Britain - Floods for some, a river of profits for others

Sept/Oct 2007

The flooding of parts of England during June and July caused the deaths of 8 people and material loss of some kind for several hundred thousand. The "exceptional" natural conditions - whether or not due to climate change - which led to these floods, were widely reported, even if this amount of rain is not without precedent. Nothing was said, however, on the reasons why the damage caused was disproportionately severe, nor on what these events reveal about the system in which we live.

Hull's sewage flood

First to be affected by flooding was South Yorkshire. In particular, the city of Hull, where one month's rainfall fell in one day, on 25 June. It was the poorest parts of Hull which were flooded the worst - outlying working class suburbs, schools and facilities and this caused many to recall the way that Hull's rebuilding after WW2's bombings had been neglected, because it was the working class parts which had suffered most.

One person in Hull died as a result of the flood and 7,208 homes and 1,300 business premises were damaged by flood water. But this was not just rainwater. It was drain water and raw sewerage. Quite simply, "Hull flooded because the drainage system was overwhelmed". This was the conclusion of the Independent Review Body's report published on 24 August this year - a body of 6 members led by two professors of geography from Hull University.

As they point out, Hull is a port city which is low-lying - 90% of its area lies below the high tide sea level. As a result, its drainage system relies entirely on being actively pumped. In fact, after continual flooding problems due to the pre-WW2 gravity-fed sewer system, the whole of Hull's drainage and sewer system was replaced over the following 20 years and two big pumping stations in West and East Hull were built to empty the sewers into the Humber River. A pumping station was also built in the central outlying area of Bransholme, which had its own drainage system. However, by the 1990s, pumping sewerage into rivers had become unacceptable according to EU regulations, and so the (by then) privatised Yorkshire Water was forced to develop a new sewage treatment works at Saltend under a system which it called "Humbercare"... Drainage from East and West Hull was directed into a new, big, trunk sewer to Saltend. The old 1950s Bransholme station was left to pump that area separately, but was not refurbished despite an increase in its inflows due to the expansion of housing developments.

The new 10.5km long trunk sewer was designed to use gravity for its "dry season" flows, so pumping capacity at the West and East Stations was cut down and eventually West Hull pumping station was no longer considered necessary at all. This new tunnel was, however, meant to make up for less active pumping taking place by providing more capacity and protect against a 1 in 30-year excess rainfall event. It then became evident that the new trunk sewer might not have a wide enough diameter to cope with the inflows from the West and East Hull sewers which drain into it if these increased suddenly, so two extra storm pumps (for emergencies) had to be restored to the West Hull pumping station. But the station was still not restored for routine pumping.

In addition, despite having owned the whole system for over 16 years, Yorkshire Water had never actually collected real data on flow rates and volumes pumped by its system. So in fact it was not really in a position to know whether its system was able to withstand "exceptional events" even of the once in ten years nature, let alone what actually occurred - which (we are told...) was a one in 150 years event.

As it happened of course, the system was overwhelmed. Surface water, mixed with sewage, was soon flooding low lying areas of the city. The old un-refurbished Bransholme pumping station was actually flooded itself and the pump bearings seized up on 26 June.

Yorkshire Water, in its submission to the Independent Review Body which investigated the floods, had this to say on what it would do to remedy the situation: "a key first step should be a major hydraulic study to model flows in the city as a whole and to better understand the impact on systems of climate change which may result in increased frequency of major rainfall events and rising sea and river levels. This may then lead to recommendations to upgrade the system, or remodel the existing configuration."

The Review Body considers that such a "major hydraulic study" is vital. What is more, it insists that the system must be upgraded and remodelled, so it is hardly a question of a study "maybe" leading to changes! The water company also had the cheek to excuse its inadequate investment by saying "It should be recognised that even the best infrastructure in the world would most likely be overtopped and overwhelmed by 1 in 150 year rainfall events." This, despite the fact that it ostensibly accepts government policy - which is to take preventive action now, because of the unexpectedly rapid consequences of climate change.

