Labour pledges cost-free renationalisation to end “freeloading water companies' stranglehold ove

Shadow chancellor John McDonnell MP launched a blistering attack on the water industry over the weekend. His chief criticisms concerned: dividends and tax.

• Dividend payments – of c£13bn since 2010 while firms hiked up prices for customers. According to Labour Party analysis, annual dividend payments have jumped up by around 11%, while at roughly the same time average household water bills have risen by around 8%.

• Tax – short-changing taxpayers by receiving more in tax breaks than they have paid in tax.

McDonnell (pictured) said: “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.

“Rather than the scandal of rip off prices and huge dividend payments, we will bring them back into public hands, so we see more investment and lower prices. The next Labour government will call an end to the privatisation of our public sector, and call time on the freeloading water companies that have a stranglehold over many working households. Instead, Labour will replace this dysfunctional system with a network of regional, publicly-owned water companies.”

The Labour Party provided more detail on its thinking on renationalising key public services including water, energy and rail over the weekend at its Alternative Models of Ownership conference, and in a report of the same name. This included the claim that its renationalisation plans would be cost-free.

This followed hot of the heels of a separate report out last week produced independently by the Social Market Foundation but funded by Anglian Water, Severn Trent, South West Water and United Utilities on The cost of nationalising the water industry in England. This found nationalisation would cost £90bn, entailing a 5% increase in government debt levels as well as long term investment requirements.

Commenting on Sunday, 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.”