Water UK’s chief executive has responded to leaked Labour plans which reveal a “cut-price raid” on the water industry.
According to an article in The Sunday Times, Labour’s leader Jeremy Corbyn plans to pay up to £24 billion less than the market value of water companies to bring the sector back under public ownership.
Michael Roberts, chief executive of Water UK said a “cut-price raid on the water industry would see millions of pensioners lose out on thousands of pounds.
The internal Labour document circulated among the party’s frontbench members reveals plans to try to pay a fraction of the market value for the water sector.
It is thought that pensioners, employees and shareholders who have funds invested in water companies would lose up to half their value.
Responding to the story Roberts said: “It would be an absolutely devastating blow for millions of pensioners if the water industry was subject to a smash and grab raid by a future government paying well below market value for it.
“More than five million pensioners have funds invested in the water industry – including very many public sector workers – and they would lose thousands of pounds each under these leaked plans.
“It’s becoming clearer by the day that the financial case for nationalising the water industry doesn’t stack up. As well as hurting pensioners it would land taxpayers with a multi-billion pound bill, both for the purchase of the industry and the extra £100 billion that needs to be invested in the sector over the next decade.”
The Sunday Times outlines that Labour’s renationalisation blueprint reveals for the first time the scale of Corbyn’s plan. It says Labour will pay compensation of less than £20 billion for water companies, which at conservative market estimates are valued at £44 billion and anywhere up to £90 billion if debt is included.
The Social Market Foundation published a report last year which estimated that shareholders would require £44 billion worth of compensation based on the companies’ market value.
And the thinktank’s paper said that taking into account water companies’ debt, which it estimated was worth £46 billion in late 2017 when the research was being carried out, would increase the government’s costs to £90 billion.
Compensation would be a “political process of negotiation with shareholders”, the Labour briefing paper states and the final level could be less than £20 billion.
Shareholders and lenders are expected to see government bonds handed out in return should Labour get to power and execute its plans to renationalise the water sector.
Energy companies could also see similar losses.
Thames Water recently added a new clause to some of its financial bonds to ensure investors are paid back immediately if the utility company is nationalised.
John McDonnell, the shadow chancellor of the exchequer, lined up water as the first industry Labour will bring back into public ownership when he gave his keynote speech at the Labour party conference last year.
A Labour party spokesperson said: “Water bills have risen 40 per cent in real terms since privatisation. In the last ten years, water companies have paid 1,000 times more in dividends to their shareholders than in tax. Some have even paid more in dividends than they have made in profit, running up debts that are passed on to bill payers.
“Labour will fix this broken system by bringing the water companies back into public ownership, saving households £100 per year on their bills.”