Who owns our water?

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There are wildfires in Suffolk and the Ken Gomes, not to mention much of Western Europe in France and in Spain. And thousands of households here also have a host-pipe ban, alongside rising water bills. And this is all coming after an incredibly wet winter. So what is going on?

Well, two of my colleagues have been investigating water, both from different angles. Our investigative reporter, John Ongo Thomas, has been digging into what companies who are extracting British spring water for bottled water are paying us, companies like Coca-Cola and Nestle, and he's found something pretty extraordinary. And on the other hand, our business editor, Barney McIntyre, has been digging into the future

of Thames Water, a utility company that has been threatened with the prospect of nationalisation under our new Prime Minister Andy Burnham. And both of these stories are really about how we treat and value water in the UK and who owns our water. And I'm delighted to say that both John and Barney are here with me today to talk about

the very timely issue as we face another heat wave this week of water. So John, tell me, you've spent the last few weeks looking at bottled water, the water that we drink, the water that we buy and train stations and airports that we know is, you know,

“what is the sort of average cost of a bottled water now?”

It's like two, three quid. Yeah, two, one, and three pounds for bottled water. So you've been looking at how much the companies who sell those bottles of water are paying to get that water out of the ground in this country. So tell me specifically about Coca-Cola and Northumbland, because that was one of the cases

you. Yeah, for sure. I mean, I think the reason we looked at this is because we've all got concerns about the amount of plastic pollution and we're trying to, all of us are trying to cut down on the amount of plastic we're using.

But despite that, the bottled water industry is absolutely booming and we're spending

about two and a half billion pounds a year in the UK on buying water almost usually in plastic

bottles. It's interesting. So when I read your piece, that felt sort of counterintuitive to me because it feels like over the last few years, there's been huge investment in infrastructure and like refill sites on streets and air ports now, there are these refill taps and people buying fancy water

bottles and carrying them around everywhere and the Stanley Cup viral, you know, it feels like there's been a shift away from plastic water bottles. But actually, the market data would tell us otherwise. Well, that's absolutely right. What we've tried to have done is investing a bit more infrastructure in terms of water

fountains and campaigns, trying to get people to cut down on plastic. But the bottled water industry has been very canny and the moment a lot of people concerned about kind of functional health and fitness, and they have used that to increase their water sales.

So you're getting water with electrolytes and people, the gym always want a bottle of water.

So for sure, we're carrying around bottles of water, we're drinking more water, we all know

And about a third of them are of single-use plastic bottles aren't recycled.

“So I think it's an important thing to look at and we looked at it.”

So I think one of the examples we used was glassed smart water, because it was launched in 2014, it's one of the best-selling waters in the UK, and it's been very heavily promoted, and that bottle of water comes from a spring in Morbeth. So we looked at how much Coca-Cola, your Pacific partners, which has the bottling license for Coca-Cola in the UK, was paying for that water.

And very mind that they're producing millions and millions of plastic bottles of water each year, and they're paying £6,000 a year to draw that spring water from the spring in Morbeth, and then sell it to us. £6,000 a year, and so how many liters are they abstracting as the right word, isn't it? Not extract?

Yeah, it's about a license to extract more than 600 million liters, and they're abstracted last year about 130 million liters, and they're paying about five pence for a cubic meter, which is a thousand liters. So bear in mind that if you're a customer in London, for instance, of September's water, you're paying about £2,773 for a cubic meter of water.

They are paying five pence, and that's enough to produce 1,600 bottles of glass-o-smart water.

“Now, obviously they've got overheads and they've got other costs, but I think why we found”

this quite an important story to pursue is because these figures have never been published

before, and the environment agency provided to us under free information laws, all the money that the water water companies are paying in England to abstract water. And I think there is a question about scrutiny of water resources. The amounts they're actually drawing, and the number of plastic bottles they're producing each year.

And so this story is essentially about how we, as a country, treat a resource like water, and how we allow big multinational, international conglomerates, drinks, conglomerates to abstract it, take it out of the ground, and then sell it back to us. And I suppose the next layer on top of that is then there is also an environmental impact with the plastic that is produced from that industry.

Were there other companies beyond Coca-Cola that you looked at that are paying much higher fees, where it feels like a much more reasonable exchange, or are generally the licenses very low?

Well, the environmental agency basically uses a charging structure here, which is based

upon industrial use of the water or perhaps agricultural use of the water. What they haven't really done with this charging structure is saying, we've got a company here, or a foreign company in some cases, it's coming in, taking English spring water from quite historic springs, and then selling back to us as spring water, and making a

“virtue of the fact that it's English spring water, shouldn't we be charging them more?”

