Key facts
- MPs and mayors have proposed turning failing water companies into not-for-profit cooperatives.
- The proposal offers an alternative to nationalization, aiming to avoid increasing government debt.
- The plan includes enhanced regulation, tighter restrictions on executive pay, and a ban on dividends for underperforming companies.
- Companies failing under new regulations would be forced into a special administration regime and then into a cooperative model.
- Thames Water, facing financial collapse, is suggested as a potential test case for the cooperative model.
- The proposal advocates for a "bail-in" mechanism for failing companies to ensure shareholders and creditors bear costs.
Members of Parliament and mayors aligned with Andy Burnham have presented a proposal to the Prime Minister suggesting a transformation of failing water companies into not-for-profit cooperatives. This alternative to nationalization aims to provide public control over essential utilities while mitigating the risk of increased government debt.
The proposal, detailed in a report by the Good Growth Foundation, advocates for a "third way" to manage water companies that have faced criticism for pumping sewage into waterways, hiking bills, and neglecting infrastructure investment. The mutualised model would place control in the hands of local communities, potentially keeping bills lower and enabling direct intervention against pollution.
Labour MP Helena Dollimore, alongside mayors Tracy Brabin, Oliver Coppard, and David Skaith, and the Co-operative party general secretary Joe Fortune, are backing the plan. They suggest Thames Water, currently on the brink of financial collapse and in talks with the government for a rescue deal, could be the first to adopt this cooperative structure. If a rescue deal for its creditors fails, Thames Water could enter a special administration regime (SAR).
The report recommends that other water companies face stricter regulation, including enhanced monitoring, limits on executive pay, and a ban on dividends unless performance targets are met. Companies failing to meet these conditions would also be subject to SAR and subsequently converted into cooperatives. The proposal also includes a "bail-in" mechanism for SARs, similar to that used for banks, to ensure shareholders and creditors, rather than taxpayers, bear the costs of failure.
Downing Street sources have indicated that immediate nationalization of Thames Water is not on the cards, despite the company's creditors reportedly preparing legal action if a deal is not reached. Mayors like Tracy Brabin have highlighted the long-standing issues of pollution and bill increases, emphasizing the need for greater public control. Praful Nargund, director of the Good Growth Foundation, stated that mutualization offers a route to public control and investment without burdening taxpayers with the costs of past failures.