Backed by former Director-General of the regulator Ofwat, Sir Ian Byatt, this report presents a devastating critique of water companies' financial activities since the turn of the 21st century. It describes an opaque, overleveraged and poorly regulated industry that consistently places short term profit maximisation above the interests of consumers and taxpayers.
The report makes a set of recommendations for the government, Ofwat and Department for Environment, Food and Rural Affairs select committee to implement. It urges amongst other things the imposition of a levy on 'highly geared' (overleveraged) water companies, as well as German style earnings stripping rules to prevent all companies from drawing excessive loans with the intention of avoiding tax.
The report also calls for greater corporate transparency at a time when most English water companies have passed into the hands of private equity funds. It says that Ofwat should impose London Stock Exchange disclosure requirements on non-stock market listed water companies, and require public disclosure of all intermediate holding companies and ultimate controlling companies.
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"This report sets out the issues involved in the financing of investment in the water sector with great clarity, making them accessible to non-expert readers, while providing a set of well thought out suggestions for action both by parliament and the regulator."
- Sir Ian Byatt, Director-General of Ofwat 1989-2000