John McDonnell has claimed that renationalising the utilities could be achieved at zero cost to the taxpayer.
Interviewed on Saturday (10 February) on BBC Radio 4’s Today programme, the shadow chancellor of the exchequer said a future Labour government would bring the utilities back into public ownership by swapping shares in the companies for government bonds.
“This would give a steady and consistent income guaranteed for the future and is a cost free way of bringing it into public ownership.”
And he said the upfront cost of buying back water and energy companies could be paid back from the profits the publicly owned companies made.
He said: “You borrow to buy an asset and when that asset produces profits it will cover your borrowing costs. Even if interest rates went up you would still be able to cover your costs.”
McDonnell claimed lower prices could be delivered by ending the payments of dividends to shareholders.
Following the conference, Labour yesterday (11 February) published an analysis of water companies’ accounts, according to which they have paid out over £13.5 billion in dividends since 2010, nearly equating to their pre-tax profits over the same period.
According to Labour, annual dividend payments by the same firms during this period have jumped up by around 11 per cent, while average household water bills have risen by around 8 per cent.
Labour said in 2017 alone water companies issued over £1.6 billion in dividend payments, an increase of 24 per cent on the previous year.
McDonnell said: “The water industry is quick to waste customer’s money on funding reports by right-wing think tanks to attack Labour, while running from their shameful record.
“But these figures reveal that our water system is broken. It is a national scandal that since 2010 these companies have paid out billions to their shareholders, almost all their profits, whilst receiving more in tax credits than they paid in tax.
“These companies operate regional monopolies which have profited at the expense of consumers who have no choice in who supplies their water. Yet at the same time they hike up prices and load up on debt while shelling out billions in dividend payments to shareholders.”
Responding to the Labour Party’s comments, Water UK chief executive, Michael Roberts, said: “It’s wrong for Labour to suggest that our water system is broken. Water companies secure capital provided by lenders and shareholders, who need water companies to make a return in order to finance significant improvements to the industry.
“Under public ownership, the water sector in England was starved of cash and standards were poor. Private companies have instead invested heavily to reduce leakage, improve drinking water quality, and protect the environment – and they continue to invest £8 billion each year in even better services. In real terms, bills are roughly where they were 20 years ago and will be falling over the next few years.”