We posted this short video this evening:
English water companies are financially broken and polluting our rivers. So why is Labour ruling out nationalisation? Steve Reed says it costs too much. This video dismantles that claim and explains why nationalising water could cost less than a round of drinks.
This is the transcript:
Steve Reed MP is the UK Environment Secretary, the man who is responsible for the shit in our rivers, in other words, because he is the person who has not enforced UK water regulation over the last year.
Now we have a new report on water.
It ignores the subject of the nationalisation of the English water companies because he says we mustn't do ideology but, he's been totally ideological when it comes to the nationalisation of water because he ruled it out of consideration when he set up the review by Sir Jon Cunliffe to look at the future of the water industry, saying it would cost £100 billion to nationalise water, and we couldn't afford that because it would harm the defence, the education, and the NHS budgets.
Everything that he said on that subject was untrue.
So untrue that he's either ignorant, or willfully ignorant, or a purveyor of deliberate untruths.
Why? Well, first of all, the water companies are bust. They're all bust if you take into consideration the fact that they need to spend vast amounts of money that they can't afford to stop the shit flowing down our rivers.
So if they actually met the required standard, they could not be financially viable; therefore, they're bust because we require them to meet that standard.
How much do you pay for a bust company? £1 at most.
How many water companies are there? Less than 20.
How much does it cost to nationalise the English water industry as a result?
You could get change out of a 20 quid note.
He's including the value of the debt in the price we'd have to pay. That is nonsense.
First of all, the value of the debt of these companies will be reduced on takeover, as that's what you expect to happen when a bust company is bought by a new owner. The existing people who're owed money by the company take what is called a haircut. The value of their debt is reduced. It won't go to nothing, but it will be reduced. But the government wouldn't pay for that debt. It would be paid for over time out of the profits that would be made by the water companies under state control. So his claim that the cost would be £100 billion is wrong.
And secondly, there would be no impact on the budgets of education, health, or defence because every single penny that would be paid would be paid for with government bonds, and they are costless to create, they are never redeemed in practice, and the only payment due would be interest at around 4% for the next a hundred years, if you like, but that 4% is a cheaper cost than the water industry pays for its borrowings already.
In other words, everything he said is wrong because Labour is so terrified of nationalising that it won't go near it.
There's one man who's being ideological on water, and that's Steve Reed. He's a threat to our wellbeing as a result, because so long as he's in office, we are going to have shit in our water.
Thank you very much, Steve.
Get over it.
Poll
What do you think?
Should English water companies be nationalised?
- Yes (98%, 434 Votes)
- Only if it's the cheapest option (1%, 6 Votes)
- No (1%, 3 Votes)
- Not sure (0%, 0 Votes)
Total Voters: 443
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Quick typo
How much do you pay for a bus company? £1 at most.
bust company?
Edited. Thank you.
Should water companies be nationalised?
That depends – would a nationalised water industry meet the standards that the private sector has failed to? Would a nationalised industry invest in building new reservoirs, replacing worn out infrastructure and generally behaving as good citizens? That’s test that needs to be met, not whether it’s owned by the state or some other mechanism.
I’m sure the employees know what the problems are and how to fix them. Perhaps some form of workers’ ownership and management would be a better option than leaving it up to central government.
A state company would be accountable.
Ministers would have no excueses.
They don’t want that, so they oppose nationalisation.
That is what cowardly government looks like.
And let’s not be silly about worker’s control, shall we? Why should they find the many billions required? That may be the worst suggestion I have heard.
Don’t mince your words, Richard. The worst suggestion you have heard?
You clearly have greater faith in the state than I.
Were nationalised industries accountable before the general election of 1979?
Yes. Very much so.
You may be too young to remember the promises made when water privatisation took place after years of government starving the public serice of money. “The private sector will raise the money needed so that the necessary investment can be made to ensure the future of a decent water and sewage service”.
Yeah right, the private sector failed to invest and, instead took out huge amounts of debt that was used to pay dividends to shareholders and ridiculous salaries to senior staff.
