Callum Joyce, Socialist Party southern and south east organiser
The crisis-ridden saga of Thames Water continues. Recent news suggests that a promised £3 billion of further investment into the company may be withheld, threatening the possibility that it will be unable to continue operating. At least £500 million of that was due to be provided this month, which Thames Water will need to service a £190 million debt that must be paid by the end of April.
Investors claim that Thames Water is no longer an attractive prospect for investment and they are making their continued investment conditional on Ofwat (the government body responsible for the regulation of the water and sewage industries) agreeing to reduce the amount of the fines the company could face for excess pollution and for paying dividends over a set limit. They are also asking for permission to raise consumer bills by 40% this year! This will mean more misery for the 16 million Thames Water customers who have already seen their energy, food, and housing costs rise over the past 18 months.
Thames Water and the other privatised water and sewage companies were set up as private enterprises in the 1980s as part of Margaret Thatcher’s neoliberal onslaught against public services, when huge sectors of the economy were sold into private hands. The initial debts of these companies were actually wiped out by Thatcher and set to zero in order to encourage investment. Since then, Thames Water alone has accrued a massive £14 billion of debt. Its debt levels now equate to around 80% of the value of its total assets – despite Ofwat recommending water companies not to go above 60% due to the financial risks involved. This money has not been used to maintain and upgrade crucial infrastructure however, but has instead gone to shareholders in the form of over £7 billion of dividends paid out over the last 30 years.
Renationalisation
What happens now is still uncertain, but if the investors decide to walk away from the company it will face a crisis, as its current financial reserves will only enable it to continue functioning until May next year. The idea of renationalisation – for the government to step in and take ownership of the company to ensure a continued service, is being increasingly raised as a possibility by the capitalist press. The Tories are ideologically opposed to this; it would be a tacit admission that the claim Thatcher’s neoliberal privatisations would encourage more investment is false. Pressure would grow to nationalise other polluting water companies, the crumbling railways, the postal service or the profiteering energy companies as well.
It is likely that the Tories will first look to put Thames Water into ‘special administration’, essentially giving them power to send in commissioners to oversee a restructuring process within the company in order to make it more attractive to new investors. This would still allow existing shareholders to maintain their stakes in the company if they wished, and to continue making profit afterwards if such measures are able to save the company. In short, the government will try and save the day with no consequences for the profiteers who have run the service into the ground in the first place!
However, finding new investment is not guaranteed. If they are unable to do so even after administration, the government would likely be compelled to finally step in and nationalise it. A similar process occurred with the failure of Railtrack in 2002, a private company that was responsible for maintaining large parts of the rail infrastructure in Britain. The company was placed into administration after financial difficulties and temporarily managed by the New Labour government with the aim of handing it back into private hands once the financial issues were addressed. The government was unable to find any interested buyers however and was compelled to maintain Railtrack as a public body – making it into what we now know as Network Rail.
This could well be the future for Thames Water in the next period, although the Tories may hope that they can delay the issue until after the general election to leave it for Starmer’s Labour to deal with instead. If either of these parties do agree to nationalisation however, it will not be as a socialist measure carried out in the interests of the working class, but a ‘state capitalist’ measure used to prop up their ailing system and cover for the failures of private ownership and management. This would also involve buying out the existing shareholders, at huge expense to the taxpayer while our other public services like the NHS are starved for cash. Nationalisation carried out in this way may save the service in the short term, but it will not resolve any of the underlying issues in the industry. This can be seen from the example of Scottish Water – it remains a publicly owned body but has still dumped huge amounts of sewage into rivers and lochs.
Socialist nationalisation
The solution is genuine socialist nationalisation – taking Thames Water into public ownership with compensation paid only on the basis of proven need and placing it under democratic workers’ control and management, so that decisions on investment are made by accountable representatives of workers and service users. Only this would allow the investment into infrastructure that is required without the mismanagement of government-appointed bureaucrats.
This shouldn’t be limited just to Thames Water however – the entire private water industry is in decline. Eight different water companies are at, or above, recommended debt levels and many of them have faced scandals due to excessive pollution. Southern Water is now asking for permission to increase bills by 70%! If Ofwat does not agree to these punishing conditions, then a similar investment crisis could occur all over the sector. Immediate nationalisation of the whole industry will be necessary to prevent this.
The shareholders that have milked billions from a public service should not receive a penny of compensation. However, there are some pension funds which have invested in Thames Water, potentially with money from ordinary workers’ pensions. In this case, those workers should be fully compensated. But this does not mean handing money over to big private pension firms – they should be nationalised as well! By nationalising the pension industry along with the banks and other key elements of the financial sector it would be possible to guarantee decent living pensions for everyone.
Clearly the Tories will never agree to the socialist nationalisation that is necessary – but neither will Starmer’s Labour. He has committed to nothing more than giving Ofwat the power to block bonuses for water company executives until they resolve the issues within the sector – again leaving the solution in the hands of those who have created this mess in the first place! We need a new mass workers’ party, backed by the trade unions, that will fight for nationalisation, not just of the utilities but all the major corporations and banks in Britain, so that they can be run under a democratic plan of production to meet the needs of all – in other words, to fight for a socialist society. Only on the basis of such a system will it be possible to provide the services that people need, free from the greed and exploitation of capitalism.
