The Guardian has an article addressing the above issue today in which they look at alternatives to private ownership if the U.K. water supply and sewage system. I have this rather long section within it:
Richard Murphy, of the Corporate Accountability Network and Sheffield University, argues the water companies are in effect environmentally insolvent because they do not have the financial means to raise the £260bn needed to stop their sewage dumping, according to a House of Lords assessment. Therefore no compensation is due to shareholders, or to those who lent money to the companies.
But Murphy said in order to be pragmatic, a small offer to shareholders and a reasonable offer to secured creditors would be required to take the companies back into public control using the special administration rules.
The cost of nationalisation would run into billions – all of which could be paid for by the issue of government bonds.
To raise capital for the future of the publicly owned industry, the public could be offered the chance to buy a bond paying 4% or more in the long term to last for at least 70 years. For the first 15 years the return would be guaranteed by the government, encouraging the public to buy the bonds at scale and fund much of the required investment the industry needs over time.
I think one thing is clear from the article and that is that the survival of the UK's privatised water companies is in serious doubt.
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The thing is that ALL of the world’s major industries are ‘environmentally insolvent’, because they cannot meet their real ‘externalities’ (such as environmental costs). See https://naturalcapitalcoalition.org/wp-content/uploads/2016/07/Trucost-Nat-Cap-at-Risk-Final-Report-web.pdf (link opens a big .pdf).
The public ownership model you propose Richard would bring to an end the long term pumping of value from customers to shareholders by businesses that have no competition and have been ineffective regulated.The executives have loaded the businesses up with debt in order to continue to reward themselves and their shareholders disproportionately and unsustainably while continuing to pollute our waterways.
I had an exchange with Liv Garfield the CEO of Severn Trent who drew extensively and selectively on evidence to support the current model while avoiding the more uncomfortable questions.For example she referenced the underinvested infrastructure that was inherited and not needing to invest in capacity as the result of fixing leaks. Anecdotally there is a £5m long overdue new sewer being installed locally which should prevent further pollution of waterways. The investment is not much more than Liv Garfield’s salary. She proudly pointed out that Severn Trent have not imposed use restrictions in periods of dry weather. My response was that this is hardly surprising as the catchment areas for the Servern and the Trent are Wales and The Peak District which have relatively high levels of rainfall ! The bottom line is that the current set up is unjust and unsustainable. The public should have control in order to secure the provision of a vital resource in our best interests.
The water Regulator Ofwat needs to enforce existing rules firmly i.e. no pollution spills, no loading up with unpayable debt, no water losses, (or huge fines on firms & directors personally under HSE), proper investment in new reservoirs & no dividend payments until the aforementioned complied with100%. If Water Companies cannot comply then they should simply lose their ‘monopoly licence’ to operate & revert (at no cost) back under Government control.
The public ownership model you propose would bring to an end the long term “pumping” of value from customers to shareholders by businesses that have no competition and have been ineffectively regulated.The executives have loaded the businesses up with debt in order to continue to reward themselves and their shareholders disproportionately and unsustainably while continuing to pollute our waterways.
I had an exchange with Liv Garfield the CEO of Severn Trent who drew extensively and selectively on evidence to support the current model while avoiding the more uncomfortable questions.For example she referenced the underinvested infrastructure that was inherited and not needing to invest in capacity as the result of fixing leaks. Anecdotally there is a £5m long overdue new sewer being installed locally which should prevent further pollution of waterways. The investment is not much more than Liv Garfield’s salary. She proudly pointed out that Severn Trent have not imposed use restrictions in periods of dry weather. My response was that this is hardly surprising as the catchment areas for the Servern and the Trent are Wales and The Peak District which have relatively high levels of rainfall ! The bottom line is that the current set up is unjust and unsustainable. The public should have control in order to secure the provision of a vital resource in our best interests.
What we are facing is another ‘too big to fail’ situation as we saw with the private banks in 2008.
All of those banks (with certain exceptions) were bailed out by governments and some where nothing but deals between the government and the banks which I found to be dodgy and inappropriate.
Why? Because the trust invested in those private institutions had been squandered and in my view the private banking sector should have been nationalised. Governments should have taken control of the use and distribution of their sovereign money on behalf of their electors. Yes – you read that right.
Your proposals for the water companies are as far as I am concerned are inline with what I would call ‘natural justice’. The water companies were curators of fresh water supplies and the safe handling of sewage and they have failed to manage that but enjoy the fruits of the assets.
They’ve fucked up so that is the end of that – back into public ownership it goes and this time the public can enjoy the output of those assets but I would draw the line of the making the assets tradeable in some way if that were possible.
I agree with you, but I think that only England has privatised it’s water supply. The rest of the UK decided not to tramp the profitable path to ruin.
Scotland has privatised non-household water and Wales a weird hybrid company.
Glad you are getting traction on this….
My only quibble is that selling 70 year bonds to the public might not be the way to go, I would just add it into general gilt issuance. I would also address the issue of accessibility to the gilt market for individuals… probably via NS&I.
Thanks