Letter from the editor: Southern Water betrayal is a gift to Labour

It’s hard to imagine a worse story surfacing as water privatisation reaches 30 years and calls for renationalisation grow ever louder.

If you were looking for the sector’s finest hour, then Southern Water’s underhand dealings and betrayal of public trust between 2010 and 2017, as revealed by Ofwat’s recent issuing of a record £126million penalty package, is not it.

Instead, the shocking report reads as the absolute antithesis of how a monopoly asset’s social contract with its customers should be run – and it is timely ammunition for Labour’s vociferous campaign to return water to public ownership.

Ofwat’s 72-page penalty notice lists a catalogue of data manipulation, misreporting, under-investment and failures in management that allowed a sustained seven-year cover-up of wastewater treatment performance, including a potential 162,298 wastewater spills.

It seems more than likely that the Environment Agency will add to Southern’s punishment, as it pursues criminal investigations for non-compliance with environmental permits.

While the malpractice at Southern took place under old management – barely a month into his tenure, new chief executive Ian McAulay launched a new whistleblowing policy, suggesting his own immediate concerns – some say the penalty doesn’t go far enough.

Yes, the new regime has been co-operative during an exhaustive two-year probe that lifted the drains on the company’s operations and waded through reams of data.

And McAulay has pursued wide-ranging reform, including separating the water and wastewater businesses to improve accountability and transparency.

But as one “frankly amazed” source told Utility Week, such earlier actions “undermine the whole basis of regulation”, which relies on accurate data, and create a hugely unfair reflection on the entire sector and those firms working hard to grow public trust.

So, has Ofwat been too soft on this private company, with penalties that may rebate customers but impose a relatively low £3 million compliance fine? In other parts of the economy, a change of CEO would not be enough to get a business off the hook, with a clawing back of bonuses, for instance, another enforcement avenue.

To its credit, Ofwat has done its best to crank up the regulatory pressure on companies. But are we there yet?

After two rigorous price reviews, perhaps the bigger question is why some businesses – such as the now “fast track” United Utilities – are responding, while others continue to fall woefully short.

suzanneheneghan@fav-house.com