And if you look at, for instance, a harrogate mineral water in harrogate, harrogate spring water pays money to the environment agency. And again, it pays these relatively small fees, but it also pays money to North Yorkshire Council for the use of the harrogate name, and in that case, it's paying more than £200,000 a year.

So more money can be extracted from these firms if there's a will. So there are other ways to sort of recoup some of the value, I suppose, in the spring, from the spring. There are, there are, for the councils, because they can, in, in, in, in, in, in bucks, in, for, for example, it's the local council, which controls the, one of the

key springs, which is in, in the, in the centre of the town called St. Anne Spring, and that's used by Nestle for, for, for, for, for, for, for, for, for, for, for, for, and again, the local council charges them quite a hefty fee for using that. But then, if you know, I was away, there's another spring that Nestle is, is, is using for, another one of its brands.

That's environment agency, they're paying very small amount of money for it relatively speaking. And this is all, obviously, happening in the context of, a heating world, we've had, what are we now, on our third or fourth heat wave of the year, where there are sort of two elements to that, people are presumably going to be buying more water, but also there's a question

about, how we treat this really important resource, nationally, and whether these relationships are really working for us. So, what, what, where did you kind of come out, having done this investigation, having gone through all the data? What, what do you think the kind of broader picture is here when you take into account global

warming and the climate crisis?

like in the United States, they have started looking out charging bottled water firms, hefty

fee for extracting water, but there is a school of thought among some kind of people of campaigners in this area, that the water shouldn't be given an economic value. It's a human right, and that it's quite, you're getting into fairly tricky areas when you're beginning to put an economic value on water, but what certainly when it's this heat waves and water scarcity must make us think about the infrastructure around water,

how we treat water, and the, the requirement for transparency, where people may be paying to extract water, and, for instance, in terms of bottled water companies, the companies will say, it is true, we're not paying very much to extract this water, but what we are doing is looking after the resource around the areas to ensure that the water is the best possible water.

Well, that's fine, but let's have transparency about what you're paying, what you're

investing, and what we get back is a public for the use of a public resource. Yeah, that's an interesting argument, Barney, that water shouldn't have an economic value, because you have been looking at the water companies, which have obviously been privatized

“in this country since Margaret Thatcher in the 1980s, and I think you said in your article”

that the, the experiment in privatization is one that only one other country in the world has, has also done, which is, which is, Chile, yes, yeah, so quite a kind of eccentric experiment for these brits in privatizing water, but yeah, so I've been looking at terms for a while now, and obviously we're facing a bit of a showdown, I'll show you at the moment, ever since sort of burn and launched his bid for the leadership, we are headed into this thing between

the investors in terms of water and the government that is making quite a lot of noise is about nationalizing it. So, so let's, so the reason that we're having this kind of conversation together is on the one hand, we've got these big gung-glomerates, coming paying very low fees to take water out of the ground, sell it back to us or sell it internationally.

On the other hand, we have water, private water companies that are selling us the utility of water, so the water that comes through our taps, but which I'm doing so now, is it fair to say it's just not working, that the combination of pumping sewage out into our rivers and our streams and our coastlines, the fact that there is aging infrastructure that just keeps breaking, there are spills, and now there's this question about whether actually they've

been paying out to their shareholders more, let's say, more deliberately than they have been reinvesting in the infrastructure that they're supposed to run. So these are kind of two parts of a singular problem here. Yeah, absolutely.

“I think it's sort of been a kind of willful ignorance for, for actually many decades to”

deal with this problem, and it's a bit like the Spider-Man, you know, everyone's pointing at each other. I think the regulator is pointing at, you know, the water companies, they're also pointing at politicians who haven't sort of grasped this, and yeah, I mean, there is the question of these companies, you know, I think 70% of, you know, the investors in these companies

are, you know, foreign investors who may not have the best interests at heart and, you know, do often pay out dividends at the expense of, you know, years of investment, you've got to kind of have a horizon of this investment that reaches sort of 5 to 10 years into the future, so you can build things like reservoirs and fixed leaking pipes and that sort of thing.

But yeah, so I would say it's, it's been a sort of blame game, and we're now at a point where a lot of these companies and especially terms water is just saddled with so much debt that it can't really fix itself, and the question now is who's going to kind of take on that problem. And the problem, just to sort of zoom out, the problem then for the customers that we pay

“rising bills for our water, that's how we feel it.”

