Jonathan Portes, a professor of economics and public policy at King's College London, was a civil servant in the Treasury in the 1980s, working on the privatization of the water sector.

It was part of a wider sell-off of state bodies that included some, such as British Airways and British Petroleum, that were competing in commercial markets. But, Portes said it was never realistic that selling off the water companies would have similar results.

"The efficiency argument makes more sense with a company like British Airways, which is in a competitive market, than it does with a monopoly like a water company," he said.

"Selling off institutions that relied upon government borrowing, to reduce the deficit and enable tax cuts, made political sense but not economic sense, and the third reason was to encourage a so-called shareholder democracy, where lots of private investors would have a financial stake."

Many shareholders sold at the first chance of a quick profit, rendering the last motivation redundant, Portes said, and despite early promise, the other reasons fared little better.

"In the first 10 or so years there was limited success in increasing investment and productivity but the water industry regulatory framework was initially very generous. The Treasury knew it was selling off the companies for less than they were worth," he explained.

"It was hoped that over time, the rules would be sharpened up and there'd be a better deal for bill payers, but exactly the opposite has happened."