Private Island: Why Britian Now Belongs to Someone Else

by James Meek

  What Perry meant by ‘business continuity plan’ was an alternative to Mythe if Mythe failed. But Severn Trent didn’t have one. Not until 9.41 p.m. on Saturday night, almost sixteen hours after the severe flood warning, did the company alert Gloucestershire’s fire and rescue service to the danger to the waterworks. By that time it was too late. Niall Hall, who was on duty in the Environment Agency’s control room on Saturday night, remembers getting a phone call from the fire brigade saying ‘Mythe’s going to go under.’ ‘They were saying they had high-volume pumps, where could they pump the water to? I said: “Nowhere, unless you’ve got hoses that can go four miles.” ’

  Hall recalls a phone conversation with staff at Severn Trent’s HQ that night. ‘They were panicking,’ he said.

  ‘They were struggling,’ Perry said. ‘They didn’t understand how it all worked, really.’

  ‘If you’ve got infrastructure by a river, there’s a risk,’ Hall said.

  ‘But it’s what level of risk,’ said Perry. ‘It’s having plans, in case, isn’t it.’

  At midnight, Severn Trent bowed to the inevitable, and at 1.45 a.m. began a controlled shutdown of the plant, to save electrical equipment when the inundation happened. At 2.16 a.m., water gushed in from the Avon side, followed shortly afterwards by water from the Severn side. With the shutdown complete the flooded site was abandoned at 6 a.m.

  When he appeared before MPs after the emergency, the head of Gold Command and Gloucestershire’s chief constable, Timothy Brain, complained that he and his staff hadn’t been told of the Mythe crisis until seven hours after flood water had entered the treatment works. They had no idea that a water cut-off was even a risk until it was about to happen. Severn Trent executives who gave evidence at Gloucestershire County Council’s inquiry into the floods said they would have needed at least two days’ warning of a severe flood for a temporary barrier to be put up in time to save the waterworks. Yet when, between Sunday and Monday, a similar emergency faced the National Grid at a vital electricity substation in Walham – the failure of which would have triggered the evacuation of half a million people from Gloucestershire – the emergency services and the military managed to complete a temporary barrier to hold back peaking floods less than fifteen hours after the Grid first contacted the fire service for help. On that timescale, had Severn Trent asked for help earlier, Mythe could have been saved.

  ‘The critical thing Severn Trent failed to do was to let Gold Command know in time to protect that vital piece of infrastructure, as National Grid did for Walham,’ said Martin Horwood, MP for Cheltenham. ‘At Walham, Gold Command brought in the army and protected it, not with much time to spare, but they protected it. Severn Trent never joined up the dots.’

  On average, a Severn Trent customer uses 138 litres of water a day. The washing machine, the bath and shower, the tooth-brushing and shaving, the dishwasher and washing-up, the flushing of toilets, the drinking, the cooking, the car-wash, the dozens of times a Briton unthinkingly turns on the tap to wet a cloth or wash hands or boil a kettle: it adds up. As news spread on Sunday that mains water was going to be cut off to much of Gloucestershire, householders rushed to wash clothes and fill baths. Normally the reservoirs would have stored enough for a day and a half, but by noon water was pouring out of Churchdown reservoir so fast the meters could no longer register it, and early on Sunday evening the taps started to cough, rattle and go dry. The phone-tappers, web spooks and cyberwarriors of GCHQ were forced to scale back operations at their new doughnut-shaped building on the edge of Cheltenham. Surrounded by the most advanced technology, reaching out across the globe, GCHQ’s five thousand staff could no longer go to the lavatory.

  Severn Trent had contingency plans to deal with water cutoffs. Government regulations say the private water industry as a whole should be able to supply 200,000 people with ten litres of water per person per day for seven days. Severn Trent had to supply 350,000 people for between seven and twelve days, and the company soon realised ten litres wasn’t enough. One researcher at the post-flood inquiries said her work in African communities dependent on hand-carried well water showed twenty litres was the minimum needed for drinking, cooking and basic hygiene.