Of course it would be expensive for Yorkshire Water to invest in modernising the 50-year old Bransholme pumping station and also to open up new watercourses and link them to Holderness Dam - which is what the Review Body recommends. But Yorkshire Water was meant to have produced a report on the condition and proposed development of Bransholme station in 2002. Five years later, it still has not done so. The company was not even convinced that it had to improve pumping capacity at the West and East Hull stations, even though the Review Body was unequivocal about this! The Review Body also found that it was totally unacceptable that there were no contingency plans in place, in case Bransholme pumping station failed.

The water companies' profit deluge

At this point it is worth digressing to explain how the administration of water, drainage and sewers has developed generally, because in fact Hull actually has a more modern system than most British cities!

Long before water and sewer privatisation, and for at least 3 decades after WW2, it was up to local authorities to supply clean drinking water and control and administer public drains and sewers - that is until the passing of the Water Act in 1973. This Act created 10 water authorities whose areas were actually defined by river basins - and these authorities controlled water supply, sewers and also the rivers (flood defences, outflows, etc.).

Then, in 1989, Thatcher's Conservative government passed a new Water Act which privatised the 10 regional authorities. In effect the 189,000 miles of sewers running underground in Britain became one of the largest "capital assets"(!) in the country. These are especially long-lived "assets" into the bargain, since many of the sewers and drains date back to the engineering feats of the 19th century - if not before.

The responsibility for management of rivers (flood defences, etc.,) was retained by the state, but transferred to a new and separate quango, the National Rivers Authority - which was eventually taken over by the Environment Agency in 1995.

But of course the new private companies - like Yorkshire Water - now not only had statutory duties to provide drinking water and an effective system of sewers and drainage, but above all, their duty was to supply profits and dividends to their shareholders. And these have turned out to be very substantial profits.

The two companies which are up to their necks in the scandal of this summer's floods, Yorkshire Water and Severn Trent Water, made £323m and £407m operating profits respectively in 2006-07.

Yorkshire Water paid out dividends to the value of £110m and Severn Trent paid out £655m. In the latter case, this included a "special dividend" of £580m paid in autumn 2006. Severn Trent seems to have anticipated that it would be under pressure to invest more in the future and was taking pre-emptive action. In fact it even boasts in its 2007 financial report to shareholders that over the previous period it had invested only the bare minimum required to meet its obligations under the agreed capital programme. In 2006 it invested £399.8m and in 2007, £403.7m - a hefty 1% increase!

Yet the upgrading of these companies' old pumping stations and their inadequate drains have been neglected for over a decade and a half. No wonder they are so profitable.

Ofwat - aptly named

Of course, the government-appointed "regulator", "Ofwat", is in charge of ensuring that the water companies fulfil all of their statutory obligations properly. It is also responsible for setting the limits on what companies can charge for water and sewer supply. These prices are set for a five year term. So theoretically, at least, there should be some way of controlling the companies' natural (and entirely predictable) tendency to put profits before providing clean drinking water, and before repairing or replacing leaky pipes and cracked and broken drains. But as usual, government regulation is designed to have no teeth at all.

The last Ofwat report - for 2005-6 - notes that "2005-6 has seen much public concern about the service provided by the water industry to customers". And this was before the floods.

It goes on to say "Customers also noted that most companies have announced significant increases in profits during the year, following increases in prices that were allowed by Ofwat and that were well above inflation" !

In fact Ofwat justified allowing hefty price increases (in some cases a 20% rise in water charges) because of the dire state of most of the water infrastructure, which was resulting in huge volumes of water loss from leakage, in the context of a period preceding this "wettest summer", of unprecedented low rainfall and drought. The companies were meant to institute programmes of substantial capital investment - an estimated £16.8bn - over the five year period 2005-2010.

But surprise, surprise, Ofwat relates"This is just the first year of the 5-year period, but capital investment was around £1 billion (23%) less than we assumed in price limits for 2005-06."

