Posted by: westlancashirerecord | January 25, 2018

Where Have All The Water Profits Gone?

Have you wondered why you’ve been told United Utilities doesn’t have plans to improve some of your local sewage and surface water drainage from their Victorian era impression of them? It’s probably because the benefits for shareholders and company debtors come before we who pay our water bills.

Credit ratings of some privatised UK water companies have been continually downgraded as they loaded up debt, offset the costs of that against tax to pay less, and used the debt to pay out dividends rather than cut prices to consumers or invest in improved efficiency and services.

Privatised UK water companies took on so much debt they couldn’t afford to pay taxes. They didn’t have to as they offset the costs of debt against tax. Thames Water has paid almost no corporation tax for the past decade. Debt-free when privatised, water companies borrowed straight away.

Our own local provider United Utilities states “Under the regulatory framework the group operates within, the majority of any benefit from reduced tax payments will typically not be retained by the group but will pass to customers via reduced bills. In any given year, the group’s effective cash tax rate on underlying profits may fluctuate from the standard UK rate due to the available tax deductions on capital investment and pension contributions. These deductions are achieved as a result of utilising tax incentives, which have been explicitly put in place by successive governments precisely to encourage such investment. This reflects responsible corporate behaviour in relation to taxation. In 2016/17, we paid corporation tax of £42 million, which represents an effective cash tax rate on underlying profits of 11%, which is 9% lower than the headline rate of corporation tax of 20%”.

United Utilities PLC and United Utilities Water Finance PLC are issuers in the debt markets. Prior to 11 November 2014, United Utilities PLC and its regulated subsidiary, United Utilities Water PLC, were issuers in the debt markets . On 11 November 2014, United Utilities Water PLC re-registered as a private limited company, United Utilities Water Limited, and a new subsidiary, United Utilities Water Finance PLC, was introduced to act as a financing arm and issue listed debt on behalf of the regulated business.

“The main driver behind the group’s debt requirement is the capital investment programmes of United Utilities Water Limited. For the five-year regulatory review period 2015 to 2020, United Utilities Water Limited has agreed an investment programme with the regulator with an estimated spend of circa £3.5bn. Below is a chart detailing our gross debt position as at 31 March 2017” .


Responses

  1. I feel very sorry for the staff of UU when they want to provide a good service to their customers but their execs insist that they have to divert their money that could be invested into an infrastructure that would be fit for purpose, (let alone improve or future proof) and have to deposit vast funds straight to shareholders dividents and returns. Time for OFWAT to enforce their powers and bring these big utilities companies to task and provide the service that they are being very well paid for!

    • All of the old utility companies use the same methods of reducing corporate tax, and many of the employees receive share options. It probably doesn’t even register with the “workers” that their company pays so little tax. You might even find that we taxpayers pay a higher rate of tax, income tax. than the utility companies do. We are taxed at source, they are taxed after their corporate tax-avoiders have introduced the dark arts of avoidance into the accounts.


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