  The company began buying bottled water in industrial quantities, and scoured the country for bowsers to augment its own depleted stocks. It thought it would need 900; by the end of the crisis it had 1,400 in place, effectively the country’s entire inventory. In the early days, the distribution of bottled water was chaotic, and Severn Trent’s efforts to keep the bowsers filled were unsuccessful. On Monday, in Longlevens in Gloucester, amid panic-buying, arbitrageurs were spivving water in the Co-op car park for £4 a bottle. The county council was calling contractors in the US, trying to get supplies of a disposable toilet designed for hunters and hikers called a wag bag. On Tuesday, a sixty-nine-year-old woman in Bishop’s Cleeve told the Gloucestershire Echo: ‘We’ve only got three-quarters of a bucket of water left. We’re having to flush the loo with pond water. If we can get drinking water it’ll be OK. We just have to give up on washing.’

  The big tankers the company normally used turned out to be useless in the narrow, winding streets of Gloucestershire villages, and smaller tankers were in short supply. Severn Trent cobbled together a mixed fleet of beer, milk and water trucks, all of which turned out to have different connectors. A cross-county bowser audit at dawn on Thursday, four days after the flood, found that three-fifths had been drained, vandalised or stolen. Some later turned up on eBay.

  The company bodged fixes, opened its corporate wallet – by that Friday it was buying six million litres of water a day, equivalent to the usual daily bottled water consumption for the whole of Britain – and, crucially, turned to the army, which took over much of the organisation and distribution work from a base at Cheltenham Racecourse. The fact that there don’t appear to have been any serious public health consequences came down to three factors: Severn Trent trucked special deliveries of water to hospitals and other essential users; the army; and the ad hoc, unpaid generosity of neighbours and volunteers like Chuck Pavey, who helped the elderly and infirm get their water. Tony Wray, who took over as Severn Trent’s chief executive after the emergency ended, told MPs: ‘We were absolutely inundated with the sheer scale of this.’

  Ofwat, the quango regulating the private water industry in England and Wales, accepted Severn Trent’s argument that it should be excused the normal compensation rule – which would have given £110 to a household cut off for ten days – on the basis that the floods were an exceptional event, outside the company’s control. Tony Wray, who wouldn’t be interviewed, has argued that even if Severn Trent had wanted to invest in a back-up to Mythe before the floods, Ofwat would have rejected the plan as a bad use of the company’s scarce capital resources. Yet, like all England’s private water companies, Severn Trent would have more money to invest in rebuilding and improving the water system if it didn’t pay out such hefty sums in dividends each year to the shareholders who own it. In 2007, the year Severn Trent failed its customers catastrophically for the lack of a £25 million pipeline, then declined to compensate them, it handed over the equivalent of £38.65 per customer to its shareholders in dividends. Its biggest shareholder, Barclays Bank, got £5.2 million. That year, Barclays’ profits were £7.08 billion.

  Supporters of the existing private water regime argue that, in order to build and renovate facilities in a market economy, a company has to borrow from somewhere; dividend payments, the argument runs, are just the price you pay shareholders for permanently ‘borrowing’ their cash, in the same way interest payments are the price you pay banks for temporarily borrowing theirs. (This is a very crude explanation of the difference between ‘equity finance’ and ‘debt finance’ corporate financiers spend so much time talking about.) That reasoning might work if Severn Trent were an Internet start-up, or a drugs company staking its all on a novel medicine. As we shall see, as an argument about a British water monopoly, it fails.
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  Edward Warner Shewell, who did most to get the Mythe waterworks built, was a long-lived Conservative patriarch whose career spanned most of the nineteenth century. With his wife, Emma, he raised sixteen children at their house in Royal Crescent, Cheltenham. For many years, with the help of the Tory majority on Cheltenham’s Board of Commissioners – the precursor to the local council – he managed to sustain a glaring conflict of interest, being both chairman of the commissioners and chairman of the private water company that had a stranglehold on Cheltenham’s water supply. It was particularly remarkable because, for decades, the town and the company were bitterly at odds over where their water should come from.

