Looking through the photographs I took in Tewkesbury in May, I found two pictures of Chuck Pavey and his floodwater hand. There’s Pavey, a 66-year-old retired electrician in a Manchester United hooded top, a wispy white pageboy haircut and dark glasses, standing by a wall on the bank of the River Avon. He’s holding his right hand horizontally in the air, about thirty centimetres above the top of the wall, which comes up to his waist. The olive-coloured Avon ripples away, three or four metres further below. In the background is an arched pedestrian bridge, a willow tree with its lower fronds stroking the water, and the massive red brick wall of a derelict flour mill. In the next picture, Pavey is standing next to the freshly whitewashed wall of the White Bear pub, looking more agitated, as if he’s afraid I still haven’t got the point. It’s the same stance, except that this time the hand has risen above his head. It hovers about two metres above the level of the road; it comes three-quarters of the way up the casement of the pub window. I got the point. If you’d tried to stand where Pavey was standing on Monday, 23 July 2007 – the day water levels peaked in Tewkesbury – you’d have been treading water.
At first there seems nothing in the pictures, apart from Pavey’s hand, to hint at the fury of the flood that turned the old town of Tewkesbury in Gloucestershire, at the confluence of the rivers Severn and Avon, into an island on the banks of a vast brown waterway resembling the Mississippi Delta. There are clues, though. In the first picture, you can see two jetties that were mangled by the torrent and haven’t been repaired. The wooden boards were sucked off and swallowed by the flood, and only the metal skeleton remains. In the second, the new paint on the pub indicates that the insurance has paid out and the flood damage has recently been put right.
There are a couple of A4 sheets of yellow paper stuck in the pub window. One reads: ‘gl20’ – the local postcode – ‘new houses no insurance’. The other has a picture of a house, with a wavy line representing water cutting off its bottom half. The slogan is ‘stop building on flood plain: no more’ and then in tiny letters ‘please’ and – back to big letters again – ‘mr shaw.’ This is a reference to Chris Shaw, Tewkesbury Borough Council’s director of planning.
Pavey, an activist in the Severn and Avon Valley Combined Flood Group, a band of concerned citizens who believe that flooded Tewkesbury was the victim of a greedy, callous government, is one of those people you feel you could trust in a tight spot. He’s a saintly man who is forever a-doing, volunteering, raising money, inventing practical solutions to concrete problems and helping people out. So it was during the floods, when a water treatment plant in Tewkesbury belonging to the private company Severn Trent was overwhelmed. Much to the surprise of almost everyone in the county, it turned out that this one waterworks, at a place called Mythe, was the sole, irreplaceable source of supply for 350,000 people. For ten days, much of urban and rural Gloucestershire was pushed back in time by a couple of centuries. It was completely without running water.
Pavey commandeered a food trolley from Marks and Spencer and set himself the task of pushing it around the sodden, cracked streets of central Tewkesbury, delivering hundreds of litres of bottled water to the aged and infirm, for no reward but thank yous. ‘All that week, when we ran out of water, I delivered water to all the old people’s places who couldn’t carry it and that,’ he said as he took me on a tour of his old clients. ‘Sometimes they brought you water in little tiny bottles and little old ladies could carry that. But sometimes they brought five-litre bottles that little old ladies had no chance of carrying.’
He introduced me to Gladys Mills, a former farm worker, now 86 and living in sheltered housing. ‘They said to use bathwater for flushing the loos,’ she explained. ‘You can’t carry much at my age. A little pint bottle is quite heavy.’ He introduced me to John Russell, an 88-year-old ex-engineer in a residential care home. ‘I saw one old lady trying to stagger off with six bottles,’ Russell said. ‘They were carried for her by a complete stranger.’ He introduced me to Joan Bufton, whose daughter needs kidney dialysis three times a week; at the height of the floods she was pushed out of Tewkesbury in a wheelchair along a disused railway line. Bufton’s husband suffered a stroke after it was over. ‘I just think it was the trauma of all this,’ she said. ‘And he’s not the only one … unless they do something it will happen again, I don’t care what anybody says.’
As we walked and talked, Pavey would adopt a scolding tone in his reminiscences: towards the businessman who kept filling five-gallon water containers from the town’s emergency supplies until he got ‘thumped’, for instance; but he praised others. He didn’t seem angry, whereas Dave Witts did. Witts, a fellow Combined Flood Group activist, was calm and polite as he spread documents, reports and evidence out on his kitchen table, but he seethed with victimhood. His house, which is not on the Environment Agency’s at-risk flooding map, was flooded last July; it took five months to repair. He believes the government has starved Tewkesbury of money for flood protection, while encouraging development in flood-prone areas. The government, he pointed out, was planning to build three million houses by 2020. And why, he asked, did they want so many? ‘If you believe the Daily Express,’ he said, with a look that suggested he was being bold to raise the idea that I might not, ‘we’re going to have 600,000 immigrants a year from now on.’
Ken Powell was sitting with us, listening. He was mayor of Tewkesbury at the time of the floods, though not the only one. The town has two mayors: one representing the borough of Tewkesbury, which covers a number of other communities, has a multi-million pound budget and heavy responsibilities, and is based in a large modern building in Tewkesbury’s southern approaches; and one representing the town council of Tewkesbury, which has almost no money, virtually no formal responsibilities and sits in an 18th-century town hall on the high street. Powell was the lesser mayor, and it rankled. It still does. Being mayor number two, he had to stand behind the borough mayor at municipal events.
‘The second-fiddle aspects,’ he said, as he drove me back from Witts’s house. ‘They opened a new heritage centre down the bottom of town. I had to play second fiddle there. We have a thousand years of history with the Mop Fair, and every year it has to be opened by the mayor, but it’s the borough mayor, not the town mayor. It just sticks in there a little bit, but there’s nothing you can do about it.’
What unites Powell, Pavey and Witts? If a visitor from 18th-century France were to spend time in Tewkesbury, and if he were asked to describe a new Three Estates for the town and English towns like it, he might reasonably conclude that Tewkesbury was divided between public servants, private servants and localists. Powell, Pavey and Witts are localists: locals, for sure, in the sense of being long-time residents, but also localists, convinced that local people know better than outside experts – even on highly technical questions – what happens in their town, and what is best for their town; convinced that public servants, the bureaucrats and Westminster politicians, are being especially mean to Tewkesbury, and doing it on purpose.
