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Lib Dems Are On Labour's Case To Make Water Companies Not-For-Profit Community Projects

Lib Dem leader Ed Davey has ruled out making electoral pacts with either Labour or the Conservatives at the next general election (Alamy)

5 min read

Former Liberal Democrat leader Tim Farron has urged Labour to “borrow” Lib Dem ideas on reforming water utility companies if Keir Starmer's party gets into government, including turning some businesses into not-for-profit, community run schemes.

Government has been under pressure to tackle the sewage pollution crisis that continues to grip UK rivers and lakes, while water companies continue to make large profits. 

Last year, the Lib Dems accused water companies of failing to publish the volume and litres of sewage discharged into rivers, lakes and coastlines. In December, a BBC Panorama investigation reported that north-west water firm United Utilities misreported its sewage pollution, with bosses receiving a £5m bonus for meeting environmental targets.

Labour Party analysis has found that nine water chief executives were paid £25m in bonuses, incentives and benefits since the last general election in 2019, and water companies in England are currently looking to hike customers' bills by up to an extra £156 a year to invest in improving infrastructure.

As the MP for Westmorland and Lonsdale in the Lake District and as Liberal Democrat Spokesperson for Environment, Food and Rural Affairs, Farron has been particularly vocal on this issue. He has proposed that all water companies should be turned into community benefit companies: organisations that operate on a not-for-profit basis with the purpose of benefiting the community as a whole.

“The government realises that there is a huge issue, but doesn't seem to have it in themselves to really square up to the water companies in any meaningful way,” he told PoliticsHome.

Farron, who was leader of the Lib Dems between 2015 and 2017, said there was a general “injustice” where the government was not tackling big corporations across the utilities industries, but also failing to prevent the closures of independent shops on high streets and tackle social media companies falling short on protecting young people from online harms. 

“[The government] is showing an absence of backbone… this appears to be the government being weak against the incredibly powerful pillars of an unregulated market,” he said. 

Farron suggested, however, that he felt there was more potential for Labour to take up some of the Lib Dems’ proposals as they are more ideologically aligned with Starmer's party than the Conservatives. A general election is due to be called this year, and polls currently suggest Labour is likely to be elected to office. 

“I would like to think they’re not a million miles from us and hopefully open to it,” he said of his community benefit water company proposals, pointing out that Labour chose an opposition day debate on the topic of water company bonuses in December.

“It’s clearly something they want to talk about and I hope they won’t want to find themselves six or 12 months [into government], having said about how terrible everything was and they're not actually doing anything structurally that would make things any better.

“We [the Lib Dems] have got a good plan and if [Labour] want to borrow it in part or in total, then that would be good. We certainly oppose them constructively, in a way which we’re seeking to get them to take on what we're proposing without trying to score too many points.”

The Lib Dems have been explicit in their plan to target 'Blue Wall' Conservative seats in the next general election, meaning there will only be relatively limited contests between Labour and the Lib Dems; only three of the Lib Dems' 30 target seats are Labour-held.

Farron suggested that while the Labour leadership was clearly being as “cautious as possible” – referencing their decision last week to ditch the £28bn annual spending target from their green investment pledge – they were unlikely to recommit to renationalising utilities industries such as water and energy. 

The Lib Dem MP is in agreement with those on Labour’s front bench who, in his own words, think renationalisation of water is a “silly idea”.

In 2022, Shadow Chancellor Rachel Reeves ditched Labour’s policy to nationalise the water industry. “Within our fiscal rules, to be spending billions of pounds on nationalising things, that just doesn’t stack up against our fiscal rules,” she said.

Farron said he believed that his party could nudge Labour towards community benefit companies as a “more sensible” solution.

Tim Farron and his dog
Tim Farron's constituency is in the Lake District where the famous lakes are being damaged by phosphorus from human waste (Alamy)

“My aim is to make the lakes cleaner, our rivers cleaner, and to shift the dial and make sure this injustice is undone, in which case I will be almost as happy if a non-Lib Dem government did it as if a Lib Dem government did it,” he said.

“You've just got to have a relationship with them where you hold them to account, but you’re constructive and suggest other ideas.”

Lib Dem MP Layla Moran led a Westminster Hall debate on Wednesday to address Thames Water having spilled sewage into rivers in Oxfordshire. She described the local environment as “under threat, thanks in part to the shoddy performance of Thames Water”. 

Farron suggested in the debate that the testing of water pollution should be done by the Environment Agency and not by the water companies themselves.

“The water companies should be charged the full cost of that testing regime, because one of the issues they've got is the Ofwat regulator is weak and feels compromised,” he told PoliticsHome.

“The Environment Agency in my opinion is not so much compromised, just massively restricted by lack of resources.”

While Environment Secretary Steve Barclay has recognised water companies should not be “marking their own homework”, in Farron’s view, he had done “nothing about it”.

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