Letter from the Editor: utility-bashing is cheap politics

Valentine’s Day is coming, but the UK’s politicians are showing little love for the utilities that keep the lights on, the taps running and the gas flowing. Environment secretary Michael Gove has marked water companies’ cards with a high-profile intervention, telling The Sunday Times he expects a “crackdown on fat cat water company bosses using offshore tax havens while cashing in on their monopoly position” – to borrow that newspaper’s words.

Is this really fair? The most recent figures from Water UK show the latest set of bill rises will be below inflation – so effectively, bill cuts – and customer satisfaction scores are high and rising.

That’s not to say there aren’t problems. Indeed, Ofwat, under chairman Jonson Cox’s leadership, has been banging the drum on opaque financial structures, offshore tax havens and corporate governance for some years. He took to these very pages last year with an unprecedented public call for reform at Thames Water – a call the company has heeded. Likewise, Yorkshire Water has announced plans to shut its controversial Cayman Islands operations, alongside an ambitious bid to boost itself into a top quartile performer before this AMP is out. Meanwhile, all water companies are getting to grips with the historically low cost of capital threatened for PR19.

Gove has come late to this party. Companies such as Thames and Yorkshire, which have heeded the regulator’s call to action, could be forgiven for wondering what else they are now expected to do. Cynical observers could be forgiven for thinking Gove’s headline-grabbing comments are motivated mostly by politics.

There’s a similar tale to be told in energy, where Conservative MP John Penrose, fresh from the fight over the price cap, has turned his ire on networks. He told parliament the companies are “fat and lazy” – comments which energy secretary Greg Clark lauded as “absolutely right”. This relentless bashing of companies for making profits agreed with the regulator through a rigorous and ­transparent process, enjoying the benefits of an upside just as they would have taken the pain of a downside, wilfully ignores the nature of the regulatory structures and the deal made with private capital. Again, the irony is that Ofgem has already indicated swingeing cuts to the cost of capital in the next price review.

There’s nothing wrong with debate about acceptable levels of profit for monopoly companies. But the services they provide are too critical to be used as a political football: let’s at least get the facts right, and acknowledge the reforms that are already underway, before point scoring and jumping on political bandwagons.