  Many of Shewell’s children died before he did. His commercial and political machinations were regularly interrupted by dismal despatches from far corners of the Empire. His brother Frederick, a colonel in the Eighth Hussars, is said to have ridden in the Charge of the Light Brigade with an open Bible on his saddle. Perhaps his contemporaries saw something biblical in the fact that Shewell, so instrumental in getting the Mythe waterworks built, lost three of his sons at sea, two of them drowned.

  Water-wise, Cheltenham in the early nineteenth century was, despite being a spa town, not unlike one of the less developed towns in the poor world now, heavily dependent on wells and springs. Unlike present-day Africa, however, which draws well-intentioned rich world aid agencies and profit-seeking rich world multinationals, post-Napoleonic Cheltenham had only localist solutions to its water problems: local entrepreneurs and local campaigners for a cleaner, healthier, more socially just town. The origins of the Mythe waterworks lie in the first avatar of Cheltenham’s town commissioners, set up in 1786 to charge the gentry a rate to pay for street lighting and road maintenance. Because the streets needed to be cleaned, and because this demanded a reliable water supply, in 1824 the commissioners set up a private firm – the Cheltenham Waterworks Company – to do the job. Funded by a mixture of shares and loans, the company built a reservoir on the eastern outskirts of Cheltenham, laid a network of pipes into the town and began selling water.

  Indoor running water and the novelty of water closets proved popular. The more houses the company supplied, the greater the demand; the greater the proportion of houses with mains water in Cheltenham, the more uncomfortable it became for the town’s liberal consciences that the poor couldn’t afford it. The company was coming under pressure from three sides: from the town, to supply more water more cheaply; from the springs of the Cotswolds, which couldn’t cope with demand; and from its shareholders, who expected profits and dividends to be timely and fat. When government officials arrived from London in January 1847 to hear about plans for a new reservoir, they walked into this conflict. At the time fewer than half of Cheltenham’s 4,700 houses had mains water; the hospital and orphan asylum got water free, but there were no public fountains for the poor; in some of the poorer parts of town, up to ten tenements drew water from a single pump. The company was making a profit of £677, 15 per cent of its turnover. With the national debates that would lead to the 1848 Public Health Act at their height, the government agents told the company that the Act of Parliament needed to get the project going was more likely to get backing if it ‘contained some provision for the comforts of the poorer classes’. The company retorted that if the landlords of the poor were prepared to pay for piped water, the poor would get it.

  The feud between the Board of Commissioners and the water company went on for years, despite the cross-membership of the two boards, culminating, in the 1860s, in Shewell’s long tenure as head of both. On 15 August 1863, Shewell chaired a meeting of shareholders, who voted to pay themselves a massive dividend and bonuses worth 95 per cent of the company’s profits, give up the effort to supply more water, and sell out to the ratepayers. The plan had the enthusiastic support of the town’s liberal newspaper, the Cheltenham Examiner, but a few weeks later the town commissioners – also chaired by Shewell – voted down the plan. One commissioner, who believed like most people in Cheltenham that there was plenty of water in the Cotswolds if the company would only fetch it, declared prophetically: ‘There is enough water to be got off the hills to drown Cheltenham twice over.’

  Letters from India took about six weeks to reach England at this time and it would have been just after this knock-back that Shewell heard of the death, from illness, of his nineteen-year-old daughter Louisa in the cantonment at Mhow on 27 August, where she was staying with her brother William, an army major. The timing is probably coincidental, but it was in this period that the relationship between Shewell the water company boss and Shewell the top politician in town began to go downhill. Shewell (company) seemed to decide that if Shewell (town) wanted more water, then more water he would have. To the horror of the genteel ratepayers of Cheltenham, it emerged that his water company was planning to make up the supply shortfall by taking water from the River Severn – described by one MP at the time as ‘the common sewer of the Midland Counties’ – at a place called Mythe, just upstream from Tewkesbury.

  ‘It is thus sought to substitute,’ thundered the Examiner, ‘for the pure and limpid supply we now obtain from the spring head, the contaminated waters of the Severn.’ As the town resisted the plan, hostility towards Shewell, and the undemocratic way the commissioners were elected by a minority of citizens in stitched-up contests, deepened. The town begged the company to install double taps for its customers – one with nasty Severn water for washing and flushing, another with nice Cotswold spring water for drinking. The company said it would cost too much. An attempt by the town to buy the company fell through. To Shewell (company’s) fury, which Shewell (town) shared and failed to conceal, the other commissioners spent thousands of pounds trying to set up their own, rival water concern.

