As has been my habit in recent days, I put up a Twitter poll yesterday. In the light of developments in Gazza, the question that I ask was unsurprising, as was the reaction.

That being said, neither of the Conservative or Labour Parties are providing any real lead on this issue.

Rumour has it that legal opinion has been given to the government saying that arms exports should end, but they still have not acted.

But was legal opinion really needed to determine that?

And does Labour need to hide behind the fig leaf of demanding this opinion before saying that it thinks that all export licenses should be banned?

Is it beyond the wit of our politicians to make up their own minds without having to find excuses for their action? Seemingly, it is.

I watched both boat races yesterday. Why? Because I wanted Cambridge to won. They do, after all, train in my home city of Ely on a bit of river with which I am very familiar. There was some local interest for me.

I was, as a result, happy to note two Cambridge wins, both against the odds.

But there was another slight satisfaction in noting this. My disquiet about Oxford, its politics, philosophy and economics degree, and the pernicious impact that graduates from that degree seem to have had on British political life over the last forty years meant that I could not help but note that the failings of neoliberalism played a big part in the Cambridge wins.

Oxford could not get on the water to practice for weeks before the race because of flooding at their boat club. The regulated waters of the Ouse suffered no such fate. One for state backed controls in the face of global warming then.

And then there was e-coli, which the Oxford crew blamed for sickness amongst their crew. Privatisation, much beloved of the Oxford PPE crowd, appeared to bite back in that case.

There was, for me, an inevitable sense of schadenfreude about this that I could not suppress.

Will Oxford be campaigning for clean water now? I got that sense from Cambridge commentators, and less so from those from Oxford. Maybe they should wake up and smell the shit. It would be long overdue if they did.

A new commentator on this blog named Tony Wikrent made an interesting comment yesterday, saying, when discussing the purpose of economics:

”Many subscribe to Lionel Robbins’ definition of economics as the allocation of scarce resources among competing ends”

This is where economics goes wrong – right from the beginning. The actual history of Understanding this would radically shift the what economists emphasise. Financial markets and prices would become much less importance, and the creation of science and new technology would become paramount areas of inquiry.

Robbins, whose overall contribution to economics was not nearly as important as I think the London School of Economics like to claim it to be, undoubtedly heavily influenced economic thinking with his 1935 book in which he offered the above suggestion. That idea was taught to me in the 70s. It is still commonly noted. Ask ChatGPT what economics is about and it suggests:

Economics is the social science that studies how individuals, businesses, governments, and societies allocate resources to satisfy their wants and needs, given scarcity. It analyzes production, distribution, and consumption of goods and services, as well as the behavior of markets and economies.

Scarcity is the condition that requires economic choice, apparently, based on a search of the web as a whole. The idea remains in common use then, in itself constraining us all. It was, apparently, Robbins maxim that human beings want what they cannot have, and that notion need not be true, meaning it did not have the power he gave it.

In the 1930s, when Robbins wrote, I am aware that one of my grandfathers earned 30 shillings a week (£1.50) and lived in a tied cottage in a state of both considerable insecurity and poverty. My mother’s descriptions of that upbringing have influenced me, without a doubt. In that situation, then Robbins was to some degree right; human beings did want what they could not have.

But, as Tony Wikrent implies, Robbins thinking (both economic and social) was decidedly static. His presumption was that what was scarcity was a permanent state in which the economy must exist. Post-war development showed that this need not be the case. .

Vastly better housing became available. Incomes rose. The post-war consensus delivered prosperity to vastly more people, me included. The problem of scarcity was not solved, but it altered radically. Three themes became apparent.

The first was that it became possible that we could meet need. It was, and remains, possible for us to ensure everyone in the world could enjoy a life where their needs are met. I am not saying that would be easy. I think it could be done.

Second, that fact did not solve the problem of scarcity. Those with the ability to solve the problem of unmet need chose not to do so. Scarcity with regard to need was imposed instead. It was no longer inevitable, but it continued to exist, nonetheless.

Third, the reason why need was not met was because those with the means to do so chose, or rather were persuaded, that satisfying their wants was a higher goal than was the meeting of the needs of others.

When Robbins wrote in 1935 the whole field of marketing, and the manipulation of human perception that it involves,  was virtually unknown.  Advertising did, of course, exist. But marketing is quite different. It seeks to create wants where none existed, and that activity did not become commonplace until the 1950s. The imposition of continued scarcity was a necessary condition for marketing’s success. Innovation might have created the means to address all needs, but the reality was that it was instead primarily directed at meeting previously unknown wants.

