Labour’s plan to renationalise the water industry has been branded “potentially disastrous” by one of the party’s own MPs who also chairs the industry’s all parliamentary group.
In a speech at the conference, organised by Twenty65 in Manchester earlier today (17 April), Angela Smith said that last year’s general election Labour Party manifesto pledge to renationalise the water industry was a “mistake”.
The Yorkshire MP told her audience that the cost of carrying out the policy had not been “rigorously tested” in the context of its related plans to restore public ownership of Royal Mail and large chunks of the energy industry.
And pointing to a recent report by solicitors Clifford Chance, Smith said the current owners of the water companies would have to receive “reasonable compensation” under the Human Rights Act, which guarantee the right to peaceful enjoyment of property.
She said the nationalisation of the aerospace and shipbuilding industries in the 1970s had taken three years to carry out at the end of which their shareholders were paid the average price of their stock for the six months before the policy was announced.
Smith, who is chair of the all-party parliamentary group on water, questioned whether an incoming Labour government should “waste” its time responding to potential legal challenges by investors given the other pressures that it would face in terms of rebuilding public services and securing the economy post-Brexit.
“The implications of the key investor protections in place quite obviously need thinking through by our shadow chancellor.
“If a future Labour government has resources available to cover the substantial transition costs related to nationalisation, then surely it would better serve the country by using such funds to invest in our crumbling public infrastructure.”
She questioned whether a nationalised water industry would be able to deliver sufficient investment and expressed concern over increased political meddling in the sector
But the privatised industry could not enjoy a “free for all”, Smith said: “There is considerable disquiet, as we know, about the impact of ownership structures and debt profiling on financial resilience in the industry, especially in the context of what are seen as excess profits. This creates a difficult climate for delivering solutions to the challenges I have outlined.
“Not only should government commit to reform of water regulation, as an alternative to the much riskier and potentially disastrous choice of nationalisation, but it should do so in the context of a commitment to put water at the heart of everything it does.”
Ofwat’s PR19 methodology should be more “ambitious”, she said: “Five year control periods do not fit the investment profile required to create a more resilient and environmentally friendly water sector for this country.
“Levying fines where appropriate is all well and good. Even better when it aims to secure strengthened financial resilience.”
Smith also criticised the government’s recently issued 25-year Environment Plan as “long on fuzzy ambitions and short on detail” and said it “failed to convey a vision for a future where water is truly valued”.
She said society as a whole had to develop a better appreciation of the value of water resources and that innovative, greener waste treatment technologies were required.