Photo credit: Gio L
A group of Labour MPs and regional mayors has urged the prime minister to turn failing water companies into not-for-profit cooperatives, presenting the idea as a middle path between full nationalisation and the status quo. The proposal, set out in a report from the Good Growth Foundation, a think tank seen as close to the Labour government, is backed by the Co-operative Party and the campaign group Surfers Against Sewage.
The case for mutualisation
Andy Burnham has said he wants public control of water companies, which have discharged sewage into England’s rivers while raising bills and underinvesting in infrastructure. He is reported to be wary of full nationalisation because Treasury projections suggest taking on the companies’ debts could add significantly to government borrowing. Thames Water alone carries around £21 billion of debt.
The report’s supporters argue that a mutual model, in which a company is run as a not-for-profit owned by and accountable to local people, would allow greater public control without that debt risk. Labour MP Helena Dollimore, who launched the plans, said Burnham should end what she called the era of extraction in the water industry. The backers include the mayors of West Yorkshire, South Yorkshire, and York and North Yorkshire, and the Co-operative Party general secretary Joe Fortune.
How it would work
The plan proposes testing the model first on Thames Water, which is close to financial collapse and in talks with the government over a creditor rescue deal. If that deal is not agreed, the company would be placed into a Special Administration Regime, the water equivalent of temporary state control. The report recommends adding a bail-in mechanism to that process, similar to the tool the Bank of England uses for failing banks, so that shareholders and creditors absorb the cost of failure rather than taxpayers. Companies emerging from administration would then be required to become not-for-profit cooperatives rather than being sold to the highest bidder, which is what happens under current rules.
Polling for the foundation found low public support for the existing model, with only around one in ten adults in Yorkshire and the Humber wanting water companies to remain owned by private shareholders. Critics of mutualisation caution that the models being discussed, mutual, cooperative and not-for-profit, have distinct legal and governance structures that are not interchangeable. They also note that mutualising a company the size of Thames Water would be an untested undertaking on a very large scale.
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