My Conversation With Thames Water

Or, to be more precise, my conversation with Thames Water’s Customer Insight and Resolution Team. Come again? “Customer Insight and Resolution”? Meaningless corporate speak, just like the reply I received from Thames Water regarding my complaint about their tax avoidance and proposal to increase charges. My replies appear in italics.

Water services

Dear Mr Hell

Thank you for your e-mail of 27 August 2013.

Tax

Recent press coverage of our tax liabilities has not adequately explained how infrastructure investment is actively incentivised by the Government through the longstanding policy of granting capital allowances to provide tax relief. This approach ultimately permits corporation tax to be deferred, not avoided.

This is largely impenetrable corporate-speak. However I shall do my best to translate: what you’re saying is that the government has effectively handed you a license to rip off customers and avoid paying your fair share of tax. Infrastructure investment should be made by those with the money… that’s your shareholders. They (supposedly) invest in your company. I do not. I have no shares in your company. Investors are supposed to invest. They’re supposed to ‘take the rough with the smooth’. Shareholding is a risky business and the value of shares can increase and decrease from moment to moment. One of the risks is the cost of keeping the business going. That means investment, but it seems as though your rentier capitalist shareholders don’t want to shoulder their responsibilities. But your point that tax is “deferred” sounds rather misleading. Either you pay tax or you don’t. I believe it is the latter.

Recent press coverage has created the impression that we’ve deliberately sought to escape paying our fair share of taxes, which is simply not the case.

Excuses, excuses. It’s easy to blame the press for your company’s greed. Thames Water has avoided paying corporation tax and I would suggest that it has done so deliberately. It certainly didn’t happen by accident. This year, Ofwat described the sums of money avoided by your company as “morally questionable”. Now you’re not going to tell me that the regulator is misrepresenting Thames Water are you? Here’s what the chair of Ofwat said:

 “In the complex offshore ownership of some [water] companies, a good number use high coupon shareholder loans to improve equity returns from the regulated entity and apparently to reduce tax liability. This is not for Ofwat, but may be morally questionable in a vital public service.

 We have not yet found a regulated water company that fully complies with the UK corporate governance code or satisfactorily explains why not”.

We haven’t been required to pay much corporation tax in recent years because the Government’s tax system provides for tax relief on capital investment, effectively deferring when it’s paid. The tax is deferred, not avoided, and there is currently nearly £1bn of deferred tax on our balance sheet, which will be paid in future years.

You’re repeating yourself here to some extent. I’d like for you to point me in the direction of the relevant HMRC framework. But it’s convenient that there’s an HMRC mechanism that allows you to avoid paying tax, when people like me have no choice but to pay the full amount. But hey, didn’t Thames Water receive a massive tax rebate of £5 million last year? That’s more than I could ever hope to receive in two lifetimes!

The HMRC mechanism for providing tax relief on future investment is known as capital allowances. The aim is to encourage firms like us to invest in modernising vital plant and machinery by providing tax relief on the investment. These allowances are granted automatically by HMRC to companies making relevant expenditure.

Interesting, yet you still increase water charges. There is no excuse and furthermore, it isn’t as if I can change water supplier. Thames Water has its customers over a proverbial barrel and it knows this.

Our Shareholders

The water industry is set up to make a profit so that we can carry out much-needed improvements to our water mains, sewers and other facilities. We also need to borrow a lot of money to help fund this work. In the same way you’d expect a bank to pay you interest on your savings, it’s only fair that we pay a return – or dividend – to shareholders for letting Thames Water use their money.

Rubbish. Water is seen as an easy way to make money. Everyone needs it to survive. Your analogy with interest paid on a savings account is over-simplistic and dishonest. If you could charge people for air, no doubt you’d do that too. Ordinary savings accounts offer little more than 3% these days. The truth of the matter is that Thames Water wouldn’t bother with improvements if the regulator didn’t force it to act. Most companies ask their shareholders to invest and at the risk of repeating myself, your shareholders clearly don’t take their responsibilities seriously and are more concerned with making vast sums of money at our expense.

By any meaningful benchmark, our directors are not overpaid.  They run a multi-million pound investment programme, delivering essential improvements of benefit to both customers and the environment.

What is a “meaningful benchmark”? You also keep repeating the word “investment” as if it were some sort of word of power. If shareholders invest in your company, then they should be required to pay up. Besides, as I indicated earlier, the regulator forces you to carry out improvements. Otherwise, Thames Water wouldn’t bother. And yes, your directors are paid handsomely…obscenely so I’d say. Indeed last year, your CEO, Martin Baggs salary was £425,00 and who knows how much his bonus will be next year? Last year it was £418,000, this year it was £274,000. That’s considerably more than the directors of the old water boards earned. You know something? In all the jobs that I’ve done in my 36 year working life I have never once received a bonus. Your company is practically allowed to print its own money.

Thames water is one of Britain’s top 100 international companies.  Globally we employ over 18,000 people serving 70 million customers in over 20 countries.  As such we are a significant contributor to the success of UK Plc.

Is this supposed to impress me? It’s PR guff. Then you close the paragraph with “UK plc”. The United Kingdom is not a “public limited company”, it’s a nation-state that allows companies like yours to cream off profits and increase charges arbitrarily. It’s what is commonly referred to these days as “spiv capitalism”.

Managing water and sewerage for our 13 million customers in London and the Thames Valley is a complex business that continues to require major investment.  To ensure that it is effectively managed, we have to offer remuneration that attracts and retains staff capable of leading this important work

So what am I supposed to do? Applaud you? Bow, scrape and tug my forelock? No. I am not alone when it comes to being appalled by Thames Water’s behavior. You increase water charges, while millions of gallons of water are lost in leaks every year – so much for your infrastructure improvements.  But it’s the way your company has told people like me that I have to pay for your bad debts. They’re your debts, you pay for them. I notice that you’ve not bothered to address this point. Why?

I hope this information is of use.  However, if you have any questions, please feel free to call me on 0845-6410033, extension 61594.

I’m not phoning an 0845 number, which is expensive when using a Virgin Media fixed line. That’s the final insult.

Yours sincerely

Chanèl Dziuban

Case Manager

Customer Insight & Resolution

Readers, I don’t expect a reply. But what a patronizing load of twaddle. Thames Water continues to increase its charges and tells us that we have to pay off their bad debts, while they laugh all the way to the bank. Its CEO is paid handsomely and receives a massive bonus each year. And it wants more of our money? Go to hell.

Here’s what Tony Montana would say:

Renationalize water NOW!

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