The localists make fair criticisms of the status quo in their reports. They complain, correctly, that the Environment Agency, away from coasts, only considers the dangers from fluvial, or river, flooding, and not from pluvial flooding, also known as flash or surface flooding, the kind directly caused by heavy rain. They complain that local councils will not or cannot resist pressure from wealthy developers who would hem in or even build on flood-prone land. But this doesn’t entirely explain the consistent venom of localists towards public servants – almost an assumption of malice – compared to their relatively mild tone when talking of private servants, the representatives of the insurance companies, the big housebuilders and Severn Trent. Nor does it account for the assumption of complete lack of liability on the localists’ own part. ‘The biggest Confidence Trick by a British Government since the Second World War’ is how the Combined Flood Group describes the government’s guidance for councils on building on flood plains. ‘Loss of the life [sic] comes third in the government’s priority.’
In Tewkesbury in general there is more hostility towards the government, the council and the Environment Agency for not stopping housebuilders than there is towards housebuilders for building houses, or buyers for buying them. When insurers raise their premiums, more blame is directed at the government for not spending enough on flood defences than at insurers for raising the premiums, or at people who choose to live in a flood-prone valley but don’t like paying extra for it. There is more hostility towards the Environment Agency for not warning Severn Trent that the Mythe works was on a flood plain (even though, in fact, it did) than towards Severn Trent for not being prepared for floods.
I was curious about how Pavey felt towards Severn Trent, this highly profitable, private monopoly which had chosen not to provide a back-up in case Mythe failed, and whose subsequent mess he, unpaid, had voluntarily helped to cope with. He told me, but only because I asked. ‘I suppose I think it should be nationalised,’ he said. ‘I don’t think anybody should have any particular control over water. Everything on earth relies on water to live.’
Categories overlap, and Powell, the ex-mayor, besides being a localist, used to be a public servant – he worked for the fire brigade – and is now a private servant, working as an electrician for Severn Trent, based at Mythe. After the waterworks was flooded he toiled hard to help get it back on line. Severn Trent gave him £150 as a thank you. ‘I gave part of that money to the mayor’s charity fund,’ he said. ‘We were there, doing our job. Trying to get that works back and running so people could have clean water to drink and wash in, and that was our priority. Most of the people who worked there were out of water themselves.’
Since the flood, Severn Trent has announced plans to build a pipeline so that, should Mythe fail again, its output can be replaced. This will cost the company £25 million. When asked why it hadn’t been done before, the company explained that the risk of Mythe failing was too low to justify the expense, and funds for investment were limited.
Last July, a few days after the floods arrived, with 350,000 people still cut off from the first necessity of life, Severn Trent held its annual general meeting. It announced profits of £325 million, and confirmed a dividend for shareholders of £143 million. Not long afterwards the company, with the consent of the water regulator Ofwat, announced that it wouldn’t be compensating customers: all would be charged as if they had had running water, even when they hadn’t. Colin Matthews, chief executive of Severn Trent at the time of the floods, left the company soon after this to head another private monopoly, BAA, arriving just as the baggage-handling chaos at BAA’s new Terminal 5 at Heathrow was peaking. In his last full year as head of Severn Trent, he was paid £1.2 million.
Like many Severn Trent workers, Ken Powell owns shares in the company. I asked him if he hadn’t felt a bit guilty taking the dividend when his fellow townsfolk were going without water. ‘I don’t see why I should,’ he said. ‘I went in there and worked hard to give people back their water.’
The Severn is Britain’s longest river. It stretches 220 miles from its source in the Welsh hills. When the river makes trouble for Tewkesbury, it begins there, far to the north-west, with downpours that take days to swell the Severn downstream. There’s time to act, and usually there’s no need; the river bloats out into the meadows of the floodplain for a few days, one or other of the usual handful of houses gets flooded, and the waters recede. That, at any rate, is the standard script. But in July 2007 the source of the trouble was much closer, and hit much faster.
You can see the Cotswold Hills from Tewkesbury, low, amiable-looking bumps on the horizon a few miles to the east, separating the Severn and Thames valleys. Their highest point, Cleeve Hill, isn’t much more than three hundred metres. The Cotswolds are an escarpment. On the eastern side, the land rises gradually from the Thames valley, from the direction of Oxford; on the western side, however, looking towards Cheltenham, Gloucester and Tewkesbury, the hills fall away sharply. When it rains on the Cotswolds, the rivers that run off towards the Thames follow that gentler, slower course. The obscure rivers that take the Cotswold rain towards the Severn and the Avon, in contrast, deliver their load to Tewkesbury in as little as two hours.
Even before July, 2007 had been established as a summer of floods. The summer was wetter than any since records began, 250 years ago. It started in late May, with peaks in mid and late June. In Yorkshire and Humberside, the worst affected areas in June, 27,000 homes and businesses were flooded. In low-lying Hull, pumps failed to cope with the deluge, and a man trying to clear a storm drain died of hypothermia, surrounded by rescuers who could not free his trapped leg. A man and a teenage boy were swept away by a flood torrent in Sheffield; the city was cut in half by floodwater. In Gloucestershire itself, schools and roads were closed, and homes and businesses flooded, but the most perilous impact for Tewkesbury of that earlier series of ferocious, unsummer-like storms was more subtle.
The Jurassic limestone of the Cotswolds had started May bone-dry – drier, in fact, than ever previously recorded. But by late July, the soil of the hills just east of Tewkesbury – Bredon, Alderton, Woolstone, Nottingham, Cleeve – was saturated. If more rain fell, the only place for it to go would be down to the valleys. And more rain did fall.
For weeks before 20 July, the weather had been behaving strangely over north-western Europe. If you were to look at a weather map for a regular July, it would show the jet stream – the ultra-fast wind, roaring at high altitude, that marks the boundary between cold polar air and warm tropical air – shooting north-east in a line between Iceland and the UK, across the Faroes. Britain would be comfortably on the mild side of the line, experiencing the benefits of the high-pressure zone centred on the Azores. Look at the same map for July 2007, however, and you see the jet stream take a sharp right turn halfway across the Atlantic and sweep through Brittany before heading across Central Europe into Poland. The whole of the British Isles was on the wrong, low-pressure side of the line. As if this wasn’t unpleasant enough, the air and sea temperatures still corresponded to summer. Warm air is capable of carrying more moisture before it falls as rain, leading to the short, intense, highly localised showers that cut short summer picnics and bring out the covers at Wimbledon. The combination couldn’t have been worse: saturated ground, the storminess of winter, and the moisture-laden air of summer.