The report goes on to explain how companies' actual implementation of their plans for maintenance of the sewer network - which accounts for half the investment programme - is an area "for concern". In particular above-ground sewage works are barely kept in a stable condition and in the case of Southern Water and Yorkshire Water, it was deteriorating. Anglian Water was also approaching an assessment of "deteriorating". As for Severn Trent it is among the worst, in almost all respects, with the worst record on repairing leaky water pipes and a failure to address the poor drain conditions in its region. So much so, that it has been told by Ofwat to reduce charges to customers in 2008-09 by around £12m.

It is hardly surprising that, overall, the water industry's operating profits increased 17% in 2005-06 to £2.6 billion!

Last year a report was prepared by Ofwat entitled, "Out of sight - not out of mind: Ofwat and the public sewer network in England and Wales". It describes in some detail the various ways in which companies have sidestepped their responsibilities - while making much of the extremely limited achievements since privatisation. Its aim is to lay the basis for a common framework to assess the state of the sewage network and a common approach to improving it. Yet this is what it has to say about the starting point, 17 whole years after privatisation "Although the quality of information held by the companies on their networks has improved since privatisation, Ofwat concluded at the 1999 review that no company knew enough about its network to provide reliable forward plans for maintaining their asset systems."

The report also explains that companies usually spend money on infrastructure maintenance in a peak, just after the 5-yearly review has taken place and then tend to do the minimum or less. It also remarks that companies are known to "overbid" by saying their infrastructure is worse than it is, in order to be allowed to charge more to their customers. They can then cook the books on their expenditures to make it look as if they did something with the extra cash.

Yet, knowing how devious the water companies are, Ofwat has no specific plans to do anything about this negligence, fraud and trickery on the part of the water companies. It will continue to monitor the companies' progress or lack of it. Its means to act against companies will be almost entirely confined to its ability to set the prices which companies charge their customers... (in 4 year's time)! That is all!

That said, the Department for Environment, Food, and Rural Affairs (DEFRA) has a general responsibility for the water and sewage sector and can change the regulatory framework by legislation. So it could give Ofwat some teeth if it wished. But, quite evidently, it does not wish.

Ofwat is not on its own in terms of regulating the water companies however. The Environment Agency has to ensure that any discharges from sewers and drains do not damage the environment and it also controls flow from drains into rivers and the sea. It can and does prosecute companies for pollution incidents.

There is a "Drinking Water Inspectorate" which is supposed to be responsible for drinking water quality, although it is seldom heard from. Local Authorities also have some power in this regard in that they are meant to ensure there is no health risk from the activities of the water companies. Lastly, the "Consumer Council for Water" (previously WaterVoice) apparently represents water "customers" (all of us, of necessity) and has 9 regional committees in England and Wales to do so. Up to 2005, however it was merely a sort of subsidiary of Ofwat, and few people even knew of its existence.

In other words the private water companies have a licence to soak the public (or wring it dry) - and they will continue to do so with the blessing of all the government agencies, designed, precisely, with this benedictory function in mind!

Water, water everywhere, etc., etc.,

Almost exactly 4 weeks after the floods in South Yorkshire, it was the turn of the Midlands, where one sixth of the usual annual rainfall (121mm) fell in 24 hours on the 19/20 July. But the flooding was not, this time, the result of failed pumping stations. It was due to flood defences which were not up to the job, although overwhelmed drainage systems certainly played a role. Much of Gloucestershire lies below the Severn River's flood level and so relies upon pumped drains (just like Hull).

After heavy rains, peaking by Friday 20 July, the low-lying areas of the Severn Valley and the Vale of Oxford turned into great bowls of water unable to shed the run-off water as fast as it poured in off the surrounding hills and higher ground. So towns along the Severn and upper Thames rivers flooded. In particular, Tewksbury, which is located at the junction of the Avon and Severn rivers, was engulfed. Just north of Tewksbury, the Mythe Water Treatment Station flooded and shut down - and remained shut down for the next 17 days, leaving up to 350,000 people without any running water and, of course, no clean drinking water. There was no contingency plan for such an event. And the same old excuse was produced: this was a one in 150 years event, so how could anyone be prepared for it?

