Southern Water’s pollution of our coastal seas is not just criminal — it is evil
Eastbourne Beach, Sussex. (PA Images)
The scandal of Southern Water is so shocking and on such a vast scale that its full implications have not yet sunk in. After the largest investigation in the history of the Environment Agency and a major criminal trial, this giant utility has been fined a record £90 million for deliberately pumping between 16 and 21 billion litres of raw sewage over nearly six years into protected seas. By its actions, Southern Water has endangered the delicate coastal ecology of England, devastated the shellfish industry and put the health of millions of people at risk.
Even this list of superlatives does not convey the enormity of Southern Water’s guilt. The trial at Canterbury Crown Court revealed a pattern of corporate negligence, with a list of 168 previous offences and cautions for what the judge, Mr Justice Jeremy Johnson, called “a shocking and wholesale disregard for the environment” over an even longer period. “There is no evidence that the company took any notice of the penalties imposed or the remarks of the courts,” he said. “Its offending simply continued.”
In other words, Southern Water has behaved as if it were above the law. With annual profits of more than £200 million, it can easily absorb even very large fines. As it enjoys a quasi-monopoly, they can be passed on to customers and treated simply as a cost of doing business. The judge’s hope that shareholders would now demand that the company improve its compliance is not borne out by its history of recklessly ignoring its legal obligations in pursuit of profit. Its underreporting of sewage discharges amounted to a massive cover-up. This is a corporate culture that simply cannot be trusted with providing such a vital public service. For a water company to knowingly pollute coastal waters on such a scale is not merely criminal — it is evil.
Though the utility pleaded guilty to 51 counts of knowingly permitting entry into the sea of untreated sewage from 17 wastewater treatment works between 2010 and 2015, its counsel excused its conduct by blaming mechanical faults and claimed that the dumping had not been deliberate. The court rejected these arguments: the discharges were not due to accidents, but to a deliberate policy, while the failure to maintain its infrastructure was also part of the corporate culture. The prosecution argued that there was “long-term corporate knowledge of the situation”. There was also an element of fraud: “It was being paid for something it was not doing.” Moreover, Southern Water appears to have instructed its staff not to cooperate with investigators. Some of these staff have since been convicted of attempting to conceal evidence.
Yet the management of Southern Water is evidently still in denial about what it has done. The 4.6 million people for whose sewage it is responsible, plus another two million whose drinking water it supplies, have no say in the matter. But the consortium that owns the company, Greensands Holdings Ltd, most certainly does. This consortium, which took over Southern Water in 2007, consists of investment funds, pension funds and private equity. It is managed by the three major financial institutions: JP Morgan, UBS and Hermes. JP Morgan Asset Management is represented on the board. All of these organisations share moral responsibility for the crimes of the company they own.
Yet nobody is going to jail. No individual has been fined. No senior officer of the company has even been sacked. Ian McAulay, the chief executive of Southern Water, is paid a basic salary of £435,000 a year. Last year — when the scale of the pollution for which he bears ultimate responsibility was already clear — McAulay was given a bonus of £538,100. In other words, Southern Water rewarded its boss with more than a million pounds for keeping profits high by flooding the seas off the southern coast with effluent. Not a single penny of the £90 million fine imposed by the court will come out of McAulay’s salary and bonus, or those of his colleagues.
Meanwhile the Environment Agency, whose eight-year investigation uncovered these crimes only in the teeth of obstruction, abuse and intimidation, had its budget cut by more than half last year, from £157 million to £75 million. Given the scale of corporate malfeasance revealed by the Southern Water trial, this is simply not enough to police the many industries that affect the environment, let alone the agency’s other duties.
For those like me who defend the market economy, this case is especially disturbing and depressing. The disgusting conduct of Southern Water’s owners and management calls into question the principle of privatisation; it is enough to make one despair of business leadership in Britain. A change in the law is evidently overdue. As executives expect to share in profits and help themselves to huge rewards after corporate takeovers, they should also be liable for fines imposed for the kind of corporate criminality uncovered at Southern Water. Courts should also impose custodial sentences in the worst cases. The sight of white collar criminals going to jail is common enough in the US, but far less so in the UK. That needs to change. The British public should never again endure the spectacle of a major utility wantonly polluting the environment while its executives and owners go unpunished.
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