On Thursday, 19 July, a damp, subtropical mass of air rolled from France into a depression over southern England and all but locked into place, like a ball in a cup. When the thick clouds in this air mass burst, they dumped extraordinary intensities of rain. It rained most ferociously on and around the Cotswolds. On Friday afternoon, Pershore, just north of Tewkesbury, was experiencing ten millimetres of rain an hour. Gloucestershire got two months’ worth of rain in 24 hours. Between Friday and Saturday the worst-hit hills of the Cotswolds had more than 350,000 tonnes of water dumped on them. Much of this water soon found its way west, seeking the Avon and Severn. Normally sleepy brooks and streams became savage torrents. The major obstacle between these suddenly angry watercourses – the Carrant Brook, the Tirlebrook, the Little Fid and the Swilgate – and the two big rivers of the valley was the town of Tewkesbury, its ten thousand inhabitants and the Mythe waterworks.
Gloucestershire’s public servants – the councils, the health service, the police and fire service – had been well warned by the Environment Agency and the Met Office that there were likely to be problems with unusually heavy rain on the Friday, although nobody knew exactly where or when. The county’s emergency command system, known as Gold Command, opened up at its base in Quedgeley, south-west of Gloucester, on Friday morning, ready for the worst. The private servants knew too: Severn Trent says it issued an ‘emergency weather warning’ to its managers on Friday. But the company had locked itself into a mindset that precluded the possibility that its waterworks would flood.
Severn Trent periodically commissioned an engineering consultancy, Tynemarch, a spin-off company from Imperial College, to assess the risks to its treatment and supply network. By Severn Trent’s own admission, Tynemarch identified Mythe as a critical point of failure in the 1990s: if it shut down there was no back-up. But according to Severn Trent, Tynemarch’s most recent report, in 2004, assessed the risk of this happening through floods to be insignificant.
Short of burglary, there is no way to verify what the Tynemarch experts told Severn Trent in 2004, since Severn Trent refused to let me see the report on the basis that it was commercially confidential; Severn Trent, as a private company, is exempt from the Freedom of Information Act, and Tynemarch did not return my call. But here is what Martin Kane, Severn Trent’s director of customer relations, said in an interview with Radio Gloucestershire shortly after the floods: ‘The risk of flood defences being breached at the Mythe was – I think it was something like a one in a thousand chance of that happening, and the flood defences were considered to be absolutely secure, and we passed the 1947 floods without an issue, and we’ve had waterworks on the site for over a hundred years without any problem. So in terms of what were we looking for on the site, breaches of the flood defences were not part of the equation.’ He went on: ‘It was risk assessed, and the [assessment] was that it won’t happen. Therefore there wasn’t a plan for that.’
The Environment Agency takes a different view of the risk to Mythe. The agency’s publicly available flood-plain maps show large parts of the Mythe works covered by water in the event of a once in a hundred years flood – that is, a flood with a 1 per cent chance of happening in any given year. There are two ways of looking at that risk. Severn Trent’s way was: it hasn’t happened in a hundred years – actually, 137 years; the works opened in 1870 – so it’s not going to happen. The other way is: there’s a one in a hundred chance of it happening, and it hasn’t happened for 137 years, so a catastrophe is well overdue. Hardened gamblers will tell you that the chance of a coin falling heads or tails in any one flip is exactly the same. But I doubt that even Colin Matthews would take his turn at Russian roulette with a light heart on the basis that a revolver had been fired five times and not gone off once. Mathematically, over 137 years, the chance of at least one flood on a site likely to flood every hundred years is 75 per cent.
What makes Severn Trent’s relaxed attitude even more surprising is that the Mythe treatment works did come close to being catastrophically flooded in 1947 – floodwater entered basements – and in 2000, when staff got as far as shutting down key equipment. Then, the Severn peaked at 12.07 metres above sea level, only 45 centimetres below inundation point. One of the consequences of Severn Trent’s certainty that Mythe was floodproof is that the county’s emergency planners in Quedgeley had no inkling of how important it was. Severn Trent’s managers hadn’t taken part in emergency planning exercises, and when Gold Command convened at 9.45 a.m. that Friday, nobody from the water company was there, and nobody remarked on their absence.
The quickly swollen rivers shooting off the Cotswolds combined with flash floods in unexpected spots, many of them on higher ground, caused by the sheer local intensity of rain. The fire service took its first flood emergency call from a business in Chipping Campden at 11.24 a.m. Less than an hour later they were dealing with the first threat to life: a group trapped in a car by rising waters near the village of Adlestrop. By then the emergency services switchboards were lighting up with hundreds of calls. Minor and major roads across Gloucestershire were being snipped into unconnected sections by floodwater, just as the school holidays were beginning. The M5 and M50 motorways began to flood at lunchtime; by late afternoon both were closed, as were most of the roads that would normally have been used to bleed traffic off. All trains from London to Cheltenham, Gloucester, Bristol, Worcester and Birmingham were cancelled. Thousands of motorists and train passengers were stranded wherever they happened to be.
In Cheltenham, the River Chelt burst its banks by noon. More than a hundred roads were underwater by 4 p.m. Some residents were flooded for a second time in a month. In Chipping Campden, staff at a Ford dealership abandoned their premises when cars started to float out of the forecourt. In Gloucester, where most of the city centre was underwater, witnesses saw a motorist driving through a deeply flooded road crash into the back of a completely submerged van. In Bishops Cleeve, almost all roads were impassable. In Moreton-in-Marsh, manhole covers popped up like the lids on Smartie tubes and sewage gushed out.
In Tewkesbury, the small Cotswold rivers smashed up against roads and bridges. Following the lines of least resistance they and then the rising Avon and Severn encircled the town. Of the four thousand homes flooded in Gloucestershire in July, 1500 were in Tewkesbury. At the height of the floods it was completely cut off by road. Aerial pictures showed Tewkesbury’s medieval abbey and its grounds seemingly afloat in a sea the colour of builder’s tea, like some fantastic Arthurian vessel attempting to moor at the half-drowned jetty of the town’s old high street.