It was not the first time this had happened. The Severn and even the Avon tend to flood quite frequently, but usually not on such a scale. The worst previous such flood was in 1947 when emergency food parcels were sent from Canada. This time, emergency water supplies were flown in from "Aviation Sans Frontieres", based in Germany!

Severn Trent Water company eventually managed to come up with 50 million litres of bottled water to distribute - but the army had to be brought in to deliver it. It then put 1,300 water bowsers around the water-less area - but in reality many of these were not refilled and in the first week people had to carry their pots and pans around the streets looking for a bowser with water in it. Apparently 100 tankers were meant to be refilling the bowsers and then, later, 400 mini-tankers. But it their efforts were evidently not enough.

Severn Trent's boss, Tony Wray announced that out of its over £300m profit it would be making an allowance of £3.5m to Gloucestershire councils to "compensate" for their 17-day long water deprivation - which amounts to less than £30 per household! In fact, because of the "unprecedented" weather Severn Trent did not have to pay any regulatory compensation: one begins to see what the stake is in hyping up the exceptional nature of the flood as much as possible! Otherwise Severn Trent would have had to pay each household £20 compensation for the first 12 hours of water deprivation and £10 for every 12-hour period afterwards. Compensating businesses would have been even more costly with a £50 starting rate. In total, Severn Trent might have had to fork out something close to £30m.

Where were the flood defences?

Was all of this inevitable? Not at all. As one Gloucester resident wrote to "This is Gloucestershire", quoting the Environment Agency's Severn at Gloucester Flood Study of 2005, although Gloucester had no proper flood defences, these could easily be built - and without causing any knock-on problems elsewhere. However, the Agency actually argued against building them on the basis that it did not expect the river to rise more than once in 100 years above the level of 10.6m - that is, above the line seen during floods in 2000.

On 23-25 July this year, the level rose above this, to 10.93m. Yet even this was not unprecedented. This is at or below the level recorded in 1770, 1795, 1809, and 1947. It is well below the 11.18m which the Agency routinely predicts for a flood once every 100 years in its advice to city developers.

The Gloucestershire correspondent concluded that what was unprecedented "was the Environment Agency's refusal to do its job and defend critical parts of Gloucestershire from a known and devastating threat." Unfortunately, he is wrong, because this policy on the part of the Environment Agency has plenty of precedent. Indeed it is normal behaviour.

The Environment Agency has a very large remit: it must respond to flooding incidents, maintain flood defences and river channel capacity, carry out environmental and conservation works and minor construction projects as well as oversee planning applications with regard to flood risk... in the context of impending climate change. And it is evidently unable to cope.

According to the National Audit Office, in a report produced for the House of Commons dated 11 June 2007, ironically just before the floods hit, less than half the high risk flood defences (protecting urban areas) were in good ("target") condition. In fact, the Environment Agency had failed to keep as many as 63% of England's flood defence systems in good condition. In other words it has not maintained adequately the flood barriers, embankments, walls, weirs, sluices, pumping stations, river channels, etc., which protect against river and sea water inundating areas where people live, or where vital infrastructure exists which would be damaged by a flood.

For instance, the EA had already decided not to protect the Mythe Water Treatement Works which supplies most of Gloucestershire, before it got flooded this July. It had also decided not to de-silt (dredge) the River Twyer, which then flooded 107 homes in the area.

The NAO estimates that almost half-a-million households and businesses in England alone are at significant risk of flooding, and that the cost of flood repairs would be around £40,000 per household. It points out that this is precisely why the Environment Agency has the task of constructing new flood defences and maintaining the old ones. Unfortunately, says the NAO, the EA is underfunded by government. It needs an additional £150m immediately just to make good the maintenance programme identified after the floods of autumn 2000, which was never completed. And while an increase in funding to £800m has been promised for 2010-11, the government has never given the Agency enough money to deal with the general backlog of under-investment dating to before 2000.

Moreover, the Agency has been under pressure from DEFRA to make cost "efficiencies". Presumably this is why it has cut the number of regional and local flood defence committees from 20 to 11. By 2005-06 it had also reduced its workforce from 1,570 to 1,400.

