Andy Burnham’s allies are drawing up plans to seize control of England’s sewage-dumping water companies – using the model that returned Paris’s water to public ownership.
The blueprint aims to bring the utility firms back under public control, cut household bills and tackle the pollution scandal that has fouled the nation’s waterways – as spotlighted by The i Paper‘s Save Britain’s Rivers campaign.
Burnham launched a scathing attack on “profiteering” water companies during his campaign to win the Makerfield by-election, arguing that dividend payments to shareholders should instead be used to lower consumer costs.
The Paris model is seen as attractive because it was done relatively cheaply, although it will not be as simple for England.
In 2010, the French capital allowed the operating contracts of private firms to expire and folded water services into a single public company, Eau de Paris, lowering water tariffs by eight per cent in the first year.
But it would not be as straightforward in England because the water companies own the physical infrastructure, whereas Paris only contracted out the running of it.
Firms such as Thames Water own the pipes, reservoirs and treatments works, and buying the assets back at full value would lead to an enormous bill for the taxpayer, plus compensation for shareholders, including pension and sovereign wealth funds.
But Burnham’s circle believe there are ways to mitigate that, taking inspiration from the model used by the current Government to bring Britain’s railways back into public ownership. Under this programme – originally led by the co-chair of Burnham’s by-election campaign and former transport secretary Lou Haigh – the government declines to renew operators’ contracts as they expire, avoiding any compensation cost.
While private water firms are not contractors, the thinking is a similar template could be applied, with companies being taken over if they are failing.
When Railtrack, the private company that owned Britain’s tracks and signalling, ran into financial trouble, it was not bought out but allowed to collapse, with its infrastructure passing to a new state-owned body, Network Rail. Under Britain’s water laws, a failing company can be placed into special administration, and taken over through failure rather than bought out.
Burnham’s allies point to Thames Water, grappling with a near £20 billion in debt, as a potential Railtrack moment for the sector.
Burnham has dropped heavy hints, while choosing his words carefully about what he might do. He talks of stronger public control rather than nationalisation, insisting they are not the same, and points to Greater Manchester’s buses, which are publicly controlled but run by private operators.
On Thames Water, which is the UK’s biggest water and sewerage company and has been teetering on the brink of collapse for more than two years, he told The Guardian that public ownership is “absolutely an option”, framing the wider goal as running the essentials of life for the public, not private, interest. He has described plans for a rolling, decade-long programme – with companies taken over as they fail or as franchises end – with the aim of arriving at an end-state closer to Berlin or Paris, where public bodies hold majority stakes and residents and workers sit on the board.
Thames Water is likely to be the test case: a creditor consortium has tabled a multibillion-pound rescue package, but Environment Secretary Emma Reynolds has objected amid claims that it does too little for customers or the environment, and 107 MPs have demanded special administration instead.
The i Paper’s Save Britain’s Rivers campaign has been calling on the Government to toughen the regulation of water companies.
As part of a five point manifesto published ahead of the 2024 General Election, The i Paper called on the new Government to restrict water company bonuses and dividends, putting an end to the system where firms could prioritise profit over the environment. A ban on bonuses for water bosses at failing firms came into force last year.
The i Paper called on all the major political parties to sign up to the Save Britain’s Rivers manifestoBringing water companies into public ownership could be a significant step in ensuring profits are reinvested in infrastructure, reducing the amount of waste flowing into our rivers, lakes and seas.
Burnham told The i Paper earlier this month that the status quo is unacceptable, and Thames Water came in for heavy criticism. Customers “were asked to pay 23 per cent extra on their bills… when the water company doubled its profits to £800m,” he said.
His verdict on the industry is withering: “the shareholders never lose and the public never win.”
The question he is betting on is a simple one – that voters would rather own the problem than keep paying for it.
Analysis: Public ownership is not a silver bullet
Lucie Heath, Environment Correspondent
Bringing England’s water firms into public control would win plaudits for Burnham from campaigners, as many of them view privatisation as the key driver of the sewage crisis.
Private water companies have been blamed for prioritising high profits and shareholder dividends over reinvesting in their own network. Critics claim this has led to widespread dumping of untreated sewage into rivers and seas amid rising household bills.
But public ownership is not a silver bullet. Scottish Water, which is publicly owned, is responsible for vast numbers of sewage spills and is behind England’s water companies when it comes to monitoring and addressing the problem. However, water bills in Scotland do remain lower.
The majority of Wales’ network is run by Dŵr Cymru/Welsh Water, a not-for-profit company that does not have any shareholders that is also responsible for high numbers of sewage spills.
The reality is that fixing England’s sewage crisis will take a huge amount of investment, a process that is likely to take decades no matter who owns them.
However, bringing the water companies into public ownership would give the Government much more control of the process. It would bring an end to the type of situations we are currently seeing with Thames Water, whose investors have been accused of pushing the Government for regulatory leniency in exchange for running the firm.
Big questions remain over what bringing the companies into public ownership would look like in practice.
Defra has calculated that it would cost £100bn to pay off shareholders and take on the companies’ existing debt, but some academics dispute this figure as they argue firms such as Thames Water should be valued much lower. It has also been argued that the Government should be able to take water companies into Special Administration – a form of temporary public ownership – if they are found to breach their licenses, without paying off shareholders.
These are the questions Burnham and his team will be grappling with as they flesh out their policy proposal.
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