover, she argues, companies such as Severn Trent are now facing challenges that could not have been envisaged at the time of privatisation and that mean more investment is required.

One is climate change, which has led to changes in rainfall patterns, while another is the vast increase in the country’s population.

After Thames Water, Severn Trent is now expected to see a larger increase in population on its patch than any other water company, which means more ‘future-proofing’ to the network is required to ensure supplies do not run out.

Environmental standards, while immeasurably improved, also continue to rise and also add to costs.

Otters and salmon, which have returned to the River Trent after disappearing in the 1960s and 1970s, now enjoy special protection which means the company can take less water from the rivers in its region than it used to.

That means putting on more capacity in reservoirs.

Ms Garfield said: “We’re looking at similar numbers [in investment terms] for the next 25 years as in the last 25.”

But what about the other argument frequently deployed by critics of privatisation – that bills are too high and that too much of the income of the water companies is siphoned off by shareholders?

Unsurprisingly, Ms Garfield, who previously ran BT Openreach – the part of BT that runs the UK’s broadband and telephone network – disagrees.

She points out that householders in Birmingham, the biggest city in Severn Trent’s patch, pay half as much for their water as they do in Berlin, where the water supplier is publicly-owned.

She notes that the typical household bill for Severn Trent’s customers works out at £1 a day – for all of that household’s needs for drinking water, baths and showers, washing machines, to flush the toilet and carry away waste water and sewage.

She added: “It’s fair to say that we are really good value in the sector.”

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