Gareth Thomas: The water industry is failing – it’s time to put the public in charge

Posted On: 
21st January 2019

Bringing water into public ownership on a mutual model would ensure a well-resourced and accountable industry – and save the taxpayer money, writes Gareth Thomas

Thames Water improvement works. Gareth Thomas calls for the company to be converted into a mutual
Credit: 
PA

Margaret Thatcher’s decision 30 years ago to privatize our water industry has created a system which is expensive, unaccountable and unfair. No other country has completely privatized their system of water and sewage services. There is little competition and regulation has been deeply flawed. The consumer voice has carried little weight when up against the interests of distant investors and not surprisingly water bills have rocketed as a result.

Bringing the water industry back into public ownership by mutualizing the industry has long been the ambition of the Co-op party. Indeed, only a change in ownership so that the public are in charge will deliver the shift in priorities to make the water industry fit for the environmental, investment and financial challenges it faces.

The owners of Thames Water have particularly exploited their monopoly position. In the ten years to 2016 Thames Water’s shareholders paid themselves £1.6bn in dividends, ran up a pension deficit of £260m, loaded Thames Water with £10bn of debt and regularly paid zero corporation tax. In 2017 Thames Water was ranked 23rd out of 23 water companies for customer satisfaction according to, the Water Watchdog, The Consumer Council for Water. According to their own performance report for 2017/18 Thames are failing to meet basic targets in 17 out of 41 key areas.

Research by the Open University suggests that the owners took more in dividends from Thames Water than it actually earned from its income from its consumers over the last decade. Dividends, debt and the pension deficit weren’t the only things to increase in this period – customer bills and the number of complaints went up too.

Thames Water should be converted into a mutual, operating in the private sector but owned by its consumers and its employees. Thames Water would be jointly owned by a consumer trust and an Employee trust to share ownership of the new mutual company which would be limited by guarantee, similar to Glas Cymru who provide water in Wales.

Public ownership can take many forms but a mutual model, building on the success of what has worked in Wales and some of the lessons of the industry before privatisation would ensure Thames Water is well-resourced, accountable and effective.

Mutualising the water industry would also not require taxpayer money to be diverted from funding public services into buying out the current owners of water companies.

One of the key arguments used to bring in privatisation was that companies would deliver new investment. The government of the day cancelled all the former nationalised industries debts to help and huge sums have over the last 30 years have been borrowed, but it is questionable whether that has led to more investment than there would otherwise have been.

All of the investment in tackling leaks and improving water supply could have been covered using the resources garnered by customer bills suggesting that the debt on water companies’ books is at least in part delivering tax and dividend benefits for shareholders rather than new investment to help tackle leaks and improve services.

Mutuals would still be able to borrow for investment taking away one of the arguments opponents of reform would inevitably use to argue against public ownership and for reprivatisation.

Increasing the powers of Ofwat to reduce dividends, increase investment and put the consumers first would transform the ownership of the water industry delivering public ownership at no cost to the taxpayer and making re-privatisation much less likely.

The water industry needs reform. But if the reform is to be meaningful a change in ownership to put consumers and employees in the driving seat is essential.

Gareth Thomas is Labour MP for Harrow West. The Westminster Hall debate on the future of the water industry is on Tuesday 22nd January