Realist, not conformist analysis of the latest financial, business and political news

The Advantage Of Water Privatisation

Wellington, in New Zealand, is discovering why Britain privatised the water companies. Although I think we all realise that no one at all observing Wellington’s problems is going to draw the correct conclusion from this – privatise the damn thing.

Water supply there isn’t all that good:

Wellington City Council has alerted Island Bay residents to another burst water pipe, frustrating the city’s residents who are weary of harbour pollution, streets filled with brown sludge and some homes with no water at all.

Since the start of the year the capital has had one water set-back after another. The iconic Oriental Bay was closed to swimmers on some of the hottest summer days due to dangerous levels of pollution, two major city wastewater pipes burst, dozens of homes lost water access, and streets were flooded due to worn-out infrastructure.

Wellington mayor Andy Foster said Wellington’s water pipes were 100 years old and had seen decades of chronic underinvestment by successive councils.

But it is feared the capital’s water woes may be a taste of similar issues to come nationwide, with few New Zealand cities or towns spending money on upgrading tired and over-used water pipe infrastructure, seldom seen as a winner with voters. “We have billions of dollars worth of under investment in this sector,” Wellington councillor Daran Ponter told RNZ. “The issues that we have seen pop up over the Christmas period in Wellington are potentially just the tip of the iceberg in terms of the country as a whole.”

OK. So, what’s the actual problem?

Company structure
Wellington Water is jointly owned by the Hutt, Porirua, Upper Hutt and Wellington city councils, South Wairarapa District Council and Greater Wellington Regional Council.

We are a council owned, shared service organisation, providing three waters network management services to our clients, who are also our shareholders.

A representative from each council sits on the regional Wellington Water Committee that provides overall leadership and direction for the company.

Government is really pretty terrible at spending upon maintenance. It’s not sexy, it doesn’t gain votes in the here and now – taxing now for some future future benefit rarely does – so it doesn’t get done.

The UK faced this problem with the water companies. The solution was to privatise them. Capitalist bastards are rational over longer time spans than politics is. So, privatisation led to a vast increase in capital spending and maintenance. And the more capitalist the sell off – a gradient from England most, through Wales, Scotland to NI – the greater the improvement in both financing and outcomes.

Privatisation – it works. More places should do more of it.

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