As it happens, the Environment Agency’s main flood-warning control room for the west of England is on an industrial estate in Tewkesbury. But the town doesn’t use flood sirens, and the agency’s archaic website uses text, rather than maps, for its warnings. Residents get an automatic phone message from the agency warning of floods only if they’ve signed up for one, and on average only two-fifths of the people at risk do sign up. Besides, as Anthony Perry, flood-risk manager for Gloucestershire, explained, the key to the July floods was the water pouring off the Cotswolds, and the agency doesn’t give warnings for those small, nippy rivers. ‘The limitations are small watercourses, where they respond very quickly to flash flooding,’ he told me. ‘It’s technically very difficult to provide a flood-warning service to give a two-hour lead-in time. We don’t provide any flood warnings for the Swilgate or the Chelt at the moment and that’s something we want to do. But it’s difficult. Because of the speed. The rainfall that hits a rain gauge will be into the system and within the town within a few hours. It’s something we’re looking at now: is two hours better than nothing?’
The Environment Agency’s flood warning for Tewkesbury – ‘Flooding of homes and businesses is expected. Act now!’ – didn’t come until 6.53 p.m. on Friday. A severe flood warning – ‘Act now! Severe flooding is expected with extreme danger to life and property’ – followed at 5.45 a.m. on Saturday. By that time, many residents had already been flooded; others had been woken by the sound of rescue helicopters, and the first person in Tewkesbury to die as a result of the floods, 19-year-old Mitchell Taylor, had drowned while taking a short cut past the abbey on his way home from the pub. Passers-by heard him yelling for help – he couldn’t swim – and tried in vain, via mobile phone and the 999 centre, to guide a helicopter to him. His body was found a week later by an Italian hovercraft crew.
Overnight, the waters around Mythe rose with a speed that staggered the flood specialists. Perry showed me a chart plotting the level of the River Severn at the bridge next to the waterworks, sourced from an agency gauge. A red line charts the story of the floods of winter 2000; from a high base the river rose gradually over two days, levelled off for a week, and then slowly sank back. The blue line showing what happened in July 2007 is quite different. Because it was summer, the Severn was running relatively low before the rains. At 1.48 a.m. on Saturday, 21 July, the gauge readings began to shoot up almost vertically. In the next seven hours, the water rose 4.4 metres. Soon afterwards, with the water still rising, the gauge broke.
Severn Trent subscribes to the agency’s flood warnings and was monitoring them on Friday at its operations centre in Birmingham. But as the rivers swelled, the company and the Environment Agency, without realising it, weren’t understanding each other. Despite the agency’s severe flood warning at 5.45 a.m. on Saturday, Severn Trent still refused to believe that its waterworks would flood. Throughout the day, the company called the agency, asking for updated predictions of what level the river would peak at. The agency obliged; and, since their predictions were lower than Severn Trent’s flood point of 12.52 metres, the company didn’t feel the need to warn anyone that they were at risk, or what the consequences would be. Severn Trent argues that it based its actions that Saturday on those agency predictions of the exact peak flood levels through the day. The Environment Agency maintains that the predictions were provided as a courtesy, and that what mattered was the earlier severe flood warning.
Perry showed me the agency’s flood map for Tewkesbury. ‘Half of the [waterworks] site is under water in a one in a hundred year flood,’ he said. ‘The map shows that. So where we issue a severe flood warning, it is to say half of that site will be flooded. We try to educate [Severn Trent] about what we are here to provide and we made clear to them that we are not here to provide millimetre-accurate warnings at Mythe. We issued a severe flood warning, which includes them, and we expect them to take action. After the 2000 flood, when Severn Trent came close to taking action, there’s a requirement for them to have a business continuity plan.’
What Perry meant by ‘business continuity plan’ was an alternative to Mythe if Mythe failed. But Severn Trent didn’t have one. Not until 9.41 p.m. on Saturday night, almost 16 hours after the severe flood warning, did the company alert Gloucestershire’s fire and rescue service to the danger to the waterworks. By that time it was too late. Niall Hall, who was on duty in the Environment Agency’s control room on Saturday night, remembers getting a phone call from the fire brigade saying ‘Mythe’s going to go under.’ ‘They were saying they had high-volume pumps, where could they pump the water to? I said: “Nowhere, unless you’ve got hoses that can go four miles.”’
Hall recalls a phone conversation with staff at Severn Trent’s HQ that night. ‘They were panicking,’ he said.
‘They were struggling,’ Perry said. ‘They didn’t understand how it all worked, really.’
‘If you’ve got infrastructure by a river, there’s a risk,’ Hall said.
‘But it’s what level of risk,’ said Perry. ‘It’s having plans, in case, isn’t it.’
At midnight, Severn Trent bowed to the inevitable, and at 1.45 a.m. began a controlled shutdown of the plant, to save electrical equipment when the inundation happened. At 2.16 a.m., water gushed in from the Avon side, followed shortly afterwards by water from the Severn side. With the shutdown complete the flooded site was abandoned at 6 a.m.
When he appeared before MPs after the emergency, the head of Gold Command and Gloucestershire’s chief constable, Timothy Brain, complained that he and his staff hadn’t been told of the Mythe crisis until seven hours after flood water had entered the treatment works. They had no idea that a water cut-off was even a risk until it was about to happen. Severn Trent executives who gave evidence at Gloucestershire County Council’s inquiry into the floods said they would have needed at least two days’ warning of a severe flood for a temporary barrier to be put up in time to save the waterworks. Yet when, between Sunday and Monday, a similar emergency faced the National Grid at a vital electricity substation in Walham – the failure of which would have triggered the evacuation of half a million people from Gloucestershire – the emergency services and the military managed to complete a temporary barrier to hold back peaking floods less than 15 hours after the Grid first contacted the fire service for help. On that timescale, had Severn Trent asked for help earlier, Mythe could have been saved.
‘The critical thing Severn Trent failed to do was to let Gold Command know in time to protect that vital piece of infrastructure, as National Grid did for Walham,’ said Martin Horwood, MP for Cheltenham. ‘At Walham, Gold Command brought in the army and protected it, not with much time to spare, but they protected it. Severn Trent never joined up the dots.’
