The billionaire owner of Northumbrian Water is at the centre of a documentary being aired on North East screens on Monday (12 Jan) night.
The water company, owned by Hong Kong-based Li Ka-shing, one of the richest men in the world, has made more than £630m profit in the last two years, according to BBC investigations programme Inside Out.
But the firm pays on average less than 10% tax because of a legal tax loophole, the show will claim.
Northumbrian Water told the BBC that the company always acts transparently and within the letter and spirit of the law, adding that it is not in dispute with HM Revenue and Customs on its tax affairs.
But presenter Chris Jackson will tell viewers:
“Northumbrian Water sounds nice and local but when you pay the bill you may be surprised to learn the profits leach away to the other side of the world.”
Mr Li is the richest man in Asia, and 17th richest in the world, with an estimated wealth of £20bn.
He owns Superdrug and the Three mobile network, invests in Spotify and Facebook and has owned Northumbrian Water, which employs 1,600 staff, since 2011. He also runs a charitable foundation.
In terms of his North East assets he ranks alongside Mike Ashley and the Duke of Northumberland – except nobody here has ever heard of him, says Jackson who asks in the show:
“Of all the things he could have bought in the world, why did he buy a slice of the North East?”
Interviewee Professor David Hall of the University of Greenwich, will tell the documentary:
“The UK government provides a regulatory environment which most people think of as protecting the consumer, but its core objective is to ensure that the companies continue to make enough profits so that they want to carry on investing.”
In the last two years, Northumbrian Water has paid less than 10% tax on £630m profits, compared with the 20% standard corporation tax, because it has borrowed £1bn from Mr Li, Jackson will claim in the documentary.
The government has looked at closing the tax loophole – which is completely legal – but decided against it, prompting Labour MP John McDonnell to attack the situation in the House of Commons last year. He said:
“No wonder he’s the world’s ninth richest person. We’re making him the world’s ninth richest person. I think this is a scandal.”
> Earlier the article named him the 17th richest person. Perhaps he’s lost a bit since last year, poor dear. Down to his last few billion.
Mr McDonnell is calling for an independent public inquiry.
Nobody from the government would be interviewed for the programme, but a statement from the Treasury said recent analysis showed that changing the system used by Northumbrian Water would not save money and would undermine the competitiveness of the British economy.
Most utility companies in the UK now have owners dotted across the world, the programme will say.
> Well of course they are – subsequent governments – of all colours – since Thatcher have been obsessed with selling off the family silver to the highest bidder. A process that continues today with the NHS and DWP.
Barbara Leech, from the Consumer Council for Water which represents customers, will appear in the documentary describing how Northumbrian Water – which provides water supplies to the homes of 2.7m people in the North East – is top of the league in terms of satisfaction with services.
The full story can be seen on Inside Out (North East and Cumbria) on BBC1 at 7.30pm on Monday 12 Jan, in an episode which also features a Tyneside surgeon’s dream of building a hospital in India’s slums and a Teesside woman who helped shape modern Iraq. It will also be available on iplayer for 30 days.
Source – Newcastle Evening Chronicle, 12 Jan 2015
A North East water supplier has stopped issuing “frightening” debt collection letters after its tactics were likened to controversial pay day loan company Wonga.
Northumbrian Water was found to be among half of UK suppliers sending correspondence which appears to be from an external debt agency, but is actually from the water company itself.
The news follows June’s ruling by the Financial Conduct Authority (FCA) that 45,000 Wonga customers must be compensated after being sent letters from nonexistent law firm threatening legal action, while similar practices were also highlighted among banks and energy firms.
Northumbrian Water, which stopped the policy earlier this year, used the name Alexander James in large print at the top of the letters, but say it was clearly linked to the company.
In total, 12 of the UK’s largest water suppliers have been found to have taken part in the practice – which water watchdog Ofwat has written to companies with concerns over – while five are still doing it.
Shona Alexander is chief executive of Newcastle Citizens Advice Bureau, which offers free debt advice.
“It is good news Northumbrian Water has stopped using this letterhead and it is disappointing to hear some companies are still using it.
“It is bad practice. By saying Alexander James at the top it looks to the client as a debt collector and that is frightening. Then at the very bottom in small print it says this is part of Northumbrian Water.
“At best it is unfair and causes distress, and at worst it is deliberately misleading.”
A Northumbrian Water spokeswoman said:
“The Alexander James brand was used to encourage customers who were not paying their bill to contact us to talk about a payment plan and to receive debt advice. It was very clear that Alexander James was part of Northumbrian Water Limited.
“We took the precautionary decision to suspend using the brand name the day after the Wonga story broke. After researching why the FCA took action against Wonga, we believe we have complied with best practise as the brand name was registered with relevant financial agencies to ensure transparency and our consumer watchdog, the Consumer Council for Water, was also fully aware we were using this brand name.
“After a review we have now decided that we will not be using the Alexander James brand in the future although our use of it was transparent and compliant.”
Source – Newcastle Evening Chronicle, 16 Oct 2014