A water chief executive has hit back at leaked plans which could see a Labour government renationalise the water industry at a fraction of the sector’s market value.
Anglian Water’s boss Peter Simpson said the water sector is already tackling issues highlighted by Labour as part of its reason to target water companies.
The sector would also not be a “priority” for investment over other key public services such as the NHS, he told Utility Week.
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.
Simpson said the move would “spell disaster” for customers and shareholders. Water UK’s chief executive Michael Roberts has also warned that the “cut-price raid” on the water industry would be to the detriment of millions of pensioners.
Speaking to Utility Week, Anglian’s CEO said: “Labour’s proposals to renationalise the water industry and buy back the water companies at less than half their market value would spell disaster for customers, shareholders – many of whom are public sector pension funds – and the environment too.
“Many of the issues highlighted by Labour are already being tackled. Take leakage, for instance. At Anglian, we’ll reach world-leading low levels by the end of 2025, despite already being at the forefront of performance in the UK. Across the sector, bills are set to fall. And we’re doing right by the environment, too. The industry’s Public Interest Commitment is aiming for net zero carbon emissions by 2030. That’s a voluntary commitment by the industry which will deliver 20 years ahead of the date advised by the Committee on Climate Change.
“Water company investment over the next five years totals £50 billion. If the water service was owned and run centrally, it would simply not be a priority for investment against other critical public services like the NHS, education and public pensions. This funding will specifically tackle the unique challenges faced from climate change and a growing population to ensure resilient water supplies for the future.”
A labour party spokesperson said the party would fix the “broken system” by bring water companies back into public ownership, saving households “£100 per year” on their bills.
The party claims water bills have risen 40 per cent in real terms since privatisation.
Following reports that a Labour government would pay shareholders £20 billion in government bonds as part of the proposed renationalisation of the water sector, the three listed water companies saw a dent in their share prices on Monday (7 May).
Pennon Group, Severn Trent and United Utilities all dropped by about 2 per cent in early trading before promptly recovering.
Labour highlighted that taking water into public ownership by exchanging bonds for shares is “cost neutral” according to international accounting standards, because the government exchanges a liability (a bond) for a profitable asset (the water companies).
The party also referenced Oxford economist and government adviser on regulation of utilities, Dieter Helm, who is reported to have said that “with the revenues from the water bills, the government would have sufficient income to pay for the assets it acquired.”
The Social Market Foundation (SMF) published a report last year which estimated that shareholders would require £44 billion worth of compensation based on the companies’ market value.
The thinktank said the figure could be up to £90 billion if debt is also factored in.
Meanwhile analysis for the Financial Times by rating agency Moody’s suggest the bill for Labour’s plans to renationalise water companies in England could cost the government as little as £14.5 billion.
Labour described the £90 billion detailed by the SMF as a “fantasy figure”.
The level of compensation paid to water companies would be decided by parliament.