On average, a Severn Trent customer uses 138 litres of water a day. The washing machine, the bath and shower, the tooth-brushing and shaving, the dishwasher and washing-up, the flushing of toilets, the drinking, the cooking, the car-wash, the dozens of times when a Briton unthinkingly turns on the tap to wet a cloth or wash hands or boil a kettle: it adds up. As news spread on Sunday that mains water was going to be cut off to much of Gloucestershire, householders stampeded to wash clothes and fill baths. Normally the reservoirs would have stored enough for a day and a half, but by noon water was pouring out of Churchdown reservoir so fast the meters could no longer register it, and by early on Sunday evening the taps started to cough, rattle and go dry. The electronic surveillance organisation at the centre of Britain’s efforts to fight international terrorism, GCHQ, was forced to scale back operations at its new doughnut-shaped building on the edge of Cheltenham because its five thousand staff could no longer go to the lavatory.
Severn Trent had contingency plans to deal with water cut-offs. Government rules say that the private water industry as a whole should be able to supply 200,000 people with ten litres of water per person per day for seven days. Severn Trent had to supply 350,000 people for between seven and 12 days, and the company soon realised that ten litres wasn’t enough. One researcher at the post-flood inquiries said her work in African communities dependent on hand-carried well water showed 20 litres was the minimum needed for drinking, cooking and basic hygiene.
The company began buying bottled water in vast quantities, and scoured the country for bowsers to augment its own depleted stocks. It thought it would need 900; by the end of the crisis it had 1400 in place, effectively the country’s entire inventory. In the early days, the distribution of bottled water was chaotic, and Severn Trent’s efforts to keep the bowsers filled were unsuccessful. On Monday, in Longlevens in Gloucester, amid panic-buying, chancers were spivving water in the Co-op car park for £4 a bottle. The county council was calling contractors in the US, trying to get supplies of a disposable toilet designed for hunters and hikers called a wag bag. On Tuesday, a 69-year-old woman in Bishop’s Cleeve told the Gloucestershire Echo: ‘We have only got three-quarters of a bucket of water left. We are having to flush the loo with pond water. If we can get drinking water it will be OK. We just have to give up on washing.’
The big tankers the company normally used turned out to be useless in the narrow, winding streets of Gloucestershire villages, and smaller tankers were in short supply. Severn Trent cobbled together a mixed fleet of beer, milk and water trucks, all of which turned out to have different connectors. A cross-county bowser audit at dawn on Thursday, four days after the flood, found that three-fifths had been drained, vandalised or stolen. Some later turned up on eBay.
The company bodged fixes, opened its corporate wallet – by that Friday it was buying six million litres of water a day, equivalent to the usual daily bottled water consumption for the whole of Britain – and, crucially, turned to the army, which took over much of the organisation and distribution work from a base at Cheltenham racecourse. The fact that there don’t appear to have been any serious public health consequences came down to three factors: Severn Trent trucked special deliveries of water to hospitals and other essential users; the army; and the ad hoc, unpaid generosity of neighbours and volunteers like Chuck Pavey, who helped the elderly and infirm get their water. Tony Wray, who took over as Severn Trent’s chief executive after the emergency ended, told MPs: ‘We were absolutely inundated with the sheer scale of this.’
Ofwat, the quango which regulates the private water industry in England and Wales, accepted Severn Trent’s argument that it should be excused the normal compensation rule – which would have given £110 to a household cut off for ten days – on the basis that the floods were an exceptional event, outside the company’s control. Tony Wray, who declined to be interviewed for this article, has argued that even if Severn Trent had wanted to invest in a back-up to Mythe before the floods, Ofwat would have rejected the plan as a bad use of the company’s scarce capital resources. Yet, like all England’s private water companies, Severn Trent would have more money to invest in rebuilding and improving the water system if it didn’t pay out such hefty sums in dividends each year to the shareholders who own it. In 2007, the year Severn Trent plc failed its customers catastrophically for the lack of a £25 million pipeline, then declined to compensate them, it handed over the equivalent of £38.65 per customer to its shareholders in dividends. Its biggest shareholder, Barclays Bank, got £5.2 million. That year, Barclays’ profits were £7.08 billion.
Edward Warner Shewell, who did most to get the Mythe waterworks built, was a long-lived Conservative patriarch whose career spanned most of the 19th century. With his wife, Emma, he raised 16 children at their house in Royal Crescent, Cheltenham. For many years, with the help of the Tory majority on Cheltenham’s Board of Commissioners – the precursor to the local council – he managed to sustain a glaring conflict of interest, being both chairman of the commissioners and chairman of the private water company that had a stranglehold on Cheltenham’s water supply. It was particularly remarkable because, for decades, the town and the company were bitterly at odds over where their water should come from.
Many of Shewell’s children died before he did. His commercial and political machinations were regularly interrupted by dismal despatches from far corners of the Empire. His brother Frederick, a colonel in the Eighth Hussars, is said to have ridden in the Charge of the Light Brigade with an open Bible on his saddle. Perhaps his contemporaries saw something biblical in the fact that Shewell, so instrumental in getting the Mythe waterworks built, lost three of his sons at sea, two of them drowned.
Water-wise, Cheltenham in the early 19th century was, despite being a spa town, not unlike one of the less developed towns in the poor world now, heavily dependent on wells and springs. Unlike present-day Africa, however, which draws well-intentioned rich world aid agencies and profit-seeking rich world multinationals, post-Napoleonic Cheltenham had only localist solutions to its water problems: local entrepreneurs and local campaigners for a cleaner, healthier, fairer town. The origins of Mythe waterworks lie in the first avatar of Cheltenham’s town commissioners, set up in 1786 to charge the gentry a rate to pay for street lighting and road maintenance. Because the streets needed to be cleaned, and because this demanded a reliable water supply, in 1824 the commissioners set up a private firm – the Cheltenham Waterworks Company – to do the job. Funded by a mixture of shares and loans, the company built a reservoir on the eastern outskirts of Cheltenham, laid a network of pipes into the town and began selling water.
