Labour leadership challenge: statements on water and public ownership

(by Verity Mitchell)

There has been a flurry of public statements about utilities in general and water in particular from potential Labour leadership contenders and Labour think tanks.

On 11 May, the Labour Growth Group published a paper, An honest day, in which it continued to advocate that Thames should enter special administration.

It said: “Let Thames Water fail: If Thames Water cannot stand on its own obligations, it should enter special administration. Creditors take losses. The balance sheet is reset. Workers and suppliers are protected. The public is not held hostage. Then legislate an Essential Services Accountability Regime for water, care, children’s services, dentistry and other captive essential markets: leverage limits, dividend locks, capital‐resilience tests, public‐interest ownership tests, and clawback powers where owners extract while services fail.”

This is a theme it had already set out in a paper published in February: “There is a big political prize in allowing Thames Water to go into administration. It could reduce bills for 16m people and show Labour picking a fight with extractors. The risks from the company going into administration are overblown. Rather than scaring away investors, a fundamental reset of Thames’ finances will reassure them. It will cauterise the much bigger risk in investors’ eyes: the spectre of nationalisation. A fudged deal that softens pollution targets, appears likely to see large returns for some hedge funds while bills remain high, and fails to free up Thames’ balance sheet for more investment will fuel calls for nationalising the whole industry. That is the real contagion risk. Allowing Thames to go into administration may require some temporary liquidity support from HMT.”

Only two of the potential contenders have made statements about public service provision more generally, whilst not explicitly promoting re-nationalisation of water ownership.

Andy Burnham as mayor of Manchester supported United Utilities’ regional business plans and local partnership approach for the North West. He directly engaged with Ofwat during PR24. He was also publicly supportive of the privately financed project for the Haweswater Aqueduct refurbishment. “It’s not just about securing the water supplies… it’s about creating jobs, building skills and delivering long-term value for our communities,” he said.

However, he advocated “taking control of our utilities” in a speech in March. During his tenure as mayor of Manchester, he has taken buses in the region back into public ownership, creating an integrated transport network with trams.

He is significantly one of the founding signatories of Mainstream, a policy network initiated by Labour members of Compass and the Open Labour National Committee. Blogs from Mainstream members advocate policies such as Defra reporting regularly on water “bill reduction progress” and “national assets… not sold off to the highest bidder, others repossessed”.

Mainstream’s call for a new “reset of the Labour Party” states that Labour can "only survive... if we choose a different path", with policies such as wealth taxes and taking essential services into democratic ownership.

Angela Rayner, not a Mainstream statement signatory, has said: “We should be unafraid to promote new forms of public, community and cooperative ownership across the board. Buses and trains being brought back into public hands can now operate for the public good, at prices passengers can afford. Thames Water is an iconic failure of privatisation, which resonates for the same reasons. People are rightly sick of bonuses for bosses who deliver nothing but higher bills. We must face down demands that the public pay the price of private failure.”