Can nationalisation be any worse?
No
And if my ancient memory serves me well, Cyndy, there was much talk of private sector efficiencies, increased water quality and lower bills. All of these things came to pass of course, with no pigs, snouts or troughs being spotted at all in the 40 years since.
No chance..Tge bond holders would take the govt to court and they would win. You are talking nonsense. Ask your buddy Clive Parry. He will tell you.
So you think law prevents losses in private companies, even when they are bust?
Go on, tell me why.
And if you read what Clive Parry says, he thinks a considerable haircut is inevitable, as do I.
Of course there will be some kind of haircut. You said the bonds were worth zero. 100 to zero is a long way. Are you saying the bonds are not not now worthless? Elliott Associates are the largest holder of Bonds.. look at the resume of Paul Singer. Then look at yours. I’m backing that he knows what he’s doing.
I did not say the bonds were worthless. I talked about a serious haircut.
But that does not create a cost to nationalisation.
1. Clean water is essential for life.
2. Water is a natural monopoly.
3. The government can borrow more cheaply than the private sector.
What more is needed to make the case?
I think wholesale nationalisation of water at this point would be unwise – the focus should be on Thames Water where there is virtually NO opposition to nationalisation. Once achieved it sets a precedent that can then be followed on a case by case basis for other companies “as and when”.
For TW the value of equity is £1 – indeed current owners already accept this. The only remaining question is what do existing lenders get?
Huge numbers are bandied about but it need not cost the government anything. In a default debts are rescheduled and existing lenders will take a haircut. This would best be done by swapping existing bonds for (say) 3% 40 year bonds. No money required from government and the interest burden on the new company would be cut drastically to release cash (from customer bills) to invest. It’s simple and the only question is 2%, 3% or 4% and 30, 40 or 50 year bonds?
Sadly, this won’t clear the shit instantly but this new company would set the benchmark of what others must deliver…. And if they can’t then they get nationalised in due course.
Finally, how do we price water? I would argue for a cheap rate for the first few litres that are essential…. with increased pricing for heavier users.
Much to agree with but this must be for the whole industry – they are all totally broke, as is the environment. None can stay in private hands.
Slowly, slowly catchy monkey!
It would be too much for our political infrastructure in one hit.!
TW needs to be rained in and taken into public ownership. That itself sets a benchmark of what is expected!
I think Clive Parry’s proposal is a shrewd way to do it. First, it is easier to do, and easier to sell in the inevitable public, political propaganda war (Thames is indefensible using any criteria at all, and nobody wants to be associated with a sinking ship). It also provides a trial run of the process; and offers an orderly transfer (with room to learn from experience, and refine the process) from private to public sector.
Once Thames is done in this way, what future do the others companies have? They will be paying far higher debt costs, and who is going to bring fresh money to the table in the transformed environment? For investors the writing is, effectively already on the wall. The debt holders of the other water companies will soon enough read the writing on the wall, and look to Government for a negotiated settlement; in a queue of negotiated settlements, in which for once the Government need not take the biggest hit.
We’ll have to differ.
My reasoning is not financial – it is environmental damage.
Allow me to clarify. I differ from Clive on “as and when”; the “as” is an empty class. it is “when” alone. Once Thames is nationalised, it is “when”; it will be a matter of time, and timing, I do not believe there will then be a plausible future for privatised water companies (and Clive does not offer one). The debt holders will be looking for a way out; and I think this all about the debt.
The Labour Government literally doesn’t think about anything else. Nor, I suspect do the privatised water company debt holders…..
Noted.
Agree, 1 on its own is easy to take down, all of them together is a fait accompli.
Especially Shamglian water, that’s got to be nationalised asap, trying to pump sewage up Honey hill, pollute the aquifers, turn Honey Hll into Bummy Hill.
All because they want to get their greedy mits on Cambridge land, relocate the sewage works that’s been already future proofed.
As said neoliberalism has the reverse Midas Touch, everything it touches turns to shit, literally.
