The Labour government set up an independent commission led by a non partisan specialist to look into the terrible state of our privatized water supply. You might think great, this is being led not by the government nor by a corporate water boss but someone independent.

Reality is a lot different.

A government can nullify the effect of any commission by defining its terms of reference. In other words which issues can be investigated and which proposals made. Despite there being consistent opinion poll majorities for taking back the water companies into common ownership the new Labour government, which claims to be for change, has ruled out renationalization. Starmer claims it would cost £100 billion which is a blatant falsehood we will explain below.

The other way this commission was set up not to be independent was to put a ‘safe pair of hands’ in charge of it. Usually it is a Lord, a retired banker or a corporate boss who will put on a good show of being reasonable and tap a few knuckles, but will essentially not change much at all. They might criticize the private management of water but their role is to set up the conditions for the privatization to continue with a few reforms and a bit more regulation. The aim is to calm public anger about the price rises and the way our rivers and seas are used for sewage.

A safe pair of hands

Step up Jon Cunliffe who is both a knight of the realm and a former Bank of England governor. He is somebody unlikely to rock any boats and will not seriously question the role of capitalist profit in the provision of a vital human need like water. Most commissions and inquiries work along the same lines – it is part of British political culture. The PR has to be well orchestrated so this time Ofwat, the water industry regulator, was well and truly blasted.

It will be eliminated… and a new type of ‘stronger, better’ regulator established. Some other rules will be established and there may be a cheaper tariff for the really poor but the privatized companies have been well and truly reprieved.

A progressive government that actually listened to ordinary people or even considered renationalization might have thought about putting up a trade unionist knowledgeable about the water industry. Or propose an environmental specialist who had campaigned for clean sea and river water such as former Undertones frontman and water campaigner Feargal Sharkey. Unfortunately he can only react to the whitewash report: released last week

“I think Steve [Reed, minister responsible] has got to reflect very carefully on the shambles that the last 12 months has been. He should go.

The Labour government has had 14 years to look at this, he should have walked into the office on July 5th last year and taken control of the industry. He has failed to do so.”

Regulation yes but we want public provision

In themselves nobody would oppose some of the proposals for improving regulation and monitoring. A publicly owned, regionally accountable water provider would still require external checks and controls. Public transparency in real time of all sewage releases into the environment and the end to all self-monitoring would apply to a public body too.

An ombudsman could be an additional level of jurisdiction. Re-organising the water regions by the major river basins also makes sense. Rationalising all the different environmental and other bodies dealing with water issues is not a bad idea. We are in favour of new protections for consumers and fairer prices.

Nevertheless the commission has had to waste a lot of time working out ways of regulating capitalist companies to avoid a repeat of the way huge profits were given to shareholders through the leverage of debt whilst investment in infrastructure was never adequate. The issue of foreign ownership, bonuses and salaries also have to be regulated externally if you leave the industry privatized. Consequently the whole Cunliffe operation – as the Surfers against Sewage aptly describes it – is like putting lipstick on a pig. 

Giles Bristow, chief executive at Surfers Against Sewage, says:

“Look past the glossy veneer of today’s Independent Water Commission recommendations and you’ll see it utterly fails to prioritise public benefit over private profit. This is not transformational reform, this is putting lipstick on a pig – and you can bet the champagne is flowing in water company boardrooms across the land. Prime Minister, you must abandon the dangerous fantasy that the current privatised water industry can be patched up – it can’t, and the public knows it. Your party was elected on a pledge to clean up our rivers and coasts; now deliver on that promise, and go far beyond these half measures.

For 35 years, profit has come first – and our waters have paid the price. Only one path forward remains: a full, systemic transformation that ends the rUuthless pursuit of profit and puts the public good at the heart of our water services.

Indeed, Giles was correct about the champagne flowing – Shares in private water companies have gone up: Pennon Group (owner of South West Water, Bournemouth Water and Bristol Water) is now up almost 1.5%. Severn Trent has gained 0.5% while United Utilities is up 0.6%.