Indoor running water and the novelty of water closets proved popular. The more houses the company supplied, the greater the demand; the greater the proportion of houses with mains water in Cheltenham, the more uncomfortable it became for the town’s liberal consciences that the poor couldn’t afford it. The company was coming under pressure from three sides: from the town, to supply more water more cheaply; from the springs of the Cotswolds, which couldn’t cope with demand; and from its shareholders, who expected profits and dividends to be timely and fat. When government officials arrived from London in January 1847 to hear about plans for a new reservoir, they walked into this conflict. At the time fewer than half of Cheltenham’s 4700 houses had mains water; the hospital and orphan asylum got water free, but there were no public fountains for the poor; in some of the poorer parts of town, up to ten tenements drew water from a single pump. The company was making a profit of £677, 15 per cent of its turnover. With the national debates that would lead to the 1848 Public Health Act at their height, the government agents told the company that the Act of Parliament needed to get the project going was more likely to get backing if it ‘contained some provision for the comforts of the poorer classes’. The company retorted that if the landlords of the poor were prepared to pay for piped water, the poor would get it.
The feud between the Board of Commissioners and the water company went on for years, despite the cross-membership of the two boards, culminating, in the 1860s, in Shewell’s long tenure as head of both. On 15 August 1863, Shewell chaired a meeting of shareholders, who voted to pay themselves a massive dividend and bonuses worth 95 per cent of the company’s profits, give up the effort to supply more water, and sell out to the ratepayers. The plan had the enthusiastic support of the town’s liberal newspaper, the Cheltenham Examiner, but a few weeks later the town commissioners – also chaired by Shewell – voted down the plan. One commissioner, who believed like most people in Cheltenham that there was plenty of water in the Cotswolds if the company would only fetch it, declared prophetically: ‘There is enough water to be got off the hills to drown Cheltenham twice over.’
Letters from India took about six weeks to reach England at this time and it would have been just after this knock-back that Shewell heard of the death, from illness, of his 19-year-old daughter Louisa in the cantonment at Mhow on 27 August, where she was staying with her brother William, an army major. The timing is probably coincidental, but it was in this period that the relationship between Shewell the water company boss and Shewell the top politician in town began to go downhill. Shewell (company) seemed to decide that if Shewell (town) wanted more water, then more water he would have. To the horror of the genteel ratepayers of Cheltenham, it emerged that his water company was planning to make up the supply shortfall by taking water from the River Severn – described by one MP at the time as ‘the common sewer of the Midland Counties’ – at a place called Mythe, just upstream from Tewkesbury.
‘It is thus sought to substitute,’ thundered the Examiner, ‘for the pure and limpid supply we now obtain from the spring head, the contaminated waters of the Severn.’ As the town resisted the plan, hostility towards Shewell, and the undemocratic way the commissioners were elected by a minority of citizens in stitched-up contests, deepened. The town begged the company to install double taps for its customers – one with nasty Severn water for washing and flushing, another with nice Cotswold spring water for drinking. The company said it would cost too much. An attempt by the town to buy the company fell through. To Shewell (company’s) fury, which Shewell (town) shared and failed to conceal, the other commissioners spent thousands of pounds trying to set up their own, rival water concern.
By October 1865, relations between Shewell and the town commissioners’ clerk, George Williams, an indefatigable opponent of the Mythe scheme, had reached the stage of open warfare. Yet in the cosy world of old-time west of England politics, nothing could stop Shewell. In November 1865 he came up for re-election as chairman of the commissioners for the seventh time. He was opposed. One commissioner declared: ‘I would not say that Mr Shewell would set up his private interests against the general interests of the town, but human nature is such that private interests must, to a greater or lesser extent, sway the transactions of life.’ Nonetheless, Shewell was re-elected by 16 votes to 13, to the cheers of the Tory end of the table, and five years later the Mythe waterworks opened for business.
When, in April, I asked Peter Gavan, Severn Trent’s director of external affairs, if I could visit the Mythe waterworks, he said I could not. The floods, he said by way of explanation, were history; the implication being that history was not a good thing for a business to have. During the four days I spent in Tewkesbury a month later I cycled past the works each day on my way to and from the B&B where I was staying. It’s surrounded now by a temporary flood barrier built of components I last saw in Kandahar in Afghanistan in 2006, where they protect British troops and their allies from attack: textile and steel-mesh bins, filled with sand or earth, made by the Leeds company Hesco Bastion.
Edward Shewell’s youngest son, Arthur, a lieutenant-colonel, was killed in Kandahar in 1880, rescuing a wounded comrade outside the Kabul Gate. His father didn’t live long enough to hear about it; he died in 1878, two years after the town commissioners were replaced by a more democratic council and a few months before that same council finally bought the water company out. It would be easy to caricature Edward Shewell and his cronies as corrupt old Tory buccaneers, damning the poor and holding back progress. That would be unfair. The ratepayers of Cheltenham could have bought the company out much sooner than they did, but feared the responsibility, and weren’t ready to accept the principle that universal access to water and sewers benefited everyone, even if the rich ended up paying proportionately more for it.
More than that, Shewell, manipulative as he was, was something that his latter-day counterparts, the Colin Matthewses and Tony Wrays, emphatically aren’t: a genuine entrepreneur and risk-taker, and a localist, deeply embedded in the community he both served and exploited. Even his attempts, through political control of the town, to establish what Severn Trent has today – a monopoly of water supply in its area – couldn’t fend off the risk of real competition from other water sources. He and his partners made fortunes out of selling water to Cheltenham, but they took a risk to build the Mythe waterworks, and the risk may not have come off. Mythe did open in 1870, but only to supply Tewkesbury – a fraction of the market its backers needed. Cheltenham refused to take Severn water until 1894, long after Shewell was dead and the water company was municipal property. Cheltenham has used it ever since. Shewell’s Mythe waterworks entered history as a 19th-century private concern, spent 111 years in public ownership, and entered the 21st century – much expanded and modernised – as a private asset again. But the private water companies of 21st-century Britain are very different creatures.
The privatisation of Britain’s water companies in 1989 had nothing in common with the romantic notion of shareholder capitalism, where inventors and entrepreneurs have ideas, start businesses and sell shares to bold investors in order to raise money to help those businesses expand. In the first place, the new private water companies didn’t get the money from the sale of shares: the government did. Far from being exciting new entrepreneurial ventures, the companies involved were settled operations that had been around in one form or another for almost two hundred years, and had benefited, for more than half that time, from steady infusions of ratepayers’ and taxpayers’ money.