  By October 1865, relations between Shewell and the town commissioners’ clerk, George Williams, an indefatigable opponent of the Mythe scheme, had reached the stage of open warfare. Yet in the cosy world of old-time west of England politics, nothing could stop Shewell. In November 1865 he came up for reelection as chairman of the commissioners for the seventh time. He was opposed. One commissioner declared: ‘I would not say that Mr Shewell would set up his private interests against the general interests of the town, but human nature is such that private interests must, to a greater or lesser extent, sway the transactions of life.’ Nonetheless, Shewell was re-elected by sixteen votes to thirteen, to the cheers of the Tory end of the table, and five years later the Mythe waterworks opened for business.

  When, in 2008, I asked Peter Gavan, Severn Trent’s director of external affairs, if I could visit the Mythe waterworks, he said I could not. The floods, he said by way of explanation, were history; the implication being, I suppose, that history was not a good thing for a business to have. During the four days I spent in Tewkesbury a month later I cycled past the works each day on my way to and from the B&B where I was staying. It was surrounded by a temporary flood barrier built of components I’d last seen in Kandahar in Afghanistan in 2006, where they protected British troops and their allies from attack: textile and steel-mesh bins, filled with sand or earth, made by the Leeds company Hesco Bastion.

  Edward Shewell’s youngest son, Arthur, a lieutenant-colonel, was killed in Kandahar in 1880, rescuing a wounded comrade outside the Kabul Gate. His father didn’t live long enough to hear about it; he died in 1878, two years after the town commissioners were replaced by a more democratic council and a few months before that same council finally bought the water company out. It would be easy to caricature Edward Shewell and his cronies as corrupt old Tory buccaneers, damning the poor and holding back progress. That would be unfair. The ratepayers of Cheltenham could have bought the company out much sooner than they did, but feared the responsibility, and weren’t ready to accept the principle that universal access to water and sewers benefited everyone, even if the rich ended up paying proportionately more for it.

  More than that, Shewell, manipulative as he was, was something that his latt
er-day counterparts, the Colin Matthewses and Tony Wrays, emphatically aren’t: a genuine entrepreneur and risk-taker, and a localist, deeply embedded in the community he both served and exploited. Even his attempts, through political control of the town, to establish what Severn Trent has today – a monopoly of water supply in its area – couldn’t fend off the risk of real competition from other water sources. He and his partners made fortunes out of selling water to Cheltenham, but they took a risk to build the Mythe waterworks, and the risk may not have come off. Mythe did open in 1870, but only to supply Tewkesbury – a fraction of the market its backers needed. Cheltenham refused to take Severn water until 1894, long after Shewell was dead and the water company was municipal property. Cheltenham has used it ever since. Shewell’s Mythe waterworks entered history as a nineteenth-century private concern, spent 111 years in public ownership, and entered the twenty-first century – much expanded and modernised – as a private asset again. But the private water companies of twenty-first-century Britain are very different creatures.

  The privatisation of Britain’s water companies in 1989 had nothing in common with the romantic notion of shareholder capitalism, where inventors and entrepreneurs have ideas, start businesses and sell shares to bold investors in order to raise money to help those businesses expand. Far from being exciting new entrepreneurial ventures, the companies involved were settled operations that had been around in one form or another for almost 200 years, and had benefited, for more than half that time, from steady infusions of ratepayers’ and taxpayers’ money.

  The most striking contradiction between water privatisation and Thatcherite free-market romanticism was the monopoly nature of the water companies: millions of customers who have no choice of supplier, no choice but to take the water, and no choice but to pay for it. Millions of captive monthly payments in perpetuity: an investor’s dream. Yes, there was a regulator, Ofwat, to limit prices, and to make sure the companies invested in rebuilding the ageing water and sewage systems, but there seemed little danger that the government of Margaret Thatcher would prevent shareholders making a fat return. And so it proved, even unto her successors.