In December, I wrote here about the need for a change to the law on the insolvency of water companies.
I suggested a change that would wipe out shareholders, give loan creditors a haircut and leave essential suppliers with their payments due intact because they were essential to the ongoing supply of water in the UK.
Renationalisation was the inevitable outcome of such a scheme, but so what? Privatisation has failed.
Now, the government has slipped out new legislation to tackle this issue. I had no idea it was coming, but they obviously read the runes of forthcoming water industry failure as I did.
However, as the FT reports:
The new law provides more options for special administrators to restructure companies that are unable to repay their debts and may make it less likely that the government is forced into renationalising water utilities.
They add:
The legislation contains provisions that will allow a water monopoly to enter administration, restructure its borrowings and then exit as a “going concern”. Under the current rules, water company assets have to be sold off, and the corporate entity liquidated, if they go into administration. The new rules would allow existing shareholders to potentially retain a stake.
Unbelievably, after the failure of the water industry, the government's priority is to protect those who have created the mess that we are in.
Who will pay for that? As the FT notes again:
[A] lawyer also warned that creditors might suffer bigger losses than they might have under the current regime.
Read that as essential suppliers on whom we depend to deliver water will take the hit.
In other words, everyone who deals with water companies but those who mismanaged them will suffer. And that is all to ensure, as another lawyer told the FT, that the government does not have to take management of these companies but can leave them with the existing shareholders who have totally failed this country.
It takes staggering arrogance to present legislation so bad, but that is the only thing the Tories now have left.
I despair.
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Typo: “everyone who deals with water companies but those who mismanaged them will suffer” doesn’t quite make sense.
It does to me….
And to me, although slightly “archaic” English…
But: With the exception of
paraphrased: ‘everyone who deals with water companies will suffer, except those who mismanaged them’.
That’s about it
This very issue is covered extensively in Abby Innes’s book “The Late Soviet State: Why Materialist Utopias Fail” Part II Chapter 5. She argues because of uncertainty and private enterprise drive for profit it’s impossible for the state to be an equal partner in any legal contract drawn up with a private enterprise in an area of service necessary for the common weal but having complex and monopolistic attributes. Because of what I’ve termed to be SAD (Selective Amnesia Disorder) none of the UK’s political parties recognise this. You might have expected the historical legacy of the Labour Party to be understood by the current party leader especially why it chose to implement the NHS clearly such effort has not been made! In a society where the education system doesn’t teach such matters even the rudiments of elementary personal finance it’s hardly surprising Starmer can get away with his obsfucation!
National Grid has been split into an asset owner and a systems operator/planner. The latter is gov owned. One supposes the asset owner has some sort of “service level agreement” – withg respect to its efforts to maintain the asset. Repeat this with the wtaer companies (& the DNOs (electrical) )- strip out operations & planning (put into gov ownership) and leave the assets owned by the current rabble & then impose an SLA that covers:
leaks
sewage
Link profits (which can be both positive & negative) to the SLA. This could then lead to the water companies failing and being picked up for a song. Wont’ happen because as Mr Schofiled observes (via Late Soviet Britain) , the UK is in neoliberal land and the two main parties are quite happy to keep the experiment running. Indeed, I’d argue that Reeves in LINO is far too stupid to understand the arguments for change contained in the book. I’m at the same chapter. The book should be required reading for all politicos.
Arrogance!? Arrogance!?
This is criminality – that’s what this is.
This is the rich creating their utopia right in plain sight.
Rule breakers and not rule takers for sure.
This may be one of the reasons Sunak and the Tories want to wait as long as possible before an election. Get as much of this type of legislation on the books before being booted out.
I presume that if water co. shares tanked it would significantly affect the FTSE. So the Cons are once again protecting the City above all us “plebs”.
Not much
Most are unquoted
This is no surprise. Britain has never, ever been committed to “free markets”; that is just empty spin. Britain has always been monopolist by instinct. The United States has the SEC, and although it is not always effective, this is usually because of how slowly it functions; but its anti-trust powers have real teeth, and the courts apply them.
Britain has never had adequate anti-monopolist legislation or powers. This is quite deliberate; set up the system in the shadows, if possible. In Britain all regulation is designed to be structurally weak; typically serving the regulated industry first. Thus regulation in virtually everything is designed to fail.
What British neoliberalism doesn’t like is public monopoly. If the only way to operate an industry or service is through monopoly it must be a private monopoly; a protected rip-off. Private interest must be entitled to make-off with the profits or rip-off the public; and if the operation is so badly run it still fails; it must be guaranteed survival, and resurrection.
Neoliberalism is a cult, an infection of the body politic.
Much to agree with
“… but they obviously read the runes of forthcoming water industry failure as I did”
The Oracle of Ely strikes again. A bit like the Oracle of Delphi, except less coherent.
The FT and Bloomberg thought so. Both have been in touch.
Stands to reason that, if the shareholders of water companies are permitted to retain some value in an administration, then it will inevitably be at the expense of the creditors.
Do you think that suppliers might start to demand payment with order?
I would.
I remember that we were told that privatising the water companies would allow them to borrow money on the markets to reduce leaks and separate storm water and sewage. They certainly borrowed money but to only buy their own shares and boots the CEO’s bonuses
This is just another example of the current government doing what they can to protect their friends and try to box in the next government.