Nevertheless, while the Agency denies it, there have been reports in the media quoting a figure of £14m as the amount by which the EA has reduced what it spent on flood defences over the past year.

This is why it was somewhat shocking that the Agency chief saw nothing wrong in actually making bonus payments to its directors while Gloucestershire's population was still reeling from the flooding. The evacuated and drinking water-free residents were probably quite flabbergasted to hear that Baroness Barbara Young (the CEO) got a £24,000 bonus on top of her £163,000 salary and that 8 other executives got an extra £10,000. Sir John Harman, the Agency chairman who authorised the bonuses said that the bonuses had been paid to these armchair bosses for "delivering new defences, which they did, improving the maintenance of existing defences, which they did, extending flood warnings, which they did, and managing all that at a time when there was some reduction in funding". So perhaps we are to understand that these were "reduced" bonuses, too? And what must the real workers at the Agency think about this?

The BBC reported at the beginning of August that the Agency was to be subject to further cuts as a result of the new subsidy system for farmers, since its budget was administered by DEFRA. This was said to amount to another £23.7m on top of the £4.4m cut in April this year. As opposition politicians like the Lib-Dem Chris Huhne rightly commented, "this is incredibly foolish when we know flood risk is increasing". But what has he to offer except to suggest different ways of tweaking a system designed not to upset the powers-that-be?

Yet funding for the Agency's flood defences could easily have been taken out of the private water companies' profits and dividends, for instance, since they would have had ample to spare, even if they actually spent what they should spend on modernising their "assets"!

Pandering to the property developers

The floods which had occurred in 2000 - mainly affecting the southern counties of England - served at the time, to provide some kind of impetus to at least review the country's flood defences and drainage systems - even if not much was done as a consequence.

However, one issue which was emphasised after this event was the problem of building on flood plains. After this July's floods a correspondent to the press from Lewes in East Sussex, recalled that 861 homes and businesses in this little town had been severely damaged by flooding in October 2000. Afterwards, the Environment Agency apparently stated: "The devastating impact of the flood was because large numbers of properties have over the years been built on the flood plain." The idea was to start to remove buildings already on the flood plain and certainly not to build any more which would be at risk. This correspondent explained that 7 years later, the last flood-damaged house has just been re-occupied and planning permission has been granted to build 125 more in the flood plain with a development of more than a thousand in the pipeline!

Within weeks of the Gloucestershire floods, thousands of people marched through Tewksbury (in the rain again!) against any plans to build homes or anything else on flood plains.

Tewksbury Borough Council is even seen by some residents as more culpable for the flooding than the water company or the Environment Agency. This is because it has been allowing (unaffordable!) houses to be built on the flood plain for years, ignoring the advice of the Environment Agency and what had happened to previously flooded and uninsurable residents.

The latest housing project is apparently actually on the banks of the (presently flooded) River Avon and, apparently, it has been called "Watermeadows"!

The march was therefore aimed both against the local council and the government, in response to the government's own statement that it would not rule out the building of homes on flood plains. Nobody has illusions in the "affordable housing" myth anyway. For most people buying homes is unaffordable, full stop.

Brown's new housing minister was probably not seeking this kind of bad publicity, however, when the 3 million new homes promised by Gordon Brown were being highlighted at the end of July. Yet part of the government's previously promised development - like the housing in the Thames Gateway - is already on a flood plain - and this is not protected by the Thames Barrier, as is Number 10 Downing Street which, we are reminded, is also on a flood plain.

Yvette Cooper, the Housing Minister, apparently thought that by saying that most of Central London and the West End is built on a flood plain, she would be reassuring the voters. She went on to explain that the government could never rule out the building of homes on a flood plain under its own plans, let alone as a result of councils dishing out planning permission to private developers against the advice of the Environment Agency. Indeed, under recently passed legislation, DEFRA is the final arbiter in contested cases of planning permission anyway, so it has de facto given the green light to the plans turned down by the Environment Agency, but where the building went ahead anyway.

