For how much longer must the water utilities are rip us off?

A good question, no?

Here’s an article from Socialist Appeal:

Severn Trent: the case for renationalisation
By Eric Hollies
Tuesday, 03 June 2008

Severn Trent Water has already been fined £36m in April. It faces another fine of perhaps £70m for vast frauds on its customers and upon the general public. Here’s the story.

The water companies were privatised by the Tories to harness ‘the dynamism of private enterprise’ to the water industry. Most people at the time didn’t realise there was a problem with the water supply. They could turn a tap on any time and water rates were low. There’s a problem now – the problem is private ownership.

In April Severn Trent were done for falsifying a report to Ofwat, the useless regulator of the water industry. The Serious Fraud Office found that Severn Trent had been lying about its performance in order to inflate the bills to its 8 million customers.

Now it has been caught lying about the amount of leakages from the water supply. One justification for privatisation was that the private firms could afford to deal with leakages. Well, they could afford to, but they find it much more pleasant to pay the money out in dividends to their shareholders. Thames Water, for instance loses one third of its water supply in leaks. The present court case showed that Severn Trent falsified its losses as 340 megalitres a day when the real figure is 514 megalitres. This is not just a cover for incompetence. The prosecution showed the firm was using ‘sophisticated dishonesty.’

Part of the evidence was an email from the leakage manager of Severn Trent who, the SFO showed, had devised a ‘template for deceit’. In his email, titled, ‘Lies, damned lies and statistics’, he wrote, “You asked me, ‘are you telling porkies?’” [pork pies = lies] “My answer is, I have done what I believed was necessary to deliver a certifiable 340 megalitre target. Because I was unable to do that within the bounds of credibility, I have had to be selective in the data I have used and put forward.

“I think it depends on your definition of porkies. I have been economical with the truth. I think I have had to go too far.”

The court decided that porkies had indeed been told and fraud committed.

Water bills are due to go up by 6% this year, twice the official rate of inflation. The water companies are due to make £1bn this year, 20% up on last year. Invest it in the industry? Not likely. £700m will go straight out as dividends. The water companies are having a laugh.

It is clear the water companies think that Gordon Brown and New Labour are fools. They are not far wrong. Severn Trent has committed real crimes with real victims. We ask Gordon Brown – how many frauds do these firms have to commit before they are sent packing without compensation, and water taken back into public ownership where it belongs?

Probation officers vote to strike after govt breaks pay agreement

From the Morning Star:

PROBATION officers voted overwhelmingly for strike action on Monday after government employers refused to pay the increments due to them from April in breach of their contracts.

Members of probation union NAPO voted 94 per cent in favour of action in a strike ballot, with a hefty 52 per cent turnout.

Union officials accused the government of breaching members’ contracts by refusing to pay the increments, which are paid annually and reflect experience.

NAPO members are still awaiting a pay offer for a settlement, also due in April.

The union’s newly appointed general secretary Johnathan Ledger said that members had sent a “very clear message” to probation employers with this ballot result.

“The fact that 94 per cent support industrial action reflects their anger and frustration at the way they are being treated by their employers,” he stressed.

“We still hope that we can resolve this dispute through negotiations, but, if necessary, members have shown their readiness to take industrial action including strike action.”

Next Monday, NAPO, together with sister justice unions Public and Commercial Services (PCS) and the Prison Officers Association (POA), will be holding a major meeting with parliamentarians to discuss common concerns, including attacks on public workers’ pay and conditions.

The meeting will be addressed by, among others, recently retired NAPO general secretary Judy McKnight, Labour MPs John McDonnell and Diane Abbott, TUC general secretary Brendan Barber and POA general secretary Brian Caton.

Mr Caton offered his union’s full support for NAPO members’ decision to take action.

“Their requests over many months had never been answered by this government, so you can’t blame them for taking action,” he said.

Mr Caton said that police, prison and probation officers were “very disappointed” at the way the government has handled their pay, stressing that co-ordinated action was needed to defend all public sector workers’ pay.

“I hope that the TUC will straighten its back and stand up to a government that does not seem to care for its workforce or supporters,” he added.

Justice Secretary Jack Straw voiced his hope that industrial action would not take place and shamelessly claimed: “We are in a period where, after considerable improvements in public-sector pay, everyone is having to accept that there is less money available.”

Union leader calls for tax cuts funded by levy on oil companies

From The Guardian:

Derek Simpson, the joint general secretary of Unite, said a levy on the profits of oil companies, which are currently profiting from high oil prices, would boost Gordon Brown’s standing with voters.

When Labour came to power in 1997, it imposed a one-off windfall tax on utility companies that raised more than £5bn to fund the New Deal programme to get the unemployed into work.

