The Financial Times reported on Friday that English water companies could be re-nationalised for as little as £14.5bn, if Labour’s favoured approach to shareholder compensation – basing it on book value – was used.
The article, by Gill Plimmer, indicated the figure could even be lower: “According to people close to Labour, shareholders could in fact receive less than book value, since the final price, to be decided by parliament, could be lowered to take into account an industry pension fund deficit of £1bn, land sales by the companies since privatisation, and other factors.”
The FT cited ratings agency Moody’s as the source of the £14.5bn figure. It contrasted the small number with the £90bn previously cited by the Social Market Foundation, which was based on £44bn of compensation for shareholders based on market value, plus £46bn of net debt. The paper pointed out Labour has said companies’ borrowings could be transferred to government “at no risk to debt holders”. It also quoted Moody’s Stefanie Voelz saying debt servicing costs could potentially fall under state ownership, noting that “some utilities that are owned by governments across Europe are rated more highly than UK water companies”.
The article also considered the alternative valuation method of basing shareholder compensation on regulatory capital value. It said: “The English water companies’ equity is worth £18.3bn when calculated as regulated capital value minus the book value of the debt, according to Moody’s.”
…and launch of Common Wealth think tank to flesh out Labour’s ownership model plans
The Financial Times last week reported the establishment of Common Wealth – a new think tank of 39 academics to design models of ownership aligned with the agenda of Jeremy Corbyn’s Labour Party.
Common Wealth is expected to work on water and wider utility re-nationalisation; growing co-operatives; promoting more public involvement in ownership models; and democratising a wide range of things including business, finance, the environment, digital technologies and land. It has been founded by Mathew Lawrence who masterminded Labour’s inclusive ownership fund (10% of shares in all big UK-based companies to be transferred to workers over a decade), and Ed Miliband is among those on the advisory board.
The FT reported: “Lawrence said the question of who owned and controlled the wealth of society was a fundamental question in 2019. ‘Just as nationalisation underpinned the postwar consensus and privatisation drove Thatcherism, new pluralistic and democratic models of ownership will be vital to moving beyond neoliberalism’.”
The FT added: “Those behind the new group believe that it fills a vacuum given the relative lack of think-tanks in Britain on the left of politics while there is a plethora of centrist and rightwing research groups.”