London rainLondon, UK --- (METERING.COM) --- July 7 2006 – England, a country synonymous with constant downpours and gloomy skies, is under drought orders after the government announced that London and the southeast has less water per person than Sudan – a country renowned for its dust storms and high temperatures.

Rupert Darwall, Consultant Director of the London-based think-tank Reform, maintains that the problem is due to privatization issues and the complete absence of prices. Consumers are charged for the pipes to their houses, but not for the water they use, and water companies do not pay for the water they draw from rivers and boreholes. Thus with no prices going into the system and no prices when it comes out, the Economics 101 lesson that there would be no incentive to increase supply turns out to be correct.

    • Since the water industry was privatized in 1989, not a single reservoir has been built.
    • Over the last two decades, household water consumption per head in London and the   southeast  has increased by 22 percent
    • The water companies’ biggest customers are leaks since an estimated 30 percent of  London’s water  disappears through holes in the network. No one does anything about it, because the lost water  has no automatic impact on profits.

But if the water companies have been privatized, how is this a state-caused problem? The lack of prices reflects the industry’s public sector origin. When it was privatized water metering was recognized and encouraged as part of the answer. Yet one of the first actions of the Blair government was to curb its spread, says Darwall.