Ewan McGaughey, professor of law at King’s College London, has informed Keir Starmer that bringing the water industry into public ownership would actually cost nothing.
Schooling Keir Starmer
In a report for Common Wealth, McGaughey argues that Keir Starmer and the government can bring the water companies into ‘special administration’ for their failings. Sky high debt, eye watering dividends and sewage dumping from the companies means the government can use such a process. Special administration is designed to protect vital public services that are too big to fail in order to maintain the service when the provider is failing.
And according to McGaughey, private water companies have already breached the threshold. He writes:
True and fair value in law — the amount that would need to be paid for public ownership — is different from market values. Market values do not reflect losses from market failures, such as the costs of pollution, or the monopoly profits taken by shareholders and banks. The question in law for a court is whether a “fair balance has been struck” in paying compensation when a government puts a company into public ownership. This concept of a “fair balance” enables the Government to take into account returns already paid to shareholders and bondholders, or the damage caused by pollution, and subtract this from market values.
Going further, McGaughey said that the cost of nationalising the water companies would actually be negative if there was a provision in the law. That is, the harm shareholders and bondholders have caused should bring about a ‘bail in’ legal provision whereby they pay for damages. In other words, the ‘fair balance’ should mean the water companies paying us, not us paying them.
Nonsense from the profiteers
The professor, who specialises in insolvency law, called out Keir Starmer for using a figure that the water industry itself cooked up to argue that nationalisation would be too expensive. United Utilities, Anglian Water, Severn Trent and South West Water commissioned a 2018 paper by the Social Market Foundation, which the government has referenced. Labour used it to argue the cost would be £90bn, posing a “huge burden on the public purse”.
But the opposite is true. As well as the cost of nationalisation being zero (or negative), a University of Greenwich study for We Own It recently found that there is a “privatisation tax” of 35% on our water bills. In other words, we’re spending over one-third more than we need to every time we turn on the taps – because of privatisation. The research found that the UK public would save £5 billion per year on water bills if the government brought water into public ownership.
And it’s actually getting worse under Labour. McGaughey points out that Ofwat is enabling companies to hike bills by 36% over the next five years. He states that nearly every river in England is polluted, our bathing quality is the fifth worst in Europe (and there is a trend showing public ownership contributes to a cleaner environment) and Wall Street banks are extracting another £800 million from Thames Water through a new loan.
‘Democratising water’
In summary, McGaughey says that public ownership should mean water staff and bill payers making up a substantial portion of the boardroom that runs the utility. He concludes:
First, worker representation — of at least one third of a board of directors — is the standard in most wealthy democratic countries for all large companies, not just those in the water industry. Staff are the experts who know far better than foreign shareholders and banks how to fix our water.
Second, bill-payer representation, in place of working competition, is found in most modern publicly owned companies. For instance, in Berliner Wasserbetriebe (Berlin Waterworks) which was brought back into public ownership in 2013, half of the board of directors is elected by workers and unions, and the other half is chosen by the Berlin City Council. Water users see the problems of pollution, and care about the waste of their hard-earned money the most.
The UK has lagged behind other countries in democratic representation in companies, historically preferring top-down Whitehall appointments to publicly owned boards. Now is the time to give change a chance.
Instead, Keir Starmer seems to be in bed with the profiteering firms, receiving donations from KKR, which was bidding on Thames Water. Labour should stop that and listen to McGaughey.
Featured image via the Canary
By James Wright
This post was originally published on Canary.