It just proves that there is no such thing as a free market, these companies are zombies, on state life support.
It’s the too big to fail lie.
I think it’s important, if/when nationalization takes place, that the CEOs, COOs, CFO, etc. of the nationalized company(ies) are not recruited from the private sector. They should be leaders who know the difference between public sector and private sector services and who are committed to serving the public rather than not spending money. Here in Nova Scotia we had a public energy company that was run by private sector trained and inclined management and they worked to privatize the company in 1993, and it’s been a disasterous combination of poor service and high prices ever since. It is simply nonsense to think that someone who runs a for-profit company has the skills (or the outlook) to run a public service.
Agreed
You really do not want Civil Servants either; or Management Consultants. I would wish more people who understand the hydrology and engineering. Technically competent first. They are running an engineering hydrology monopoly. It is specialist, and the heavy technical issues should guide the management priorities. There is a requirement for responsiveness to consumers, and an ability to market services; but that just means you need technically sound people; but with a breadth of understanding at the top.
I agree with Ronald. Attitudes centring on service to the public are far superior to those focussed on greed and profits. To keep water in public service hands once nationalised is of paramount importance. I think we need to think about different models to the old style Public Corporations. They would be easy to privatise and start the whole damned cycle off again. So let’s think about regional organisational models that would be not for profit, that would be a safe, government backed investment for those wanting a modest return, that would involve at Board level, consumer voices, trade unions, local authorities and chambers of commerce and industry. The focus would be on service to the public, not bonuses and profits. And salaries would be modest.
Much to agree with
I posted something about this earlier today but I think it didn’t get through.
Has the government explained how it gets to a £100 billion valuation? Perhaps someone should ask a parliamentary question about it.
I assume they are not paying anything for the worthless shares. So that is presumably the price they think they would have to pay to the lenders to buy in or release the debt. Is that the par value? But what price is the debt currently trading at: how many pence in the pound? Most lenders are financial investors so it is all about maximising their return. None of them will be very interested in exercising any security and taking over a heavily regulated business with no clear route to profit but rather requiring significant further investment. So make them an offer they can’t refuse, be it 10 or 20p in the pound or 50 or 60. It won’t be £20. But it also won’t be £100 billion. And it won’t be paid in cash but rather in gilts.
Whatever way we go, we need regulators that are much more muscular and not so entirely toothless and spineless.
Much to agree with
I have no idea where the first comment went
The problem was at my end I think.
For what it is worth, I agree with some of the comments suggesting starting with Thames Water rather than waiting for a solution for the whole industry. We need the whole solution but easier to tackle piece by piece.
Just as it was and is with the railways. Over time I expect the tensions in the partial nationalisation will show and more action will be required.
The problem was at my end I think.
For what it is worth, I agree with some of the comments suggesting starting with Thames Water rather than waiting for a solution for the whole industry. We need the whole solution but easier to tackle piece by piece.
Just as it was and is with the railways. Over time I expect the tensions in the partial nationalisation will show and more action will be required.
The differences in pricing mechanisms between water and electricity and railways is stark. Imagine if every water customer paid a price per litre based on a reverse auction for the “most expensive” unit necessary to meet demand. Perhaps a desalination plant. Or a myriad of pricing options depending on whether their water use was on peak or off peak, the product was first or standard class, and whether they wanted sewerage today or next week or not at all.
I would guess (and it’s only a guess) that the £100bn is roughly the EV (Enterprise Value) of all the water companies. Ie. The market value of outstanding shares and debts.
No need to explain why this is nonsense to readers of this blog.
And now I am double posting. Sorry.
[…] I know that polls here and on my YouTube channel are not statistically valid. The sample is bound to be biased, but last night I posed the same questions on both sites in response to a video on the nationalisation of water. […]
What would happen to all those receiving a pension from the Water Companies? Asking as my friend worked for TW!
The pension funds are independent and should be protected – unless there is a shortfall in paying over contributions