Labour pledges to set up publicly-owned water services run by workers

24th Sep 2018 15:20

(Sharecast News) - The Labour party has pledged to "turn off the tap" that sells-off utilities for private profit and to set up publicly-owned transparent water companies run by local councils, workers and customers.According to Labour, the aim of its proposals is to avoid the siphoning of billions of pounds into private shareholders' pockets, stop trillions being lost through leakages and ensure everyone has ready access to clean water without being ripped off.Over the last ten years, English water companies have paid out more than £18bn in dividends to shareholders. Since 2010, the £14.5bn they have paid out equates to almost all of the £16bn that these companies made in pre-tax profits.In 2018, the average level of remuneration of the CEOs of the nine regional water companies in England was over £1.0m a year and the total amount lost through leakage since 2010 was over 7.5 trn litres. That was equivalent to the total volume of Loch NessJohn McDonnell, shadow chancellor, used his speech at the Labour conference on Monday to promote these plans to overhaul utilities and to hand 10% of the shares in all companies with over 250 staff to their workers.McDonnell said it would be "the greatest extension of economic democratic rights that this country has ever seen".According to the new plans, the water industry would be reorganised under new Regional Water Authorities (RWAs). These would include local councillors, worker representatives and representatives of community, consumer and environmental interests. Shareholders would be compensated with bonds, and the level of compensation would be decided by Parliament.The value of the 16 English water companies' equity and debt was around £80bn pounds at the end of last year, according to the Social Market Foundation think tank. McDonnell argued that the companies' cash flow would cover the additional interest on the government bonds issued to pay for nationalisation.According to the Financial Times, business leaders have warned the plans would send investors "heading for the hills".To make McDonnell's water grab more affordable, Reuters's Breakingviews suggested Labour could either reduce the value of the sector's equity or for the companies to be bought by mutual or not-for-profit entities, which do not appear on the government's balance sheet.McDonnell argued that the "greater the mess we inherit" the greater need for change.Shares of listed water utilities tanked on the announcement with United Utilities and Pennon both falling 1.96% and Severn Trent sliding by 2.61%