Does the public support this?
Yes! Our recent poll with Survation showed that not only do 65% of us support punishing polluting water companies by taking shares off them (rather than cash fines) but only 5% of the public oppose it!
How will ‘shares not fines’ help stop the sewage?
There are three main ways disciplining water companies by taking their shares, rather than cash fines, will help clean up our rivers and seas:
(1) It provides a stronger disincentive to pollute — shareholders know they will lose control of their business if they don’t invest in stopping sewage.
(2) It increases their accountability — the public will get a say over the companies' plans, giving you the power to push the pace on cleaning up our water ways.
(3) It makes it cheaper to invest in infrastructure — the public will hold an increasing stake in the company, reducing the demand to make profits or pay out dividends, leaving more money to invest back into the business and to stop pollution.
We explore these issues in the next three questions.
How will it disincentivise pollution?
Instead of feeling immune, shareholders will know they can lose control of their business if they don’t invest in stopping sewage.
Cash fines have failed to discourage private water companies from allowing sewage to flow into our rivers and seas. Right now, it pays to pollute rather than upgrade infrastructure.
But if they are forced to give us shares in the business instead, that may be more of an incentive to invest to stop sewage. Either clean up or pay up!
How will it give me more power to stop the sewage?
Under this proposal, if water companies fail to improve, we — the public — will get a seat at the table and can push for more action on sewage.
This will make water more accountable, delivering REAL regulation. Currently, water company boards reflect the interests of their shareholders. Under public ownership, boards could be designed to represent you and your community.
In our “When We Own It” report we suggested a role for elected councillors, consumer/citizen representatives, workers and civil society. These representatives would sit in on board meetings, have access to data, and stand up for the interests of the public and the planet.
Civil society could include for example environmental campaign groups like Surfers Against Sewage and the clean river groups around the country that have done so much to highlight the issue of sewage in our rivers and seas.
While time should see the public gain a large enough proportion of the companies’ shares to allow them meaningful representation, a decision could be taken to prioritise public accountability from the start.
All shares transferred under this policy could come with additional rights to access board meetings or key decisions. This would be similar to the enhanced voting rights given to the UK public through their golden share in the air traffic control provider NATS.
How will it make stopping the sewage cheaper?
Over time, if companies keep polluting, more and more of them will be under public ownership and control. This proposal makes it easier to get to public ownership (the ultimate goal) at no cost to the public purse.
Right now with privatisation, water companies have a legal duty to make money for their shareholders. So, water bosses prioritise profits over stopping sewage.
As the public become shareholders, this dynamic will change: we don’t want polluted water, so we'll stop the dividends and reinvest profits into sewage prevention.
We know public ownership can deliver. Take Scottish Water which has spent £72 more per household per year (35% more) than the English water companies. If England had invested at this rate, an extra £28 billion would have gone into the infrastructure to fix issues like sewage.
Don’t we just need better regulation?
Successive governments have spent 34 years attempting to regulate private water companies to clean up our water. It just isn’t working.
Since 2020, England’s private water companies have released raw sewage into our rivers and seas for over 7 million hours.
Over the last four decades, investment by private water companies has fallen by 15 per cent while their debt has increased to over £54 billion.
Researchers have found that “the regulator is caught in an impossible bind in meeting the contradictory and contested interests of investors, end users and the state.”
Even when regulators bring fines against water companies, the private bosses see them as the cost of doing business.
In 2021-22, Northumbrian water received fines totalling nearly £800,000 over sewage pollution. The fines have had little impact with the company paying out £100 MILLION in dividends last year and having its water rating downgraded by the Environmental Agency.
Shouldn’t we just nationalise England’s water companies?
Yes! Buying back England’s water companies is a great investment, paying for itself in around 6 years. However, delivering “shares not fines” would allow us to start building up a water system based around democratic public ownership right now, at no cost to the public, without waiting for Westminster parties to back nationalisation. See more about how to take action here.
Who will own the new public shares?
Water companies are natural monopolies, each serving a different region. They should be owned by the people they serve. This is the normal way to run water around the world, with even the USA having municipally owned companies provide 85% of water services.
Local councils should set up and own regional companies which are ready to take shares in the privatised business (or to step in if private companies collapse altogether).
How will “shares not fines” work?
Parliament will need to pass a new law to set up the new “shares not fines” enforcement mechanism and create new public, regional water companies ready to take these shares. This might be a specific Stop The Sewage Bill or Labour’s proposed Take Back Control Bill.
The proposals would likely follow a similar pattern to the current penalty process with the Environment Agency applying to the courts to punish water companies for polluting.
If found guilty, judges would no longer compel water companies to pay cash fines but force them to issue shares to the new regional water companies at a notional cost (e.g., £1), thus reducing the current shareholders' overall stake in the business as punishment for polluting.
What is a reasonable size of equity to fine?
The largest cash fine to date was £90 million for sewage pollution by Southern Water. The book value of all water companies is around £14.5 billion. Assuming each water company is worth the same (e.g., £1.6bn), a fine of 90 million is worth around 5% of the business.
Judges should be presented with a range of options allowing the size of the share would scale with the extent of the pollution — e.g., 1% of the business for small offences ; 5% for moderate breaches; and up to 10% for major breaches.
How do we make sure water policies are fair?
Our water system has been failing for over 30 years. Many of the existing regulators are beyond repair. We need to overhaul how it works to put people and planet over profit.
A new Consumer Union should be created, with all water users eligible to join for free. Members would elect representatives and also have space for direct participation. See our "When We Own It" report for more details.
The Consumer Union should oversee the design of a new system and the transition to balance community needs (such as between UK pensions and consumers or to protect the interests of water company workers — a group who sometimes hold small numbers of shares). It will also hold the industry to account at a national policy level and through representation on company boards.