AS I SEE IT: TERRY MURDEN says the nationalists need to understand why shareholders matter
Given the financial mess around the privately-owned water companies in England and Wales it is little surprise that the SNP is using it as another stick to beat Westminster and claim that independence is the only guarantee for saving key services. Data from the House of Commons Library certainly spells out how the industry has diverged under private ownership south of the border while in Scotland it remained under state control.
Scottish Water is credited with cheaper bills and more money for frontline services than its counterparts south of the border where, according to the analysis, households are paying almost 10% more for water and sewerage bills than those in Scotland, at £448 per year compared to around £410 in Scotland as of 2023/24.
Furthermore, managers at privatised water companies in England and Wales are paying themselves significantly higher salaries than the CEO of Scottish Water. The analysis shows that the CEO of Severn Trent Water was paid £3.9million in 2021/22 – more than nine times the £425,000 salary of the Scottish Water CEO, which was still a hefty sum for a public servant.
On average, privatised water company bosses in England and Wales were paid £1.48 million a year in 2021/22 – around three and a half times the pay of Scottish Water’s CEO.
The SNP may feel justified in using the experience of the England and Wales water industry as a reason for not inviting the private sector into public services and rejecting occasional calls for Scottish Water to be sold to raise a few billions for the public purse. However, bringing the constitution into this issue is a red herring. Even the government in an independent Scotland could legitimately consider privatising key services, including water.
Furthermore, the SNP energy spokesperson Alan Brown’s criticism of the water industry’s “wealthy shareholders” betrays the “public sector good, private sector bad” philosophy that underpins SNP thinking.
The analysis notes that privatised water companies in England and Wales paid out at least £32.7 billion in dividends to shareholders between 2002/03 and 2021/22, the equivalent of £40.3bn at 2021/22 prices. In contrast, Scottish Water paid no dividends to shareholders.
Mr Brown sees this as a win for Scotland, against the profit-grabbing motives of greedy shareholders.
But who are these shareholders and who really gets the benefit? They are the institutions that manage our pensions and provide capital for industry. While questions can be asked of the greedy, poorly-performing executives lining their own pockets, the shareholders are looking for legitimate returns on their investments.
On the figures provided, that’s £40bn raised that would otherwise come from the taxpayer. If and when Scotland becomes independent it will need to look to these same institutions to take on that role.
In the case of the heavily-indebted England and Wales water industry, the regulator is looking to the shareholders to keep the companies afloat. Thames Water, which is at risk of sinking under £14 billion of debt, was given a £750 million rescue package by its biggest investors last week. Who else is expected to stump up this sort of capital?
Mr Brown and his nationalist chums also need reminding that some of these “wealthy shareholders” are based in Scotland and, as well as looking after our investments, they also provide valuable jobs – and taxes to pay for the Scottish Government’s public services.
STV’s clear vision
Even in these challenging times we continue to see some bold moves by businesses trying to stay ahead. Arguably the stand-out Scottish deal of the month so far was STV’s acquisition of Greenbird Media, maker of top shows such as The Hit List and Late Night Lycett.
STV has made great strides in recent years to prove it is more than a regional broadcaster and that it can punch above its weight. But the limits to ambition in the media sector were exposed on Friday when ITV said it was not pursuing a bid for Gogglebox maker All3Media.
Ken Gilmartin, CEO at Wood Group, who criticised the company’s poor performance when he took over last year, pulled a rabbit out of the bag last week when he said it was now making good progress. Analysts concluded that there was an underlying positivity about the group that had prompted bid interest from private equity firm Apollo Global Management. We’ll have to see if it comes back when time allows.
Late on Friday came news that the SPFL had apologised over the dispute between Rangers and league sponsor Cinch. This was yet another messy affair that the Ibrox outfift had got itself into, but least on this occasion it was vindicated.
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business