21 September 2017
The debate covered the failures of privatised water, how much shareholders would be compensated if it was brought into public ownership, and what we should do about the potential effect on pensions - on which, more below.
Is the debate shifting on the failures of privatised water?
“You have to look at some of these monopolies and say they have not given the customers a fair deal and some change has got to happen…In principle, public ownership is not something to be scared of, we see it across Europe in just these sectors.”Stephanie Flanders, on Radio 4 this morning
"It is a model that has very much suited the financial investors and their hangers on, who have made fortunes out of leveraging up water companies and taking out giant dividends. But for households, this regime has been vastly less rewarding. To reform it requires more than the odd admonition about leaks, debts and excessive charges. It needs a wholesale rebalancing of the system. And if Ofwat will not do it, someone else should." Jonathan Ford, in the Financial Times last weekend
We Own It believes public ownership is the way forward - and yes, that means buying out the shareholders. So...
What is a fair level of compensation for water shareholders?
- They’ve increased debt from zero in 1989 to a mountain of £42 billion today and used debt to finance investment
- They've kept the overall level of shareholder investment about the same - in fact equity has dropped slightly (see the graph from the National Audit Office below)
- They've extracted profits of around 12% - £1.8 billion - year after year
- They pay the CEOs of the 19 water companies huge amounts - £10 million in 2012
- They've increased our bills by 40% in real terms
Bringing water into public ownership would save us £1.8 billion a year on shareholder dividends alone. So, if we compensated shareholders for £18 billion, this proposal would pay for itself in around 10 years.
But what about the pension funds?
In the interview this morning, Stephanie Flanders was right to raise the question of the impact on pension funds of compensating at less than the market value of the shares.
Pension funds own only 3% of shares of UK quoted companies. Therefore, we could have a special provision for dealing with UK pension funds - to make sure that people's pensions aren't affected badly by bringing our water into public ownership.
At the moment, our water bills subsidise unaccountable investors in Australia, Canada, Malaysia and Hong Kong. This doesn't make sense.
Water is already publicly owned in Scotland, while in Wales there is a not for profit water company. Worldwide, 235 cities have taken water into public ownership in the last 15 years, many of them in France and the US.
Let's copy these great examples and bring water in England into public ownership.