Apparently the EA has objected to tens of thousands of house-building proposals over recent years, but as many as 20% have still been approved by local councils (and DEFRA). That said, councils are then meant to ensure that precautions are taken by the developers against flooding. But in practice this hardly ever happens because of cost.

In addition, the developers (and the government?) claim that it is "impossible" to find sites to build on, which are entirely free from the risk of flooding and it is this risk which needs to be assessed. In Holland, it is enshrined in the law of the land that flood risk should be calculated as a one in 10,000 year event. The Thames barrier risk protection amounts to a one in 2,000 year risk of flood. Yet the current calculated risk in English flood plains is 1 in 150 years, and, as real events show, the risk is even higher!

But the property developers who build these homes in flood plains to line their pockets, know exactly what they are doing. Not only are they exposing the lives of those who will live there to danger, they are also contributing to the aggravation of future floods. Because this mass of construction on flood plains is perhaps one of the most important factors in preventing good and easy drainage by covering over so many areas in concrete.

The only insurance - ending profiteering!

Allegedly, the guys at the bottom of the property ladder, the ones who made it possible for the high-flyers to make such huge profits, are supposed to be protected by means of compensation against such disasters. But when it comes to finding out who is going to pay, it is another question.

Brown ensured he was seen to rise to the occasion, breaking his holiday to visit flooded areas and making promises of government aid, as well as immediately appointing a "minister for floods"! Emergency payments were made to the local authorities. Flood victims were temporarily re-housed. But after that, people were left to claim off their insurance companies (60,000 claims by mid-August) or rely on social welfare if they had no insurance. It is these latter victims, who represent an estimated one in three householders, probably 10 to 20,000, who are truly forgotten.

Many cannot afford insurance costs. However even those who are insured are finding that their "cover" often means nothing. One example cited by the media was that of a 61 year old pensioner from Worcester whose house is 50 yards from the river. The only way she could get insurance cover was to agree to pay £10,000 excess on flood damage (which she did) and even then, the policy would only be valid if the temporary flood barriers were put up at the time of the flood. Since this was not the case, this woman would seem to have no valid claim!

Predictably, premiums have gone up already. In Hull, residents have been told their premiums will double. Most insurance companies have taken the opportunity of increasing all householders' premiums by at least 10%.

What will be instructive is the profits registered by insurance companies over the next year. And the bets are that the shareholders of these companies will have managed to make a packet out of the floods, after - maybe - making a packet out of their share in water companies!

The fact is that neither politicians nor governmental institutions or quangos, are prepared to do anything to stop the irresponsible profiteering of property developers, water companies or insurers. And this only exposes the nature of the state in this society.

Developing a policy designed to provide the population with reasonable protection against natural risks such as these recent floods, would require a rational, coordinated plan, on a national scale, to manage water in all its forms - whether sea, river, canals, rain, ground or sewage water. It would require a coordinated plan to redevelop, modernise and maintain these major resources, by using as much as possible the capacities already offered by geological conditions, rather than striving to transform these conditions to suit some other interests - and usually those of the profiteers, rather than those of the population.

Such a policy can only go against the interests of the capitalist class. It cannot coexist with the competitive mess and criminal profiteering generated by the private ownership of the water utilities. Nor is it compatible with the fact that property developers and companies are allowed to use the land they own to make astronomical profits on a speculative land and housing market - often at the expense of collective safety and regardless of real needs - rather than to abide to a rational policy for the benefit of all.

Yes, much of the damage caused by the latest floods might have been avoided if the system in which we live was not designed to preserve the interests of a tiny minority against the interest of the vast majority. The irony is that the same people in and around government who are making alarmist warnings against the possible impact of climate change by trying to use it to justify road charging, higher energy bills, etc.., are also the champions of this rotten profit system which cannot protect us, in any way, from such a threat.

Whether this year's floods were a warning for tomorrow or not, they can only reinforce our conviction that the only future for mankind is to get rid of the capitalist system, its chaos and its profiteering.