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Fri, 29 May 2020

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Jeremy Corbyn 'plotting cut-price takeover' in water renationalisation plans

Jeremy Corbyn 'plotting cut-price takeover' in water renationalisation plans
2 min read

Jeremy Corbyn is reportedly looking to pay less than half the market value for water firms as part of Labour's renationalisation plans.

A Labour government would snap up the firms for £24bn less than their current market value, according to a leaked briefing document circulated to members of Labour’s frontbench.

According to the Sunday Times, the party plans to compensate shareholders - including employees and invested pension funds - for the money which has already been put into firms, but would not take into account the value of future profits.

“Shareholder investment on the books of UK water and sewerage companies is less than £20bn,” the briefing said.

“We think this is a better place to start than market values because it reflects how much shareholders have actually put into a company, and doesn’t incorporate future expected profits, which will not exist under public ownership.”

But the document added the final tally would be decided through a “political process of negotiation with shareholders,” which would assess the impact on pension funds as well as “asset stripping since privatisation”.

“The final level of compensation may well be less than this,” it added.

Labour’s plans to reverse the privatisation of utilities, which began under Margaret Thatcher in the 1980s, come amid growing frustration at water firms who have been hit by a series of fines for pollution and leaks.

Instead, Labour would hand control of newly-created regional water companies to local councils who would run the services along with the help of community leaders and trade unions.

Industry concerns about Labour’s policies have already prompted some water firms to make efforts to ‘Corbyn-proof’ themselves.

Last month, Thames Water created new clauses in their bonds to ensure holders were paid out immediately should it be nationalised under a Labour government.

The £20bn figure is substantially lower than other estimates of the value of the industry, including £73bn cited by industry regulator Ofwat and a £44bn estimate by the Social Market Foundation think tank, who also claim that renationalisation would cost the taxpayer £90bn.

But Labour dismissed the valuations as ‘purely notional’, saying the totals were “fantasy figures plucked from the air by politically motivated think tanks”.