The most striking contradiction between water privatisation and Thatcherite free-market romanticism is the monopoly nature of the water companies. Millions of customers who have no choice of supplier, no choice but to take the water, and no choice but to pay for it. Millions of captive monthly payments in perpetuity: it is an investor’s dream. Yes, there was a regulator, Ofwat, to limit prices, and to make sure that the companies invested in rebuilding the ageing water and sewage systems, but there seemed little danger that the government of Margaret Thatcher would prevent shareholders making a fat return. And so it has proved, even unto her successors.
The simplest way to understand the way the water set-up works in England now is to think of it as a form of buy-to-let scheme, with us, the customers, as the tenants, paying water bills, like rent; the shareholders as landlords, owning the water companies; and the company staff, like a property management agency, collecting the rent and maintaining the property. Every so often a government inspector – Ofwat – comes round, sets a limit on how much rent the property managers can charge, and tells them they should get a move on with that renovation. But if we don’t like the property, the management agency or the landlords, or if we think the rent is too high, we don’t have any choice. We can’t move to a cheaper property, or a better-run one; we’re stuck.
Ofwat argues that English water companies are more efficient than they were before privatisation, pollute less, provide cleaner drinking water and have spent tens of billions of pounds renovating the country’s water system. All but the first proposition are true; the first may be too. But that’s to compare the privatised water companies with the investment-starved, bureaucratic, centrally funded leviathans of the 1970s and 1980s, not with what they might, or should, have been. In January this year, the Oxford economist Dieter Helm published a hair-raising analysis of the regulation of Britain’s privatised utilities which ought to have shocked the nation and, if its dense technical vocabulary had been more comprehensible to MPs and non-economists, probably would have. Helm argues persuasively that Ofwat has permitted the growth of a system which efficiently rips customers off, while exposing utility companies to a risk of bankruptcy that has never been higher.
It works like this. When Ofwat decides how much the water companies should be allowed to charge customers, one of the key numbers is how much the regulator thinks it’s fair for an investor who puts money into the water industry to get back: the ‘return on capital’. But a water company can get investment in two ways. It can get it from shareholders – equity – or it can borrow money; that is, take on debt. Crucially, equity commands a higher expected rate of return for investors than debt. The problem Helm identified is that England’s water privatisation lumped together two entirely different sides of the business: on the one hand, the existing assets (waterworks, pipeline networks, reservoirs, pumps and so on); and, on the other, operations plus investments in new equipment. The first side is low-risk, and can easily be financed with debt. The second is riskier, and is more suitable for finance with a mixture of debt and equity. But Ofwat only has one figure for what it considers a reasonable return on capital: an average of debt and equity.
In other words, Ofwat bases the amount customers pay for water on the assumption that water companies will take on a certain mix of expensive equity financing and cheaper debt financing. But what if water companies simply take on more debt than Ofwat expects? Then the customers will still pay for water according to Ofwat’s assumptions, but shareholders will pocket the difference between the two. And that, Helm says, is exactly what has happened. ‘Investors,’ he wrote, ‘now contemplate an extraordinary open goal … The scale of this transfer [from customers to shareholders] is enormous.’ In an article in the Financial Times last month inspired by Helm’s analysis, Martin Wolf wrote: ‘Investors have been able to buy the companies (BAA and the water companies, for example), replace the equity with debt and enjoy a licence to print money. Professor Helm estimates that this financial arbitrage has been worth up to £1 billion a year, at the expense of the customers, predominantly in water. This is, quite simply, a scandal.’ As if this wasn’t bad enough, Helm pointed out that the huge recent increase in utilities’ debt threatened the stability of the riskier side of their business, the day-to-day operations. ‘The utilities may not be robust against adverse external shocks,’ he said bluntly. ‘They might go bankrupt.’
Emma Cochrane, the head of corporate finance at Ofwat, wrote to me in an email that Helm’s ideas were the latest version of an argument he had been making for years. Ofwat had considered it ‘very carefully’, she said, and rejected it. Helm believes the role of Ofwat itself makes investors in water companies effectively invulnerable to risks where their fixed assets are concerned, passing the risk on to customers; Ofwat disagrees. Cochrane also questioned how easy it would be, as Helm suggests, to split the safe pipes-and-reservoirs side of the water business off from the riskier 0perate-and-build side. ‘You argue that Ofwat has permitted a system that both rips off customers and exposes utility companies to bankruptcy risk. I’m not sure you can argue both,’ she wrote. ‘We set the cost of capital based on relatively cautious gearing assumptions’ – the proportion of debt a company takes on compared to equity – ‘and are very clear that it is companies and their investors’ choice to adopt levels of gearing that may be higher than that.’
Even if Helm were right, she said, a billion pounds was too high a figure for the amount customers were losing, because not all water companies have gone for such high levels of debt. Cochrane had a point; Severn Trent is far from being in the lead among the water plcs in the amount of money it has borrowed. The Mythe debacle seems to give ammunition for both sides: on the one hand, Ofwat was sufficiently protective of Severn Trent’s shareholders to allow the company not to compensate customers for losing their water supply. On the other, Severn Trent lost £14 million as a result of the Mythe failure. Yet on balance, the shareholders seem to win, whatever happens. After the flood, profits were down, but dividends were up, and Severn Trent hadn’t lost a single customer, because the customers have nowhere else to go.
On the face of it, Cochrane might seem to be fair in questioning whether a company can be both rapacious and vulner-able. Yet the financial shocks of the last year have exposed numerous cases of firms who turned out to have been exactly that. In the five years of its sorry existence Railtrack, the privatised railway infrastructure company, sucked in vast amounts of money from government and rail-users, blew out almost four billion pounds in debt repayments and dividends, and then collapsed. Helm names no specific water companies, and there is no reason to suppose Severn Trent is particularly at risk, but he does caution that the English water industry may be approaching its ‘Railtrack moment’.
It’s not as if there aren’t other models for water companies. There’s the municipal socialism of late 19th-century Britain, when business-minded councillors ran networks of utilities as successful commercial concerns, profitable and efficient but publicly owned. Closer to hand, there’s Scottish Water – funded like the old water boards in England, but run as a commercial firm – and, under Ofwat’s supervision, the Welsh water company Glas Cymru, which has no shareholders, but is financed entirely from bonds, borrowings and income from customers. As in France, Glas Cymru puts the actual operation of its water services out to tender to private companies.
