Conor here: As the UK water companies jack up prices while also turning the country’s river and seas into sewage dumps, they are also rewarding their executives with evermore pay and bonuses. The following piece argues the only fix is nationalization, and an investigation published yesterday added more weight to this argument. The Guardian found that the head of one of Britain’s biggest water suppliers, Yorkshire Water has received 1.3 million British pounds since 2023 via an offshore parent company. Why the workaround? Well, here’s the recent band aid the UK government recently applied rather than consider nationalization:
The government moved in June to ban bonuses for the bosses of water companies guilty of the worst environmental breaches. Yorkshire was one of six companies caught by the bonus ban, after it agreed a £40m payment in March for excessive spills from storm overflows as a result of poor maintenance. It received another £850,000 fine on Thursday for pumping chlorinated water into a stream in 2017.
…Yorkshire’s published accounts reported that Shaw’s pay from that company had dropped by nearly a third in the 2024-25 financial year, from £1,028,000 the year before to £689,000.
The accounts, however, also said that Shaw and the chief financial officer, Paul Inman, had received remuneration from Kelda Holdings, which “is therefore disclosed in the financial statements of that company”.
But Kelda Holdings has no duty to file accounts publicly because of Jersey’s relatively lax laws, and Yorkshire at first declined to say what she was paid by the parent company. Singapore’s government owns a third of Kelda Holdings, with the US investor Corsair Capital, Germany’s DWS and the Australian pension fund SAS Trustee Corporation owning the rest. The refusal to disclose the pay did not appear to breach any rules, but it meant that MPs and bill payers had no way of knowing whether Shaw’s total pay had increased since the bonus ban.
By Eleanor Shearer, a senior research fellow at Common Wealth, a think tank reimagining ownership to build an economy that works for everyone. Originally published at Open Democracy.
It’s no secret that England and Wales’ water system leaks. More than a trillion litres of water are lost each year, tonnes of untreated sewage flow into our waterways, and over £85bn has flown to investors, most of whom are based overseas, since privatisation.
This is a system in deep crisis. Yet the government has refused to even consider returning water companies to public ownership, commissioning an independent review of the sector that was not given a mandate to look into nationalisation.
The Cunliffe Review published its findings last week, recommending that water firms be issued fines to finance the replacement of Ofwat with a new regulator that will try to tackle ever-increasing pollution and spiralling bills.
But attempting to fix the water industry through regulation is like trying to fix a burst pipe with a small piece of duct tape; it cannot stem the tide when the root cause of the problem is privatisation itself.
In other sectors, the Labour government has made tentative moves towards public ownership. It is renationalising passenger train operators in England (though not the rolling stock companies, which own and lease out the actual trains), and has created Great British Energy to support greater public ownership in clean energy projects.
Yet ministers have from the outset refused to countenance the same in the water sector, even as Thames Water has teetered on the brink of financial collapse and required a £3bn bailout. This is a baffling choice when the case for putting an end to decades of profiteering in this sector is so clear.
When Margaret Thatcher’s Conservative government privatised water in England and Wales in 1989, it promised that this would unlock more investment. This investment has failed to materialise, as companies have prioritised boosting returns for shareholders over building and maintaining vital infrastructure. No major new reservoirs have been built since privatisation, and our sewage and water pipes are now crumbling, increasing the risk of rapid flooding and waterborne parasites.
The water companies have tried to use these failing assets as an argument for hiking bills, claiming that this is the only way they can afford to fix things. This is a particularly bold claim given you only have to look to Scotland, where water is publicly owned, to see how different things could be.
Had English water firms invested at the same rate as Scottish Water in recent decades, we would have £28bn more for our water infrastructure. Scottish consumers also pay lower bills and, despite environment secretary Steve Reed’s claims that Scottish waterways are more polluted, the Cunliffe Review found that 66% of Scotland’s water bodies are of good ecological status, compared to only 16% in England and 30% in Wales.
Regulation has tried and failed to correct the failures of privatisation. It’s true that regulatory reforms are needed, especially to better fund environmental protection, as the money ringfenced for this has been cut by 80% since 2010. But ultimately, tougher regulation is always going to be in tension with the drive to attract private investment.
