Andy Burnham stood up in front of Labour Party Conference yesterday and vowed to “repeal Margaret Thatcher’s ideological ban on public ownership of water companies”.
This was music to the ears of many Labour activists, who had been told by Sir Keir Starmer’s Government that reversing the privatisation of water firms was off the table.
“It’s the biggest change in attitude to the water industry we’ve seen in 40 years,” said Lena Swedlow, Deputy Director at Compass, a Labour campaign group with close ties to the Prime Minister.
The rhetoric was strong, but Burnham stopped short of committing to full-scale public ownership of the water industry as many in his party have been calling for.
He also offered assurances to private companies operating in the “public interest”, which has been taken by some industry and investors as a signal his reforms might not be as radical as they first seem.
At the heart of the debate around England’s future water system lies the question of cost. Starmer’s Government said full scale nationalisation would cost taxpayers £100bn, but this is disputed by proponents of public ownership, who argue it can be done for closer to £14bn.
What’s clear is that the battle over the future of England’s water industry is well and truly under way. This year’s conference laid bare the dividing lines between rival camps within Labour, each vying to shape the Prime Minister’s thinking on what comes next.
Burnham’s plan for water
At the heart of Burnham’s water pledge is a plan to introduce a new Water Bill to Parliament that he said will kick start a “10-year journey to a very different water system”.
This Water Bill was set in motion by Starmer’s Government as part of its promise to abolish Ofwat and create a new water regulator. However, Burnham said this legislation will now be “strengthened” to address the issue of public ownership.
The Department for Environment, Food and Rural Affairs (Defra) is still ironing out the details, including whether different models could be introduced across the country depending on how a water company is performing, according to multiple sources.
Burnham hinted at this in his speech when he said the Government would “support” private companies that “serve the public interest”, while the “consequences” for failing companies would be “taking back control or public ownership”.
This suggests the new legislation will set out some criteria under which private companies can be taken into public ownership. The question is whether this will be part of a genuine transition for the industry, or simply a stick to threaten private companies with.
Public ownership, mutualisation or more of the same?
While much of the Labour Party is supportive of ending the current system of private ownership, a split has emerged in terms of what the new industry could look like.
On the one side is the Co-operative Party, of which Burnham is a member, which is pushing for water companies to be turned into non-profit customer-owned vehicles known as a mutuals.
The thinking was set out in a recent report by the Good Growth Foundation, which was backed by Labour MP Helena Dollimore and multiple Labour mayors.
The crux of their argument is that cooperatives satisfy demand for public control without the huge fiscal burden.
“Not for profit cooperatives bring water under public control and makes it answerable to the people who rely on it, without a huge cost to the taxpayer,” founder of the Good Growth Foundation Praful Nargund told The i Paper.
However, another camp within Labour has rejected the idea of the customer-owned model, arguing that the water industry must be owned by some kind of public body, whether that be central Government, regional authorities or some kind of Government-owned corporation, like Scottish Water.
Compass, a group that was instrumental in getting the Prime Minister elected, sits within this camp, as well as the left-wing think tank Common Wealth. They are working in coalition with many of the key water campaigners.
Swedlow acknowledged Burnham’s speech was “not a full commitment to bringing the industry into public ownership”, but remained hopeful it “creates a direct path to doing just that”.
Chris Hayes, Chief Economist at Common Wealth, said it was “promising” that Burnham “opened the door to public ownership”, but said the speech “leaves room for disappointment”.
“We will soon find out whether the PM is saving the detail for the Budget or leaving himself a get out clause,” he added.
On the morning of Burnham’s speech the think tank released a report making the case that public ownership was favourable to the mutual model, as publicly owned companies can borrow money at cheaper rates.
Labour MP Clive Lewis is pushing this argument within Parliament. Speaking at a fringe event at Labour Party Conference, he said they had “won the battle” over water, but warned that the debate was now becoming “slippery” as he made clear his opposition to mutualisation.
The Thames Water question
While Burnham has made clear that his plan for the water industry could take 10 years to deliver, the impending crisis at Thames Water means he has far less time to make some of the key decisions.
The company has warned that it has enough funding to last only until the end of the year, forcing Burnham’s hand on a decision.
One option on the table is for the Government to strike a deal with Thames Water’s existing creditors. This would be taken as a signal that the status quo of private-owned water companies is here to stay.
Another is to place Thames Water into a Special Administration Regime, effectively bringing it under temporary government control while a longer-term solution is found. This is the option favoured by many of those who want to see the industry brought into public ownership.
Burnham now appears to be putting forward a third option: passing the Water Bill to establish a new route to public ownership for Thames Water and any other company deemed to be failing.
It’s the contents of this bill that will tell us whether Burnham really has the stomach to reverse the past 40 years of privatisation.
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