News

Public Ownership ‘Best Way’ To Improve Water Industry

A new wide-ranging people’s commission into the water industry in England and Wales has concluded that public ownership of the sector is the best way to deliver water sustainability step change, achieved for minimal cost through the special administration process that is included in the 1991 Water Industry Act.

The commission was established by four academics with expertise in water governance and economics, with the aim being to fill in the gaps that were left in the government-appointed Cunliffe inquiry.

The interim report that was published in June came under fire failing to recommend clear actions to address the water industry crisis now facing the country, the Guardian reports.

Academic Ewan McGaughey, law professor at King’s College London, explained that there is strong interest in public ownership, with YouGov research showing that 82 percent of people support the idea.

“Our recommendations are that the British public is right, the evidence supports them and we should move to a new modern, public water system because this is the best way to cut bills, stop pollution, invest in repairs and give everyone a voice. We can have clean water or privatised water but we can’t have both,” he said.

Special administration

The Cunliffe inquiry itself was actually prevented from considering the concept of public ownership by a minister-imposed remit – but Mr McGaughey believes that the move could be made cost-effectively if the special administration process is triggered.

This can be enacted if water companies are unable to repay their debts or if they fail to maintain their statutory requirements, which includes wastewater treatment rather than discharging it into the natural environment.

According to this latest people’s commission report, shifting towards a public ownership model would reduce costs, deliver transparency, take the focus away from shareholder profits and place it on public interests instead, improve water supplier cooperation and collaboration, and improve democratic participation.

Inflated costs

Places like Japan, Denmark and Sweden, home to some of the best-performing utilities in the world, are in public ownership, with the report providing evidence that costs for the next five years have been inflated by privatised water companies and that this way of working makes capital investment massively expensive.

Cost is something that critics of public ownership models often put forth as an obstacle for moving away from privatisation, citing a thinktank estimate of £99 billion for the move… but Mr McGaughey is critical of this figure, noting that the thinktank itself was funded by water companies.

If, however, water firms (such as Thames Water, which is now around £20 billion in the red) are taken into special administration, they could be kept under public ownership – which is not the same as nationalisation.

It simply means that companies are run to service the public and the environment with public ownership of water infrastructure in place. It doesn’t, however, mean that private sector involvement is entirely ruled out and, for example, not-profit companies could be involved.

The report concluded: “There is a better future for the water sector in England and Wales, and it is vital that we have the ambition and the courage to reach for it. Getting there requires political will to unravel the complicated web of interests.

“Drawing on the evidence we present here and the UK’s vast experience in reforming vital services, we show that it is possible to conserve and protect water now and for the future.”

The Cunliffe Commission

The Cunliffe Commission’s interim report was published on June 3rd, with five areas set out to deliver wide-ranging and fundamental change for the water sector in England and Wales.

These include:

– Strategic direction and planning

– Legislative framework

– Regulatory reform

– Company structures, ownership, governance and management

– Infrastructure and asset health

Commission chair Sir John Cunliffe said: “There is no simple, single change, no matter how radical, that will deliver the fundamental reset that is needed for the water sector.

“We have heard of deep-rooted, systemic and interlocking failures over the years – failure in government’s strategy and planning for the future, failure in regulation to protect both the billpayer and the environment and failure by some water companies and their owners to act in the public, as well as their private, interest.”

The commission’s full conclusions and more detailed recommendations are due to be published later this summer.