Financial Post Letter to the Editor
March 17, 1999
To refute my article describing the benefits of privatizing water and sewage utilities, Toronto union leader Brian Cochrane cited devastating criticisms from unlikely sources(Letters, March 9). Mr. Cochrane told your readers that former U.K. Prime Minister Margaret Thatcher called water privatization her “one mistake,” and that an editorial in the Financial Times of London called the privatization “a rip-off, a steal, a plunder, a legalised mugging, piracy, licensed theft, a diabolical liberty, a huge scam, a cheat, a snatch, and a swindle.”
Fortunately for those concerned about clean, reliable water and sewage systems, Mr. Cochrane is confused. The Financial Times endorses water privatization, saying: “Regulation of privatized utilities is now delivering clear benefits to customers .. Companies are very much more efficient. Freedom from Treasury control has allowed them – notably the water industry – to invest more heavily.”
Mr. Cochrane did not imagine his Financial Times quote; it came from columnist Joe Rogaly, who in the same column stressed that “This does not constitute an argument for renationalisation. State monopolies are thoroughly discredited. We know their faults.”
More recently, Mr. Rogaly wrote, “the central point remains. A world in which government ran businesses has been transformed. Today private managements do the job better. Thus despite the flaws in its execution, denationalisation is a remarkable achievement.”
As for the Thatcher quote, none of my U.K. sources, including those in the water industry, the press, and a leading economic policy institute, remembers any such criticism by her. In her book, The Downing Street Years, she dismissed opposition to water privatization as “emotive nonsense” and “weak,” and boasted that privatization improved environmental regulation and enabled companies to raise capital for the investments needed to improve water quality. When I called Mr. Cochrane about his source, he referred me to his ghost writer, who referred me to the Mayor of Newmarket, Ont.! The Mayors office has failed to turn up the quote.
The water privatization that Mr. Cochrane described as a “taxpayer-funded boondoggle” has dramatically improved the English and Welsh systems. According to the Chief Drinking Water Inspector, the private water companies have improved the colour and taste of drinking water while reducing levels of coliforms, nitrate, nitrite, aluminum, iron, lead, and pesticides. In the five years following privatization, the percentage of sewage treatment plants complying with their discharge permits increased from 87 to 96, and the quality of more than 3,000 kilometres of rivers and canals improved significantly.
As is only right, the users of the water, and sewage systems have borne the costs of these improvements. Consumers have protested that their water bills also cover high salaries and generous dividends. Largely unmetered, consumers have been powerless to keep their bills down by reducing their water use.
While England’s experience illustrates the tremendous potential of water privatization, it also teaches us the importance of good regulation. As long as, companies have monopolies over water supply and sewage treatment, governments will need to vigorously regulate both the quality and the price of the services. As Mr. Rogaly explained, “when you turn to private monopolists to do a job, you regulate them with chains.”
Finally, Mr. Cochrane criticized the Toronto government’s failure to deliver the promised savings from its Works Best Practices Program, objecting that the program has yielded only $3-million in savings to date. Surely he knows that the program, still in its infancy, is being phased in. It isn’t expected to save the city $36-million a year until the end of the year 2OO2.
Elizabeth Brubaker, Executive Director, Environment Probe, Toronto.