Absolutely. And, you know, I've had the argument made to me a lot of times for our regulators and even people within these companies that says, actually, we've kept bills almost artificially low for such a long time. I mean, if you look at the price of your electricity bill over the last five years and

your water bill, what you'll see is that your water bill has been sort of maybe it's 10 years, sort of chugging along with a sort of smaller, smaller rate, and it's now going to go, you know, astronomical by the time we reach 2030. Because basically the system needs this reinvestment now, it's kind of reached a point of no return.

Absolutely, you've got to, so I think the numbers for tens are, I think it's 20 billion

surge spills and was kind of built in the 1880s and 1890s, it's Victorian.

You know, you go visit these things and it's like, it's a gate that opens like mechanically like, what does that make sense?

“That's the reason the bills are going to go up, and yeah, so I think it's something”

like 400 quid a year now, for the average household, I think it's going to probably reach about 700, 800 in the next decade. And the reason that this is now, in addition to the fact that bills are going to rise or have to rise, the reason that we're talking about this now is because we have a new prime minister who, while campaigning to become the MP and make a building and pave his way to

number 10, was talking a lot about nationalisation and about how the government needed to have a greater stake in utilities. So tell me, sort of, you mentioned the showdown, what is the showdown between who? It's burn and versus, so it's versus the creditors, who are the investors that hold terms debt, they are sort of, in effect, controlling terms now since a private bid to buy

the company fell through. He sort of talked about nationalisation, but in quite vague terms, burn them. So he said, you know, we need more public control of these assets without ever really specifying what he means by that. Why would you want to nationalise this asset, while the argument is, it's politically favourable

“for him, I think, eight in ten people in the country probably support nationalising water”

companies. He's got backbench MPs that are very keen on it. Would he actually want to go and do it, because you will end up facing these investors that say, actually, you know, short term, you, you may nationalise it, but what are you going to do about the investment that needs to happen that we've talked about, and sort

of, actually, do you want to bring that asset onto the public balance sheet at a time when we're paying for so much more defence, you know, obviously trying to tackle the cost of living, there are many, many other places where you might want to be expending, the kind of treasury. So nationalising just for those of us who are not sort of fully okay with what that would

actually practically means, would that mean that the government takes the debt, takes ownership of the debt, and then decides what to do with how to invest in it, how to fix the infrastructure,

basically takes on the running of it, but it also takes on the debt.

Yes, potentially, I mean, it's a point of debate, so some would argue, you know, the government can take this asset into nationalisation, and then, you know, as Richard Tice has said of reform UK, oh, you know, we would just pay them for a pound, you know, the argument I've heard from investors is that if you do that, it's basically expropriation, no one will want to come and invest in the UK in the future.

“Could you sort of, so yes, essentially, I think it's likely that the government would end”

up taking on that debt, and sort of run a more likely sort of scenario than nationalisation is that they would run the asset for a certain amount of time, just keep things going, and then sell it to a new buyer, who they think is going to, you know, solve some of these issues. I think that is probably a more likely outcome.

And with the current investors allow that, presumably they want to hold on to that debt, and that was such an interesting line to me in your piece that you wrote a couple of days ago, which is that they make money from that debt. They do, yeah, someone described it to me as the sort of rock around which they go into negotiations, they are thinking primarily about the interest that is currently being

paid on that debt, which is, I think, a good deal higher than you would get for a normal loan, you know, it's a certain amount. I think, obviously, they want to be paid in full reimbursed for holding this debt, and I don't think they will go down without a fight. So it was reported recently that this group of creditors, this group of people that hold

the debt, have engaged a sort of elite disputes law firm in order to kind of draw plans about, you know, if in the end, this is nationalized, and the threat is followed through,

what kind of legal requests do we have to get our money back basically?

So they're going to suit, they would suit, presumably. I think they would suit if it was nationalization, that seems likely, and some of the companies that are in that group of creditors are what's known as distressed debt investors, so they pick up debt on the cheap, and they will sort of use that often to go into legal

the management, which is part of this group, which has sued the government of Argentina

over a 15-year sort of legal battle, and over bonds it was holding in Argentinian debt, and it was successful. So you know, just burn and want to take on that challenge, just burn and want to go head to head with these very, very savvy investors. I mean, what links these two stories and what makes it so interesting to talk to you both

together is that this is fundamentally about something that is, you know, is a public need water, and in both examples, whether it's through bottled water or through the utility, companies that are heavily interested elsewhere, they're not necessarily interested in the running of these things or in the usage of these, and they're interested in it as a commodity, as a vehicle for making money.