Shareholders and creditors don’t want harsher fines for polluting or caps on dividends to get in the way of their profits. Labour rightly resisted calls from Thames Water’s creditors to exempt the company from key environmental laws, but has failed to see the implications of this for its entire strategy.
The harder that ministers try to crack down on profiteering and underinvestment, the less private investors will want to put their money into the water industry. Only public ownership can deliver a more patient, long-termist approach to running the water industry for the public good, not private gain.
So why has Labour repeatedly refused to nationalise water? Reed has leaned heavily on affordability, claiming it would cost £100bn. But this scaremongering figure comes from a report commissioned by the water companies and was calculated using the firms’ assumed market value at the time of privatisation in 1990, which is far higher than their real value today.
In reality, by law, the government could nationalise water at a cost even below that of the firms’ market values by factoring in returns already paid to shareholders and bondholders and the cost of environmental failures.
Ultimately, the public is paying the price for the failed privatisation of our water industry. We’re paying in the form of polluted rivers and seas and elevated risks of flooding and waterborne pathogens. We’re paying in terms of higher bills, which are due to rise by 36% over the next five years. And we’re paying again in terms of the money that leaks out to shareholders and creditors from every bill: from September every year, your money stops paying for the running of the water system and starts paying for dividends and debt interest payments.
Labour’s current approach is sticking-plaster politics of the worst kind. With 90% of freshwater systems worldwide in public control, England and Wales remain the extreme outlier. It’s time to bring us back in line with the vast majority of the world and take back control of our water industry.
The thing i don’t get the elites drink same water as everyone so why dont they care about this issue? English water have being so bad for so long that even when UK people travel they drink bottle water they cant believe that tap water can drink safely. I guess that must be brainwash from the media
I live in Scotland and always drink tap water. It is very good and I’ve not found better anywhere else.
As for the elite. Will they drink the same water? Or will they drink expensive bottle water or have additional filter systems in their houses? Or are they just too stupid and arrogant to think it through.
No they don’t drink the same water. They do what I and many others do and pay for water bottled in Scotland or overseas and they don’t drink tap water. Even the lower paid drink bottled water when they can.
Many years ago I negotiated for workers in the water industry and spent time talking to my members about their work and the improvements that could be made at tht time. We had the Callaghan government, cutbacks in maintaining infrastructure until, following a trade dispute in the industry, the Thatcher government relieved itself of all effective responsibility for the industry’s wellbeing, in the same way that it shirked responsibility for every aspect of the real economy, and that has been the path taken every government since.
We need to nationalise water without compensation, hold criminal investigations into the behaviour of owners, including institutional investors like public sector pension funds and the like, the financial affairs of every Minister, civil servant and director of every water company in England and Wales during and since nationalisation, not to mention the financial, personal and familial relationships between senior managers, contractors and suppliers at every level of each business, if need be on the basis of, “Show me the man and I will show you the crime”, and then throw the book at the bastards, and make use the experience to move on to the rail sector, and so on.
That’s the only way we can begin to lift ourselves out of the mire that’s been left by the financialisation and private theft of our nationalised industries, many of which had been built up on the backs of local ratepayers and which were handed over to the government’s tender hands on the assumption that these monopolies would never pass to crooks, rentiers and the dregs of well heeled City “advisors”.
Put aside the accepted logical position in social democracies that ‘natural ‘ monopolies and public utilities ought to be state owned and run, for community benefit, as there is no conceivable advantage to be secured from a competitive market.
Then the two immediate problems the Labour government faces are the continuing abysmal performance of English water companies both in costs and pollution management, and dealing with the financial gouging inherent in their operating model, based on private equity and hedge fund principles.
There is not a single rational argument that can sustain the current failed English privatised model for water.
Support for renationalisation in England currently exceeds 80% in public attitude surveys.
We don’t have a perfect system either in Wales or here in Scotland, (I’ll declare an interest as I studied Applied Hydrology, live right next to our local loch reservoir and have friends employed by Scottish Water) but they are broadly functional, and publicly answerable, despite deep cuts over a decade ago to the Scottish Environmental Protection Agency under austerity (and a subsequent damaging data systems hack) meaning monitoring is inadequate. They are seriously understaffed.