“How popular do you think it would be, given that oil companies are raking in billions, if he imposed a windfall tax on them and distributed it through something like a council tax cut?”, Simpson said in an interview in the Financial Times.

Simpson told the paper that this would resonate with voters, unlike other government policies, like extending the time allowed for terrorist suspects to be held before charge, which did not “address the concerns of real life people”.

In a follow-up interview on BBC Radio 4’s Today programme this morning, Simpson said: “The first thing is to try to convince those core Labour voters that appear to be deserting in droves that the Labour party is on their side and is pushing for their interests, rather than the interests of others.

“People are very concerned currently about the high price of fuel and the rising cost of food, the lack of affordable housing, and there is still a residual concern about pensions in the future and job security.

“These issues need to be pushed and measures need to be put in place that would secure people’s concerns.”

Simpson faces a leadership challenge from Jerry Hicks, and the latest news from that campaign is as follows:

Last week a legal challenge was lodged with the certification officer questioning the right of the Unite Joint General Secretary Derek Simpson to remain in office.

The challenge has been launched by former Rolls Royce convenor Jerry Hicks who until recently represented workers in the Aerospace industry on the Unite Executive Council.

In 2002 Derek Simpson was highly critical of the decision to extend Sir Ken Jackson’s period of office by two years beyond retirement but now he has hypocritically arranged for an extension of office for himself until 2010, when he will be 66. Mr Hicks has now questioned the right of Mr Simpson to remain in office on the same basis.

Derek Simpson also questioned the right of Sir Ken Jackson to remain as AEEU General Secretary as he had only been elected by the minority former EETPU section of the union. But on the same basis Derek Simpson has only been elected by the AEEU section of Unite. Members of the former MSF, Unifi and GPMU have not had a democratic vote on who should be the General Secretary.

The union has said that Mr Hicks’ application had been rejected which is untrue. It has been confirmed by the certification officer with both Mr Hicks and Unite the union that the claim is in the process of being considered. It is hoped that the result will mean that an election for General Secretary may be called for sometime later this year.

It is widely accepted that what happened in 2002 opened the door for a positive change in the union and that’s precisely what is being sought now.

Derek Simpson won the election in the AEEU in 2002 against Sir Ken Jackson by a narrow majority of 410 following a recount. Jerry Hicks, who was one of the key figures in getting Simpson elected, has announced that if he is successful in his legal challenge then he will stand as a candidate in the election for a new General Secretary.

Unite is not only the country’s biggest trade union it’s also the biggest single donator to the Labour Party having given £ millions of members’ money over the last few years. Last year Derek Simpson gave his backing to Gordon Brown helping to ensure he was unopposed for the Labour Party leadership.

Mr Simpson has also been criticised for abandoning his election pledges. Despite numerous mergers (the latest proposed being with the American USW union), which in principle Mr Hicks supports, many union members do not feel stronger and more able to defend themselves.

With 2.1 million members and 100 sponsored MPs anti trade union legislation is unchanged.

Even the most basic right to re-instatement when unfairly dismissed has not been achieved under Mr Simpson’s leadership.

With the Labour Party facing a funding crisis this challenge has the potential of being the single biggest change not just within the union, but also in the union’s relationship with the New Labour government.

Jerry Hicks said today “With this challenge comes an opportunity, perhaps the last chance under this New Labour government of really redressing the imbalance between us and the employers.”

Will there B&B a recession?

For the manufacturing sector – which is, unlike financial services sector, productive – a recession is approaching:

UK manufacturing showed no growth last month for the first time in almost three years, a survey has shown, but there was no let-up in inflationary pressures as firms raised prices at the fastest pace since the index began.

The Chartered Institute of Purchasing and Supply/NTC purchasing managers’ index fell to 50.0 in May from 50.8 – the weakest figure since July 2005. The index measures activity among UK manufacturers, with a level above 50 indicating expansion and below showing contraction.

Vicky Redwood at Capital Economics said the figures suggested the “industrial sector is on the verge of recession”. The Cips survey was more pessimistic than EEF data published yesterday that showed a slight pick-up in orders. However, Cips is a broader measure than the EEF, which focuses more on high-end engineering, such as carmakers.

Both surveys pointed to firms increasing prices to offset rising raw material, energy, component and freight costs.

The purchasing managers’ output price index rose to 62.0 from 61.9 in April. Output prices rose in each of the past 34 months, the most sustained output price inflation since the series began in 1992.

More evidence that retailers are passing on rising costs to customers may concern the Bank of England’s monetary policy committee when it meets this week to discuss interest rates. The MPC kept interest rates on hold at its meeting last month because of concerns over inflation.

