Water sector hits back at Labour’s nationalisation plans

The Labour Party manifesto “does not do justice to the water industry’s record following privatisation”

The water industry has defended its privatisation, claiming water bills would be 30 per cent higher if it had remained under public ownership.

“The Labour Party appear to have forgotten that the original reason for privatisation was that the public sector had been unable to deliver the required investment for many years,” Wessex Water chief executive Colin Skellett told Utility Week.

He said that, at the time of privatisation, the UK was the “dirty man of Europe”, with below-standard drinking water quality, poor bathing water quality and polluted rivers.

“As a result of privatisation, more than £130 billion of private capital has been invested resulting in clean beaches, renewed water and sewerage infrastructure and drinking water quality that is among the highest in the world.

“According to industry regulator, Ofwat, bills would be 30 per cent (or £120) higher if the water industry had remained under public ownership.”

Representative group for the sector, Water UK, said the Labour Party manifesto “does not do justice to the water industry’s record following privatisation”.

A spokesman said: “The quality of bathing and drinking water is up, and customer satisfaction with water and sewerage services is over 90 per cent. Access to private capital and other sources of funding, repaid through dividends and interest payments, has been key to that record of success.”

Economist and former head of Ofwat, Ian Byatt, told Utility Week the privatisation of the water industry brought a 50 per cent increase in efficiency in the first decade. He said he would be “strongly against” the re-nationalisation of the sector.

Byatt suggested that, currently, rewards for investors are “unnecessarily high” and benefits to customers and the environment “too low”. “Better regulation would be much superior to political decisions such as the Thames Tideway Tunnel,” he said.

“What I recommend is greater efficiency,” he added. “As well as more focus on benefits for consumers where capital projects are concerned and capital projects opening to competition.”

The Labour Party announced plans to re-nationalise the UK water industry if elected to power after the general election on 8 June.

Its manifesto, published 16 May, claimed that water bills have increased 40 per cent since privatisation. It said the party would “replace our dysfunctional water system with a network of regional publicly-owned water companies”.

In an interview on BBC, shadow chancellor John McDonnell said the party was “concerned by the way privatisation has operated”. By ending the practice of paying dividends to shareholders, bills would be reduced by around £100 a year per household, according to sources close to the party.

McDonnell said there were “a number of different mechanisms” for nationalising the water companies, including an outright purchase. However, he refused to set the price, claiming this would “affect the negotiations”.

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