We do not pay a separate water bill by the way, it is included as an element in Council Tax.
Cutting monitoring is a continuing challenge to epistemic democracy, deliberately set by austerity and right wing ideology, and equally evidenced now in the States with 47’s mauling of the US BLS as part of him implementing Project 25.
The problem in England is entirely down to the Labour government’s fear of renationalisation, mostly on ideological grounds, though the pretence is different.
Why Reeves accepts the fake hyper-overvaluations is because she thinks and acts like a Thatcherite, much as the rest of Starmer’s government does.
Firstly, there is clear evidence of regulatory capture of Ofwat, (allegedly the delivery agency).
Secondly, the claim it would be too expensive at £100bn – a fraudulent valuation – that is regulatory capital value (RCV ) – totally ignores the solvency issues of the main companies, and their inability to operate within the confines of their legal responsibilities.
For example, Thames Water has a RCV of around £19-20 billion. However, it cannot fulfil its legal responsibilities, has been asset gouged and has debt of over £20bn.
In the real world it is actually worth £0.
All the English water utilities could be renationalised simply by issuing bonds, just as the Attlee 1945 reforming government did with large chunks of worn out post war enterprises, like coal, rail, and steel.
It would cost very little in practice, but would annoy the finance sector to which Labour is beholden.
English water then needs massive investment, both immediately and in the medium term, having been asset stripped by the current set up.
The problem is then how to provide that essential missing investment to ensure adequate water supplies and restructure failing sewage treatment – in line with statutory duties.
Add in the need to cope with climate change imperatives, especially in the south and east of England which have increasing annual water deficits, and other areas like Yorkshire which have to deal with repeated drought episodes. However, water infrastructure investment is integral to any Green New Deal.
Reeves simply lacks the ability to provide a financial model that does not involve obvious increases in taxes or water charges or both, and DEFRA has provided no model for how renationalisation might work – so a failure of government on several fronts.
But…. as things stand, English water companies are going to impose massive increases in billing on the public; the companies are still going to extract capital; and the water technocrats still pay themselves huge bonuses for failure.
Water renationalisation will certainly be a practical concern for the Greens, Lib Dems, and Left party supporters in 2029 but I don’t know if this is going to be a critical election issue in England. It really ought to permanently mark Reeves’ card, if she survives that long, as Starmer will undoubtedly chuck her under a bus to save himself.
The Starmer government never fails to disgust voters. Starmer himself promised pre-election to lead the Labour party to renationalise various key privatised industries. Now in power with a 5 year mandate and huge majority, he has reversed all such promises. Labour ministers, when interviewed by media on Thames Water that supplies London and surrounding areas, parrot that it would cost £100 billion, which obviously the country cannot affort at a time when it is shovelling untold millions to Ukraine and defence budgets. As the article says, this figure comes from a water industry commissioned report. Thames Water is effectively bankrupt and as such would cost barely a penny to takeover. But there we are. Polls indicate a big majority of voters are in favour of renationalisation of key industries but Starmer is unmoved. In the same way, his Zionist fervour ensures the government will pay no more than lip service to stopping aid and support for Israel even though most voters are outraged and disgusted about the situation in Gaza.
If Thames Water is effectively bankrupt then it may be that Starmer wants a group of his friends to snap it up on the cheap, inject some capital and then make out like bandits. And I have absolutely no doubt that Tony Blair and his grubby mitts will be involved in one way or another. We saw that with the Royal Mail sell off for basically half price only to see it’s value double immediately after sale. Never did hear who those people were that initially brought it up but you can bet that it was all organized beforehand. It will be the same with Thames Water but this time around it won’t be British buying it up.
Thank you, John.
The water companies could be taken over for a maximum of £20, £1 each, like Barings was sold for £1 to ING.
That’s a bloody sight too much. Aim for financial recompense for any failings in individual responsibility using criminal and civil law.
