“In an era when the climate crisis demands a major rethink of how we manage and use water, it is vital that we restore democratic ownership of this most basic of essentials.”
By Livvy Hanks, The Green New Deal Group
Untreated sewage was discharged into our rivers and seas more than a thousand times every day in 2023. Thames Water, which took on vast debts and used them to pay dividends instead of improving infrastructure, is now demanding higher bills and reduced fines to protect its finances. And a lack of storage capacity means that despite record rainfall over the winter months, we may still face water shortages this summer.
But if you thought you couldn’t get any angrier about the water companies’ behaviour, you might have to think again. The most common argument for retaining a privatised water system is that private capital is necessary for investment – but new research by Professor David Hall of the University of Greenwich shows that since privatisation, net investment by the water and sewage companies has been less than nothing. Shareholder equity fell by 62% in real terms from 1990-2023. Hall finds that this reduction combined with the extraction of dividends and a reduction in retained earnings (the profits that remain on a company’s balance sheet rather than being distributed) means £85.2bn has been diverted out of English and Welsh water services since privatisation.
The government has told water companies they will need to invest £56 billion over the next 25 years just to tackle sewage discharges – and this would still fall short of eliminating discharges altogether. Water companies’ only ultimate source of revenue is customer bills, so one way or another we will pay for this investment. Bringing water into public ownership means we will own the assets we are paying to improve, instead of generating value for shareholders who have invested nothing.
There is a strong argument for bringing all the water companies into public ownership without compensation on the grounds that they have repeatedly breached their duties. If compensation were deemed necessary, however, the government could pay for it by issuing bonds – acquiring a revenue-generating asset in exchange.
In an era when the climate crisis demands a major rethink of how we manage and use water, it is vital that we restore democratic ownership of this most basic of essentials. Both heavy rainfall and drought are expected to become more common in the coming decades. The Environment Agency estimates that England and Wales will face a shortfall of 5 billion litres of water per day by 2050. We can respond to these risks, but only if the state takes on a coordinating role.
The Green New Deal emerged in the context of the financial crisis of 2007-8, as a proposal to rein in the financial sector and return it to democratic oversight so that the economy could be reoriented towards tackling climate change. That need has only become more urgent – and it is bound up with the decline of our public services, as ever more complex financial mechanisms are used to turn our water, care and other key services into vehicles for the extraction of profit. As with the banks in 2008, weak regulation has allowed the water companies to become overindebted and to engage in dubious financial engineering – and to be confident that the public will always bail them out.
We must bring our key infrastructure back under democratic control. In the case of water, this is best done at a regional level. The campaign organisation We Own It has called for local councils, trade unions and community groups to form ‘shadow water authorities’ which can scrutinise Ofwat and the water companies, and which can become fully-fledged regional public water authorities to which ownership would be transferred when the time is right.
The Tory government is being rightly blamed for the sewage crisis. But it’s a crisis that a likely Labour government will inherit; and the solution it is currently advocating – restricting bonuses and making water company bosses criminally liable for their company’s actions – will be nowhere near enough. Private water companies prioritise profit over service because it is what they are set up to do. They deploy considerable resources to outwit the regulators because it is profitable to do so. Government could resource the regulators better – but why persist in an expensive game of cat-and-mouse? The state’s relationship with key utility providers should not be an adversarial one.
Public ownership of water is overwhelmingly popular: as the Green MP Caroline Lucas pointed out in a question to the Prime Minister last week, 80 per cent of Labour supporters and 58 per cent of Conservative supporters back it. Yet with the Tories, Labour and the Liberal Democrats all opposed, it has fallen to small parties and a handful of Labour backbenchers to make the arguments in Parliament. Those MPs need a vocal public campaign to help bring more supporters out of the Parliamentary woodwork – and they need a clear alternative model to rally around, which the proposal for shadow water authorities could provide.
The Green New Deal means putting the transition to a fair, resilient, green economy in our hands. Returning water to public ownership should be one of the first steps we take.
- Livvy Hanks is Parliamentary Coordinator for the Green New Deal Group. You can follow the Green New Deal Group on Twitter/X and follow Livvy here.
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