Water should be a service, not a commodity

By MEREDYDD BARRAR*

Privatisation and competitive tendering of public services have gained ground everywhere during the past two decades. Driven by strong economic interests and the neo-liberal offensive, there has been a huge transfer of assets from public to private sector.

New Zealand has been more than typical in reflecting this trend. Advocates claim considerable financial benefit that can be passed on to the consumer, efficiencies and large savings for local and central government.

In England and Wales, water has been privatised since 1989 and there is a growing lobby for a similar situation here. This was reflected in a recent Dialogue contribution by John Ashworth.

Papakura water is already franchised to an English-French multinational, United Water. Proposals in the new Local Government Act claim to outlaw total privatisation but allow franchising explicitly.

Auckland's water review, business interests and local government bureaucrats have advocated one large water company for the Auckland region. The wholesale company Watercare is trying to take over Manukau water with that council's complicity.

The bulwark against this process has been public opposition, protest and boycott. So why the outrage when privatisation, the commercial ethic and franchising promise to be such a blessing?

Look at two New Zealand examples, rail and electricity. The profit motive has led to a lack of investment in infrastructure, gross inefficiency and chaos. But still the advocates of franchising (privatisation) of water services claim that competition between a number of companies will enhance the quality of the service and benefit everyone.

However, as the World Bank has acknowledged, there is little competition in water. Not only are water systems natural monopolies but the markets are tacitly being divided between big corporations.

Two French companies are dominant globally, Suez-Lyonnaise and Vivendi. They encounter competition from four others - SAUR, Anglian Water, Thames Water-RWE and International Water. Even this not-so-competitive model is clouded by the fact that these companies co-operate a great deal, on and behind the scenes.

When the water supply of a major city or area is privatised or franchised, two or three often establish combines and take over the entire operation.

Look no further than Papakura, where Vivendi has joined Thames Water to run the water system as a franchise. Will Vivendi or Thames team up with another corporate to run Wellington or Christchurch water?

The promise of a competitive market is another myth. The reality is ever-increasing profit, deterioration in the quality of the service, ever-increasing charges to communities, more inefficiency and more poverty.

We are then told that by freeing up water to private enterprise, local governments will enrich their coffers for other spending.

But who is paying? The price that a private company is willing to pay to obtain a concession will depend on the profit stream it can expect. This, in turn, will be affected by the price it charges to users.

So what is good for local government finances may not be best for water users.

In effect, every cent saved by councils will be paid many times over by water users.

Papakura water was privatised in 1997. In that year, a home-owner with an average property value of $50,000 could expect to pay $322.95 for 200,000l of water. By 2002-03, the same house owner was paying $606.40.

Similarly in Auckland City, since the inception of the commercial company Metrowater charges for low- to average-valued properties have, in some cases, tripled. Since the preferred method of payment is the user-pays system, lower-valued properties incur bigger cost increases. The poor are providing the bulk of the profit for water companies.

All these excesses, it is argued, can be sorted out by strong government regulation to ensure the operating enterprises are efficient, cost-cutting, and providing a service the customer wants and at a price he or she is prepared to pay.

The example is often used of the Office of Water Services, the regulator for England and Wales. But Thames Water-RWE has been rated the worst polluter in England and Wales by England's environment agency for the past three years.

A profile of Thames' environmental performance found that since 1999 it has been convicted of environmental and public health violations 24 times and fined about $1.4 million.

In case after case, regulators found the company was aware of conditions that led to raw sewage discharges and could have prevented the pollution.

It appears that Thames' corporate strategy is based on the notion that paying fines is less expensive than paying to maintain and operate water and sewage systems cleanly and safely.

It has been estimated that a third of water in the Thames region of London is wasted through leakage and lack of maintenance. Fixing pipes costs money and affects profits.

There is no incentive to encourage conservation. The more water used, the greater the financial return. So much for the effectiveness of regulators.

Corporates also consistently use commercial secrecy laws to hide their sins from regulators, as well as the communities they are supposed to serve.

Water is now being described as blue gold. The World Water Council predicts wars will be fought over this precious resource.

Commodification, franchising, public-private partnerships and other forms of privatisation will hasten that day.

The only sure way of preventing such a tragedy is by keeping our water systems under the direct democratic control of our communities. This ensures true accountability and scrutiny.

Running water as a service rather than a commercial enterprise, and defining it as a human right, not a commodity, will ensure planning and conservation occur to allow affordable water and sustainable development.

* Meredydd Barrar is a member of Citizens Against Privatisation.