Does that mean that I disagree with Tony Wikrent? It does not. The point he makes is powerful, and appropriate. It does, however, need to be framed and that framing is to be found in the choice that supposedly free markets have made with the power to create technology that we have discovered.

That power has been used to achieve three outcomes. One, very obviously, is consumption beyond the physical constraints that the planet can sustain. As a result, we have the climate crisis.

Second, this power has been used to concentrate wealth in the hands of a few. Technology in innovation has, when subverted to private purpose, and when coupled with the abuse of artificial legal constructs like patents and copyrights, been used to create market power that eliminates competition, suppresses further innovation and delivers massive inequality within society.

Third, as a result, innovation has begun to destroy its own potential to meet either needs or wants as the preservation of the wealth of a few is deemed a higher-order priority than meeting the needs of an increasing number of people, whilst it also destroys the very markets that supposedly fostered its creation.

To put it another way, the whole purpose of market-based economics has become the prevention of the meeting of needs whilst simultaneously creating the means for an increasingly smaller number of people to consume to excess way beyond any conceivable measure of human requirement.

The problem for this economic model is that it is unsustainable. As more and more people are driven towards economic desperation, which is very obviously happening at present, the social acceptability of this form of economics is collapsing. Simultaneously, the excessive use of natural resources that it requires is becoming evermore apparent. Neither, by themselves, would be sufficient to bring this system down. Together, they create a situation where that is likely.

What happens then is the question to ask? This is where I think Tony’s comment is very relevant. Suppose that the whole purpose of industrial and agricultural development was to become the overcoming of the scarcity of resources. Could we find the food to feed the world, the water to sustain it given global heating, and the means of shelter, free from risk, where people might enjoy secure lives of reasonable comfort, free from fear? I think we could. But it does present the most massive challenge to a hierarchy of innovation and power that largely ignores need at present and instead presumes that the accumulation of excessive wealth for a few is the goal of society.

I posted this thread on Twitter last June, but it is just as relevant today:

There has been much discussion about the likely failure of Thames Water in the last day or so. I've been looking at the accounts of England's water companies for the last twenty years. My conclusion is that they are all environmentally insolvent. So, a thread…..

There are nine companies in England that take away sewage. There are more that supply water alone. But the crisis that the English water companies face largely relates to sewage so my work has looked at the ones that take our waste away.

Thames Water is one of those sewage companies. The others are Anglian Water, Northumbrian Water, Severn Trent, South West Water, Southern Water, United Utilities, Wessex Water and Yorkshire Water.

It's important to say that although I used the accounts of each of these companies in my work, the results I am talking about here or for the industry as a whole. To get a proper picture of the water and sewage industry I combined their accounts into one single set.

Doing so produced some quite astonishing data. This is what the profit and loss accounts of the combined water and sewage companies of the UK looks like for 2022 in isolation, for 2003 to 2022 in total, and on average over that period:

There is a lot of data there. There are, however, some straightforward facts to concentrate on.

Firstly, the operating profit margin in this industry is 35%. That is staggeringly high, and it goes up to 38% when other income is taken into account. 38p in every pound you pay for water is operating profit i.e. profit before the cost of borrowing.

Second, note the cost of borrowing. I have generously offset interest received against interest paid. That still leaves interest costs representing an average 20% of income. 20p in every pound paid to these companies, on average, goes on interest.

That still leaves them profitable, though. And they do pay tax. The average tax rate is 19%, but that is way below the expected tax rate for this period when the tax rate was as high as 30% for some of it. And much of that tax has not been paid: more than £8bn has been deferred.

Finally, of the almost £25 billion they have made in profit over the years they have paid out every penny, and more, in dividends. In other words, the shareholders have taken 15p in every pound paid for water. There was nothing left for reinvestment, at all.

No wonder the water industry is in trouble. The income statement shows that the public is being fleeced by these companies who are simply treating the fact that the English consumer has had no choice as to who to buy water from as a means to extract profit from them.

Things are, if anything, worse if I look at the balance sheets. Now I know these scare most people, so I will talk through the details. This is a very summarised balance sheet for the  industry in 2022:

The industry has £77 billion invested in equipment. The rest of its assets are some financial investments, a bit of cash and sums owing to it from customers. So far, so good.

What is scary is what the industry owes. The £77 billion of equipment is financed, in the main by borrowings of almost £55 billion, or more. It's also funded by the tax not yet due of more than £8.5 billion, which brings down the cash-paid tax rate of the industry considerably.

Even the pension funds of those working for the industry are contributing to the funding, and there is more borrowing of various sorts in the other sums owing, totalling more than £10.7 billion.

