Andy Burnham's new government is contemplating a 'multi-stakeholder' model for England's water industry, a plan that could permit private investors to retain a long-term interest. This approach seeks to balance the promise of 'greater public control' with the practical economic and legal challenges of governing the sector.
Officials are reportedly considering a system where ownership and oversight are shared among various entities, potentially including private investors, employees, customers, and different levels of government. This 'pie chart' model, as it has been nicknamed, is seen as a way to achieve a more gradual and less costly shift from the fully privatized system in place since 1989. However, it may fall short of the expectations of some campaigners and trade unions who advocate for complete public ownership.
A government official acknowledged that this is one of several proposals being discussed, aimed at increasing public control, but emphasized that no option is currently favored. The possibility of a model without private shareholders remains open. Another official noted the existence of numerous intermediate options between full privatization and nationalization, with the key question being whether these lead to improved sector outcomes.
England's water companies face significant challenges with aging infrastructure, leading to frequent sewage discharges into waterways and occasional water supply disruptions. Burnham has pledged to move away from what he terms 'neoliberalism,' where 'shareholders never lose, the public never win.' While he has ruled out full nationalization due to its estimated £100 billion cost for England and Wales, he remains committed to 'greater public control.' Specific details on how this will be implemented have been scarce.
The Department for Environment, Food and Rural Affairs has been consulting with think tanks and campaign groups over the summer, but is expected to take several more months to make recommendations. Some officials predict the decision-making process could extend for another six months, influenced by other potential 'oh shit' moments requiring Treasury intervention in different sectors.
Alternative models being examined include those used for bus networks, where public bodies regulate private operators, and Paris's approach of placing water services under a municipally owned company. 'Mutualization,' where ownership rests with employees or customers without being on the government's balance sheet, is also being considered. However, different Labour-aligned groups have varying proposals, from full public ownership to converting firms into not-for-profit co-operatives through mechanisms like voluntary share exchanges.
Water firms contend that private capital is crucial for raising the billions needed for infrastructure upgrades, arguing that the costs would otherwise burden billpayers or taxpayers. They also suggest that mutualization would require substantial upfront capital to buy out existing shareholders. The complexity extends to ownership structures, such as full ownership, majority stakes, or 'golden shares' for veto power, and the monitoring of services, potentially through 'regional system planners' involving local councils and mayoral bodies.
There is a growing recognition of the hurdles and costs involved in reforming the sector, with various groups attempting to influence the government's strategy. The lack of a clear, unified strategy has been noted, alongside a realization that comprehensive reform cannot be immediate. A Defra spokesperson stated that the government is taking action to hold companies accountable and will legislate for fundamental reform to ensure the sector benefits the public, keeps bills low, and improves environmental standards.