Fines but no fines

Cunliffe also made it clear that the new regulatory body would still provide loopholes for private companies to avoid fines for failing to meet environmental rules. It is worth quoting directly from the report on this crucial question:

The Commission believes it is important that, where companies fail to comply with requirements, there is accountability and consequence. However, these may sometimes need to be pursued within the context of the broader public interest.

A turnaround regime would comprise a set of defined tools for the regulator to deploy when a company enters the regime, the Commission explains, adding:

These tools would include both supportive levers to improve performance, and sanctions to ensure there is sufficient consequence that prevents moral hazard and that ensures enforcement in relation to regulatory breaches.

In plain English this means as long as you can argue some ‘broader public interest’ or invoke ‘supportive levers’ you can avoid paying any fines out of your profits. So the Labour government protects profits but socializes losses or problems, and we have to pay for their incompetence. 

From the beginning the privatization of a basic service that is a monopoly means that the normal risk involved in any capitalist enterprise is largely eliminated. It is not like these companies have to compete for market share against other brands like a car maker.

Since the clamour for taking water back into public ownership is very strong Cunliffe had at least to refer to the issue even if it was not dealt with.

I understand that many people who responded to our work are concerned about profit in the provision of water through a monopoly system and how that has impacted what has happened. 

He then swiftly buries the argument by saying that pre-privatisation Britain was the dirty man of Europe. Whether that was the case is at least debatable but in one fell swoop he ignores all the profiteering and environmental damage of the last forty years or so. Even if environmental standards pre-privatisation were not optimal at least consumers did not pay above inflation prices and nobody was making huge profits, salaries or bonuses out of the industry.

It is not easy to find many endorsements of Cunliffe, the GMB union, UNITE and the Greens all denounced the report. Even the Lib Dems and Reform were more critical of it than Labour. The official Labour response was that abolishing Ofwat was the answer and pollution and price rises would now be resolved. Pigs may fly. Already it is baked in that the average consumer will be paying above inflation bills and any social tariff system would only compensate the poorest.

What about the so-called clincher argument that Labour continually use to reject taking water back into common ownership – it will cost us £100 billion?

Is Labour right to say renationalization would cost £100 billion?

David Hall, a visiting professor at THE PSIRU (Public Services International Research Unit), said previous court decisions were clear that the basis for compensating shareholders was decided by parliament on a case-by-case basis, taking account of a range of relevant matters, including public interest objectives, and the particular circumstances of each case. The PSIRU have calculate it could cost as little as £14 billion

He said the courts had consistently confirmed that public policy considerations were paramount, and there was no general right for investors to be paid full market value as compensation (Guardian article 2022).

A report by the Common Wealth written by Ewan McGaughey, professor of law at King’s College London says that water could be renationalized at far less than £100 billion if it were valued correctly. The £100 billion figure is based on the water industry’s own valuations. US private equity company KKR is currently offering a £4bn injection of equity to take over Thames Water, when its supposed regulatory capital value is nearer £20bn. Why should the state pay to cover the debts these companies have accrued?

Shareholders as they say could take a hair cut – why should they get an inflated market value. Northern Rock shareholders were not compensated by the government when it crashed. Shares could be exchanged for long term bonds. Government can still borrow much more cheaply that private capital and will reap the surplus once water is back in public hands.

If you compared the cost to the new spending on of military hardware then the potential sums involved are not a problem. Providing water cleanly is a much more positive and productive process than using arms to destroy people and property.

The Labour movement and environmentalists should reject the Cunliffe report framework and continue to campaign for taking water back into common ownership. Clive Lewis MP and Momentum are heading up a campaign for a People’s Plan for Water which includes renationallisation. Starmer’s government is wedded to a disastrous policy of a strategic partnership with capital to provide growth and trickledown benefits. Water shows this is an illusion. We need to impose a different way forward, both to defend living standards and to protect our precious seas and rivers.

photo above from Surfers against Sewage

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