A comparison of Scottish Water, Glas Cymru and Severn Trent is instructive. In 2007, Severn Trent took £143 million in income from its customers, money which could have been spent on improving the network or lowering bills, and handed it to shareholders in dividends. This year, post-floods, customers who scanned the small print of Severn Trent’s report would have seen their monopoly water provider giving away even more to shareholders: £154 million, or £41.62 per customer, a 7.7 per cent increase. Scottish Water, in contrast, with no shareholders, gave away no dividends; it raised bills by less, and invested proportionately almost twice as much as Severn Trent. Glas Cymru actually handed money back to its customers as a form of ‘dividend’.
One positive side of water privatisation is that it has shown a surprising degree of international generosity on the part of the English public. Popular fury at the impositions of Brussels may be mainstream, but it isn’t reflected in the calmness with which English water customers hand billions of pounds over to their monopoly water providers each year, only to see them transmit large chunks of it overseas. Anglian Water, for instance, is owned by a company called Osprey, much of which, in turn, belongs to the Canada Pension Plan Investment Board. It’s impressive how little troubled the captive customers of Anglian are that whenever they turn on the tap they are, in a small way, helping t0 ‘sustain the future pensions of 17 million Canadians’, as the CPPIB puts it.
The altruism of Yorkshire Water’s customers is similarly humbling. Their willingness to support the balance sheets of HSBC, Citigroup, the Prudential and the private equity arm of the government of Singapore, who now own their water, shouldn’t go unrecognised. And what to say of Wessex Water, recently acquired by YTL Power of Kuala Lumpur – its proud philosophy ‘World Class Products at Third World Prices’? Who says the west of England doesn’t have an international outlook? Just to remind the water customers of Wessex how not-Little Englander they’re being, here’s an extract from a recent edition of the Malaysian newspaper the Star: ‘Revenue inched up to RM1bil from RM976.6mil. The increases were due to better performance in all businesses, including wholly-owned Britain-based Wessex Water Ltd … YTL Power declared a first interim dividend of 7.5 per cent per share.’ I may sound like a chauvinist churl if I express regret that my own monopoly water provider, Thames Water, is now owned by a consortium led by a company based in Sydney. But I do regret it. Amid this global jamboree, Severn Trent stands out as being under relatively mixed ownership. But this may not last. Already shareholdings are becoming more concentrated. Pictet Asset Management, currently the largest shareholder in the company, owns 7.6 per cent of Severn Trent – a share that would this year have netted this private Swiss bank £11.6 million in dividends.
Thatcher’s administration must have seen a multitude of advantages to water privatisation. The companies would be off the government’s balance sheet. Instead of the government raising taxes to pay for the badly needed overhaul of the country’s Victorian water infrastructure, the water companies would smuggle the extra money into customers’ water bills, effectively creating a form of private taxation. It was assumed, though the assumption was never really tested, that shareholder-owned companies would be more efficient than publicly owned ones. Finally, if something went wrong, it wouldn’t be the government’s fault, it would be the companies’. Of all these propositions, it is the last that can be seen to be most flawed. Time and again, Conservative and Labour governments have discovered that when they give powers to private companies, and those private companies screw up, voters blame the government for giving the powers away, rather than the companies for misusing them. And it is much easier for governments to give powers away than to get them back.
In a way, all this is a chronicle of defeat for the notion of public service. It turns out that it is possible to create private tax-collectors to run private monopolies and legally skim a percentage off the top for shareholders, while leaving customers reasonably happy; that even when things go terribly wrong for companies like Severn Trent, even when the failure of the private system to defend critical national infrastructure is exposed, it is public servants, rather than private ones, who shoulder the greatest blame. It was the Daily Mail, one of the most consistently anti-government newspapers, that exposed how an earlier regime at Severn Trent had overcharged its customers by giving Ofwat false information; the reporter who broke a company whistleblower’s story, Simon Fluendy, described it later, with justifiable pride, as a story that had made a real difference. But Severn Trent has been fined, and the system of private water companies continues unchanged.
One day recently I went to Worcester to visit Malcolm McMurray, a retired Severn Trent manager who worked for the company in both its public and private incarnations. As a senior union leader, he campaigned against privatisation in the late 1980s, addressing public meetings across the region. Since privatisation, Severn Trent has showered its workforce with shares. As a result, they bridle if anyone mentions nationalisation. Union organisers from outside the water industry complain that when they meet unionised water workers now, they talk about share prices.
Worcester was drenched in hot sunshine when I walked up to McMurray’s house, past the double garage and the shining gold Volkswagen estate to his front door. He let me in. He looked lean and fit.
‘Nice house,’ I said.
He smiled, a little sadly. ‘I’m always grateful I retired while they still had the final salary pension scheme,’ he said.
We sat in his long, neat garden, rolling away into trees in the distance. He’s 64 now; he retired in 2000. In 1973, as a regional manager, he was based at Mythe for three months; the then public Severn Trent had tried to save money by changing shift patterns, and the shift workers, then members of the TGWU, were throwing strategic sickies to sabotage the scheme. In the years running up to privatisation, McMurray recalled, investment slumped. He’s sure that the Thatcher government deliberately starved the water industry of cash to enhance the case for selling it off. After privatisation, more than half the old workforce of 11,000 lost their jobs. He remembers being shocked at the shift in the public’s mood when it was privatised. ‘At times of peak demand, we used to be able to use local radio to appeal to our consumers to use less water, to not use hosepipes, and generally they were co-operative, they went along with it. But that suddenly changed when we were privatised. People knew we were only in it to make a profit. It was quite a shock to realise how quickly people’s attitude changed.’
I asked McMurray if he knew any union leaders who’d campaigned against privatisation, then taken up company share options. ‘Well, I did,’ he said. ‘It would be easier to say who didn’t.’
McMurray’s wife came in with their two little blond grandsons, bright in scarlet jumpers and covered in stickers from the school races. They went down towards the trees to play and the sun caught on a small fountain that the couple had installed, chuckling away on a pumped loop in the shrubs in the middle of the garden.
‘I had no conscience about it at all,’ said McMurray. ‘I’d campaigned against privatisation, but we’d lost that particular battle. Privatisation was inevitable. I wasn’t going to leave the water industry and so I thought well, I’ll buy some shares, and try and continue to serve the public as best I can.’