What this means is that of the total near enough £91 billion invested in the sector more than £78 billion is funded by borrowing or sums owing of some sort and only just over £13 billion is funded by the shareholders.

What that also means is that the shareholders provide less than 15% of the overall funding for this industry. So much for the idea that private capital would fund water after privatisation. The reality is that borrowing is doing so.

When I began to look at the data in more depth things only began to get worse. What I was really interested in knowing was how much the water companies had invested in equipment over the twenty years reviewed.

The answer was, in my best estimate, that sum was £89.8 billion. Of course, some of that has now worn out and has long gone from the accounts. Assets like vans and computers do not last that long in use.

Then I worked out how that investment was funded. There were just two ways. One was out of operating income. For the technically minded, this is possible using what is called the depreciation charge in the accounts. This sum amounted to £38.9 billion. Customers provide this money

The rest of the funding came from the increase in borrowing over the period. That amounted to £40.5 billion. Other long-term liabilities, which are again mainly borrowing or pension fund liabilities,  increased over the same period by £10.4 billion.

The net result is that of the £89.8bn invested, customers or borrowing of various sorts provided £89.8bn of the funding, meaning the shareholders effectively made no investment in the assets of these businesses at all.

This matters for one very good reason. As we all know, these businesses are now routinely polluting England's rivers and beaches with sewage. That sewage comes from what are called storm overflows, although that's a misnomer now, as many release sewage even after modest rainfall.

That pollution cannot persist. Unless it is stopped we will end up without reliable clean water in England. The estimated costs of ending this pollution do, however, vary considerably.

The industry has offered to invest £10 billion over seven years, or £1.4 billion a year. The government has decided that £56 billion is required over 27 years, or just over £2 billion a year. The trouble is neither sum will come close to getting rid of the crap in England's water.

The House of Lords looked at this issue based on independent analysis and concluded that the most likely estimate of the cost of getting rid of all the pollution in our water was £260 billion. And that needs to be done as soon as possible. I suggest ten years.

If that investment of £260 billion was made, we might have clean water in ten years.

What the industry is offering is something quite different. Even if they meet the government's demand of them, at best I estimate that based on officially published data they might cut the crap in water by two-thirds, at best, by 2050.

So why has the government set such a low investment target that still leaves us with polluted water? The only possible answer is that they wanted to make sure that the private water companies would not go bust by having to spend too much.

Let me put that another way. The government thinks that saving the private water companies is more important than them polluting our water, rivers and beaches with all the costs that will create.

The government has made the wrong decision. But if the required £260 billion was spent (with more required to become net zero compliant) then the water companies would go bust. What that means is that they are environmentally insolvent.

The concept of environmental insolvency applies to any business that cannot adapt to make its business environmentally friendly – as climate change and ending pollution requires – and still make a profit. What it means is that its business model is bankrupt.

That is where the English water industry is now. Thames Water might be facing environmental bankruptcy, but this industry as a whole is in my opinion incapable of funding the investment required to deliver clean water and be profitable.

The government might be making noises about taking Thames Water into temporary public ownership, but that is meaningless when Thames Water can never be profitable and deliver clean water. There is only one answer for this industry now, and that is nationalisation.

I would suggest that this nationalisation should be without any compensation to shareholders. That is because their businesses are environmentally insolvent. Providers of loans might also have to take a hit too: they made a bad decision lending to these companies.

The government will then have to support the industry using borrowed funds. I suggest it should issue water bonds via ISAs to the public to do this. Wouldn't you want to save in a way that ensures we all get clean water in the future? I would.

And the way in which water is charged for might have to change. The idea that we all pay the same price per unit irrespective of the amount of water used seems absurd now and might need reconsideration.

But my essential point is that the water industry has to now be nationalised because it is not only failing us already but, on the basis of current plans, will probably do so forever, and that is not only not good enough, but is really dangerous to our wellbeing.

Our politicians have to now say it is time to end the shit in our water and take control of this industry to make sure that we get clean water. After all, if they cannot guarantee clean water – an absolute essential for life – what are they for?

Finally, a few technical notes. First, this analysis is based on the activities of the companies actually supplying both water and sewage services in England. It is not based on the groups of which they are members.

Second, the conclusions are based on aggregate data. They cannot be applied to any one company.

Third, the data used is extracted from databases but is correct to the best of my belief based on that limitation.

And, if you want to see the report on which this thread is based, it is here.

The report is rather more technical and much more referenced than the thread on this issue, focussing in part on the use of sustainable cost accounting to demonstrate that the English water companies are, in my opinion, environmentally insolvent, meaning that they cannot eliminate their environmental damage and remain in business.