We've sort of found ourselves, whether it's through drinking or through taps, and, you know, in the hands of these kinds of companies, so John, I'm curious, if you take these two stories together, what do you kind of surmise about the state of water in the UK at the moment? Well, you private enterprise, the original idea of privatising the water companies in 1989 was

to bring in some of this capital that we could transform our water infrastructure. Private enterprise, private sector, and it's not a bad thing, and I don't think we'll see that wholesale nationalisation of our wantre industry would just be, it would be too expensive. Barney was talking earlier about the blame game. I would blame off what, I mean, I don't put it off.

That's the regulator. I'd put a lot on offer on this.

“I think they took their eye off the ball.”

There was money coming in, there was investment coming in, but, you know, since 1989, we've seen 50 billion or more paid out in dividends, and they should have put much, much tied to controls on that, but we are where we are, and from here, I'm afraid the consumer is going to have to start paying quite a lot more, not for the water, for the infrastructure

which delivers the water, and as always, whether it's bottled water or the water we get

out of our taps, private sector involvement, which is well done, well managed and well-regulated can be good for all of us, but it must be that the sectors are properly regulated. You have, in the bottled water sector, you have transparency in the utility sector where we do have a great deal of transparency, we've just had very, very poor, I would argue regulation. So we just need to make sure the regulation is good, but in terms of the water sector there's

no way around it, it's going to cost us all a lot of money to put our water infrastructure into much, much better shape. And we are an international outlier in this, am I right in thinking that, that not just in the sense that Chile is the only other country that has conducted this grand experiment in privatising water, but in terms of the money that we pay for our water, we are in one

of the higher categories of payments.

“I think that's right, I mean, part of it is sort of historic underinvestment, isn't it?”

And also sort of local opposition to things like reservoirs is also a factor that has kind of exacerbated this problem, I do think we're at a crunch point though, it's like what, how are we going to adapt to this new normal as we've been hearing with wildfires? I think it's absolutely the case that we've got to really think about the kind of climate question, how that intersects with water and Britain, you know, hearing you kind of talk

about how are you, you know, that's interesting, that's, that's, if I'm not mistaken, kind of north of the country, and actually we're going to have a really wet sort of half of the western part of Britain, while the east dries out, we've got a problem, we've got to try and make sure that water from the west goes to the east, even just practically that is going to be a huge, huge challenge.

I live not far from the water treatment's works in North London, it's a place called Copermails, it's a place where, you know, just full of pools of water, stagnant water, it serves

around three to four million Londoners, it's 60 years old and is going to take 400 million

to repair basically to fix this problem, it's one of the kind of several facilities that are on this list that are known as having a single point of failure, so if something goes wrong, this particular facility, three to four million people face a challenge getting

“water, but I think that is nothing short of a potential crisis, so how are we going to”

kind of tackle that and put not kids together and think about it properly? Okay, so I'm going to end on a really unfair question for you both, which is that if you had

you would do, John Papps, are you thinking more about the sort of bottled water side of things

“and the sort of abstraction and Barney thinking about the utilities?”

What would you be doing, what's the first thing that you think should be done?

Well, as a matter of course, I would publish all of the abstraction fees that paid by all companies and certainly. Ever the journalist, I would, as the Chair of the Environment Select Committee is called

“for, is a review of what the bottled water firms are paying, but I think Barney's got”

the more difficult question here because I think dealing with the public water sector

is a much more tractable problem. Sorry, Barney. Yeah, it's really difficult.

“I mean, there's no good options. I do think that going into a putting terms into special”

administration and having an open and fair bid for someone who sorts out that particular

utility is probably the right way to do about it, but the political winds behind Burnham make that really complicated, you know, if we nationalise one company, do we start nationalising all of them, it's going to be really expensive. So I don't, I don't think I really am an answer for you, Dad. Well, I'm pleased Barney that you're not our prime minister.

And this is me too. I'm good. Well, thank you both. That was very interesting. You can read both of these investigations on the Observer.co.uk. For months now, I can investigating a woman from London who used to call herself Emma. Now, she's better known as Asma Al-Assad, the wife of the infamous Syrian dictator.

She solved her fault with a devil in exchange of the money. If she tried to leave, she'd be knocked off or something. So who is she really? I'm Chloe Hadjimathou. My new series, we call her Emma, is out now from the Observer.