Howard Archer at Global Insight said: “The further rise in the prices-charged index in the purchasing managers’ survey reinforces the belief that the Bank of England will not be cutting interest rates again soon, even though weak manufacturing activity adds to fears that the economic downturn is deepening.”

The input price index eased slightly from record highs the previous month but remained at an uncomfortable level of 75.9. New manufacturing orders fell for a fifth month. Weak domestic demand was the main drag on total order books as new export orders posted a slight gain.

Archer said: “Most manufacturing data and survey evidence indicates that the sector is now buckling markedly as it is pressurised by slowing domestic demand, weaker activity in key export markets, elevated energy and commodity prices, and tight credit conditions.”

The bail-out of Bradford & Bingley by a US private equity company – in return for almost a quarter of the bank – shows how unstable the banking sector is, and how chaotic it will become:

Bradford and Bingley collapse brings UK recession closer
By Socialist Appeal
Monday, 02 June 2008

Bradford and Bingley are the latest bank to catch a cold in the present financial crisis. They’ve declared a loss of £8m for the first four months of 2008. This compares with £108m profits they made in the same period last year.

The main reason for the losses is because they’ve had to write down £89m of their assets. ‘Write down’ is banker-speak for the fact that they realise they can whistle for their money.

B & B is the market leader in ‘buy to let’ mortgages. One of the features of the housing bubble which has now burst is that people were buying houses, not only to live in, but also to lease to other people. This of course tended to push house prices even higher. ‘Buy to let’ was based on the assumption that house prices would just keep on rising. In that case not only had the buyer acquired an ever-appreciating asset, but they could also make enough money by letting it out to pay the mortgage. Free money!

When the housing bubble burst, the whole logic of ‘buy to let’ went into reverse. Not only is the house price going to fall after the deal has been struck, so the buyer is in effect stuck in negative equity, but tenants are expecting to pay less rent, since they know house prices are headed south. The ‘buy to let’ market, worth £120bn last year is now effectively dead in the water. And of course all those people jumping ship from the housing market will make the house price collapse that much worse.

So the number of those in arrears with B & B has risen sharply this year. It’ll get worse. The bank has had to sell 23% of its shares to the private equity firm Texas Pacific for £179m. Texas Pacific are not philanthropists. They buy into firms for what they can screw out of them. Bradford management are playing a dangerous game.

B & B have also been forced to ask for a rights issue of £258m. This means that shareholders are expected to reach in their pockets and stump up for extra shares. Now ‘investors’ don’t really buy shares so they can have further demands put upon their wallets. They expect to sit at home and watch the dividends roll in and the shares going up. So a rights issue will always hit existing share prices.

And so it has proved. Bradford shares have dropped by two thirds in the past six months and fell 40% in the last month. The announcement of the loss meant B & B shares took a further tumble. The panic spread to other bank’s shares. After all, they’re all in the same pickle.

Bradford and Bingley have just demonstrated they had an urgent need for more than £430m. These are panic measures. You can be sure they’re in big trouble.

We can all have a good laugh at the problems of financial institutions. But the trouble is, the financial crisis is impacting on the real economy. House prices are now definitely falling in the UK – maybe by 10% a year, maybe more. Does that mean it’ll be easier to buy a house? No, it will be harder. Interest rates are higher, which means a mortgage will cost more. The Bank of England would probably like to cut rates, but inflation is on the rise, so that’s ruled out. The banks are adjusting over a million mortgage interest rates this year, and it’s going to hurt. They are determined to spread their own misery around to the rest of us.

The level of mortgage approvals has actually halved over the past few months, since the house price bubble burst. No longer will the likes of Northern Rock chuck 125% mortgages at borrowers, so you can build a patio and have a holiday in Thailand while you’re buying a house. No, they want only fine, upstanding and, above all, solvent citizens on their books.

A house price collapse doesn’t just affect the unfortunates who buy at, say, £200,000 and find their precious house is only worth £150,000 a year later. They’re stuck in negative equity. They can’t afford to pay for the house and can’t move out. Negative equity blights whole neighbourhoods, as it did in 1992 in the last house price collapse.

And of course it brings new housebuilding to a stop. There are early signs that that is already starting to happen in Britain.

The Financial Times published an article (June 1st) headed ‘UK nears recession’. They quote Michael Saunders of Citigroup as saying. “Lots more economic pain lies ahead. The UK economy is heading close to recession and the recession risks are rising.” The recession is an inevitable outcome of unplanned capitalism, interested only in profit. It’s not our fault. Let’s make sure they don’t dump the pain of their recession on the working class.