Keir Starmer must consider nationalising water companies, Labour MPs have said, as the potential collapse of Thames Water means taxpayers may end up footing the bill for its debts.
Last year the shadow chancellor, Rachel Reeves, ditched the Labour party’s policy to nationalise water, saying: “Within our fiscal rules, to be spending billions of pounds on nationalising things, that just doesn’t stack up against our fiscal rules.”
Now, a group of backbench Labour MPs are calling for the leadership to reconsider, calling privatisation a “ripoff” and a “failure” for working people.
The former shadow chancellor John McDonnell said the leadership should consider a policy to nationalise water. “Water privatisation has been the biggest ripoff privatisation of them all. Fortunes have been made at all our expense as the service has deteriorated, charges have gone through the roof, massive debts have been incurred to pay shareholders, and they’ve polluted our rivers and seas. Thirty years of regulation has significantly failed. Public ownership is the only serious option from here on,” he said.
Kate Osamor, the MP for Edmonton, an area supplied by Thames Water, also called for the water companies to be nationalised. “For decades, Thames Water have passed on enormous profits to their shareholders while failing to invest. Leaks and sewage dumps in Edmonton are at an all-time high and now my constituents are going to be asked to pay more during a cost of living crisis,” she said.
“Enough is enough. Thames Water must be brought back into public ownership, without compensation for shareholders. The British public has been taken for a ride for too long. The model of nationalising risk and privatising profits has failed.”
Clive Lewis, the MP for Norwich South, who sits on the environmental audit committee, said: “When you look at the issues we will face under climate breakdown – years of drought then years of rainfall – you begin to see that having a profit motive driving investment, driving those services, is simply incompatible with how anyone would view dealing with that situation. That is where we are heading – that is where the science tells us we are heading.
“We are facing an existential crisis, and I am afraid it is not just will people have enough water to water their gardens? It is, will we have water to grow the crops? This can not be solved by having shareholders and dividends as a priority. This is beyond an ideological fight about public good and private bad. The public understand that something needs to change. Labour should get on the front foot and show it has the best interests of the British people at heart.”
The shadow environment secretary, Jim McMahon, was highly critical of the privatised system during an urgent question on the water industry earlier this week, but stopped short of calling for nationalisation.
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He told the Commons: “It was clear to anyone looking on that a culture that allowed vital investment in ending the sewage scandal and tackling water leaks to be sacrificed in favour of a goldrush for shareholders was never sustainable. The Conservative party’s cycle of privatising profit – usually for multibillion-pound foreign sovereign wealth funds – and nationalising risk is not sustainable, and neither is it a fair deal for working people.”
Mathew Lawrence, the director of the thinktank Common Wealth, said: “Thames Water is just the latest example of ripoff Britain where the privatisation of basic utilities has led to higher prices and worse services. The public have had enough and want genuine change. That means a return to what is common and successful across Europe and beyond: the water industry in public ownership run for the public’s benefit, not distant shareholders.
“Labour now have a choice. They can stick to criticising an obviously broken system, without offering substantive structural solutions. Or they can match the public mood by setting out a plan to address the extractive ownership at the heart of the problem. With other water companies in distress, the issue won’t go away. Given this, ambitious action is more prudent and effective than tweaks at the margin.”
Water companies have been lobbying Labour to warn them off nationalisation. The Evening Standard this week reported that Liv Garfield, the chief executive of Severn Trent, was trying to bring a taskforce of utility bosses together to keep what she referred to as the “status quo”.
She wrote in a letter to other utility companies: “Whilst it is clear Labour will not include nationalisation in its next manifesto, they are also not keen on entering into the election race championing the status quo. The leadership thinks there is room for improvement and, politically, there is significant pressure to ‘do something’ about utilities.
“One idea we believe might be attractive to the Labour leadership is repurposing utilities and utility networks into a new breed of declared social purpose companies – companies that remain privately owned, who absolutely can (and should) make a profit, but ones that also have a special duty to take a long-term view.”
The Labour party has been contacted for comment.