Dr Ewan McGaughey, a professor of law at King’s College London, argues England should join Scotland, Wales, Paris and most of the world, and restore public ownership using the legal framework of special administration that already exists.
This can be triggered if companies are unlikely to be able to pay their debts without public subsidies or have seriously breached their duties, for example by failing to improve their pipes to stop leaks or failing to drain and clean sewers to stop pollution.
Once in special administration, the companies can be transferred to a new publicly owned entity. Responding to the criticism that paying off shareholders and debts would cost too much, he argues the current law allows for debts to be reduced or even removed if they infringe on the water company’s ability to properly carry out its legal duties.
Richard Murphy, of the Corporate Accountability Network and Sheffield University, argues the water companies are in effect environmentally insolvent because they do not have the financial means to raise the £260bn needed to stop their sewage dumping, according to a House of Lords assessment. Therefore no compensation is due to shareholders, or to those who lent money to the companies.
But Murphy said in order to be pragmatic, a small offer to shareholders and a reasonable offer to secured creditors would be required to take the companies back into public control using the special administration rules.
The cost of nationalisation would run into billions – all of which could be paid for by the issue of government bonds.
To raise capital for the future of the publicly owned industry, the public could be offered the chance to buy a bond paying 4% or more in the long term to last for at least 70 years. For the first 15 years the return would be guaranteed by the government, encouraging the public to buy the bonds at scale and fund much of the required investment the industry needs over time.
Dieter Helm, a professor of economic policy at Oxford University, says the
privatised industry has “run into the sands” and what is required is systemic change focusing on sustainability, water conservation and a catchment system of regulation to tackle pollution at its source.
Helm does not support re-nationalisation, but he does dismiss the often-repeated view that to take water back into public control would cost too much.
“The one objection to nationalisation which has little merit is that it would cost the government a lot. This is nonsense,” says Helm. Re-nationalisation, he argues, would involve swapping the regulatory asset-based debt (RAB) for government bonds. “The government would gain the assets and the RABs and swap utility debt for Treasury debt,” he says.