“Labour ministers, when interviewed by media on Thames Water that supplies London and surrounding areas, parrot that it would cost £100 billion, which obviously the country cannot affort at a time when it is shovelling untold millions to Ukraine and defence budgets.”
And therein, as they say, lies the rub. Its the same here in the U.S., where ‘defense’ of the realm always gets top billing, and dollars, to the exclusion of some things deemed dispensable, such as medical insurance for the poor.
Defense of the realm from what threat? The ones conjured in fevered minds? Sauve qui peut. You cannot save Ukraine. You just might as well take a step toward saving Britain. Is that too blindingly obvious for the government? And yes, the performative actions of DOGE et al chasing “waste, fraud, and abuse” only in programs that aided ordinary folks while resolutely facing away from the so-called defense department is the like syndrome here in the US. Parenthetically, have you given thought to the notion that the usage ‘ordinary folks’ or ‘ordinary Americans’ admits the existence of ‘extraordinary people? Who the hell are they who fell a cut or two or ten above us? I have my answer to that. Unless you are one of “them”, I am sure you do also.
In even as patchy a democracy as ours, the “realm” consists of the citizens of this country who need to be defended from predatory finance mush more than we have ever in our entire history needed to be defended from the Russians, Chinese or any other bogey man you can think of. If course, we have the little matter of the two colonels and a big wig in MI6 but rather than pummel us with a few hypersonic weapons or vacuum bombs, it may suit us and them if we were just to hand over the political leadership of our last two governing parties who got us into the Ukraine mess in the first place as an act of goodwill to help clear the board and show the commonsense and decency which will underlie our future behaviour in the peaceful management of our political and trading relationships in the new multi-polar order.
But under investment in infrastructure is a possible defense mechanism.
The poorer a country’s infrastructure is, the less desirable the country is to a potential invader.
That’s the ticket, hobble one’s county and hobble the citizenry to discourage outsiders from invading.
Maybe there is a method to the UK’s and USA’s decay as it can be cast as defense.
The logic of this always escapes me — what good is “defense” when the place has already been so thoroughly looted that there’s nothing left to “defend?”
As many much smarter than myself have observed, we live in the stupidest timeline … 😑
Youngest son who untill recently sat on the main board of one the UK’s main water companies, as an accountant, mentioned there are a number of ways to take over/nationalise them without paying out compensation.
We need to nationalise our Government.
Alternatively, I hear they now have active slave markets in the land that formerly had the highest income per capita in North Africa along with universal free health care and education to graduate level.
The problem with nationalisation is that it doesn’t solve the fundamental problem, which is decades of underinvestment. The core problem is identifying a funding source that will allow for long term infrastructure planning (which in turn reduces costs significantly if done correctly).
The privatisation was mostly a knee jerk reaction by the Conservatives at the time when they panicked over realising what they’d signed up to in Europe (binding Directives setting strict legal targets for discharging sewage to waterways and the seas). Even advocates of privatisation now pretty much all acknowledge that it was botched, with insufficient incentives for the companies to invest (similar to British railways). Simply reversing it will be an expensive way of not solving the problem. Once again, this is a case of people in power not actually understanding how the things they are notionally in charge of actually work.
Thank you, PK.
I would add the need to raise money for tax cuts in advance of the general election (to be held no later than 1992), a give away to the City and juice up the stock market (needed after the 1987 crash and in advance of the single European market), and hand over tens of thousands of acres of land to the private sector for Blighty’s favourite way of getting the economy to boom (real estate).
Mrs Smithers, aka mum, worked at the Department of the Environment at the time.
Nearly all I know about Thames Water and OFWAT is what I read in the FT. There is never a mention of bankruptcy, insolvency or nationalization. For the pink paper it’s all about getting £3B or so to bail out the bond holders, changing the make-up of the administrators and board members, or how much they can squeeze out of the rate payers. The zombie must keep tottering along. Where asset stripping is a way of life TINA.
Thank you, Conor.
I worked with Jon Cunliffe when he was in Brussels and at the Bank of England and dispute his qualification to head that inquiry – and to head financial stability at the Bank of England.
He knew what the government wanted and concluded accordingly.