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Labour set to bring in curbs on water profits

Water companies' profits could be curtailed under a Labour government, the party's environment spokesman announced yesterday.

Labour's second annual report on the water industry, published by Frank Dobson, says that the party is not prepared to allow soaring profits coupled with higher bills and lower investment.

The report attacks price levels, which it says have gone up by more than 40 per cent while the number of incidents in which customers have had their supply cut off has also grown. Last year the number of interruptions lasting more than 12 hours doubled to more than 130,000.

Labour's report, based on three official publications released last week, says that prosecutions of water companies for polluting streams, rivers, lakes and reservoirs is now running at a rate of three per month.

At the same time, profits have totalled pounds 11.1bn in the six years since privatisation, and the heads of water companies have voted themselves more than pounds 20m in pay and perks this year.

Capital investment in water has been cut by pounds 361m in the first six years of privatisation, while profits have risen in every year but one. Total investment last year was pounds 2.3bn.

Mr Dobson said a Labour government might set up a new pricing policy which would link water rates to profits. It would mean that if profits rose beyond a certain level, prices would automatically be cut.

Utilities would still be able to keep a share of the excess profits, so there would be still be an incentive to work for greater efficiency. Part of the money should be used for investment, while the rest should be shared between shareholders and consumers.

Mr Dobson said: "The privatisation of the water industry has been a bad deal for customers, taxpayers and the environment. But water privatisation has been good for profits, and it has been better still for water company bosses."

A spokeswoman for the Office of Water Services, Ofwat, said there was adequate provision under the existing system to ensure that profits were not excessively large.

"A lot of companies have already shared profits with customers in the form of rebates. If they have made efficiency savings, we would encourage companies to do that at the earliest possible opportunity. Otherwise they will be shared with customers at the next price review," she said.

Today the Liberal Democrat leader Paddy Ashdown will set out his party's plans for customers to be given voting rights in the water companies. He believes that such privately owned monopolies give consumers little power to affect the way they are run, and that this needs to change.

Mr Ashdown will tell the National Consumers' Council as there is little competition between the water companies and no choice for their customers, there should be new controls on them.

Comment, page 17.