Andy Burnham has told officials to rip up their plans for how to fix Thames Water and present him with more radical options for what to do with the stricken company. Here are some ideas the prime minister is being urged to consider. Burnham must introduce emergency legislation immediately to protect the supply of water for the public, said Richard Murphy, tax accountant and the brains behind Corbynomics.
A new state-owned company, with a management team in waiting and all the necessary steps ready to take over the existing company’s systems, has to be put in place now. Andy Burnham has no choice but to address this matter, now,” said Murphy. The 1971 nationalisation of the Rolls-Royce aeronautical engineering company, to protect the national interest after it collapsed into receivership, could be used as a blue print.
A similar national emergency exists now to protect the supply of water, Murphy said. Murphy said that, in essence, Thames Water was financially insolvent, with real doubt about whether it could survive into 2027. It was failing in its regulatory obligations, including to maintain clean water supplies and keep rivers and beaches clean.
Emergency legislation should ensure that the nationalisation is of the assets and undertakings of Thames Water, and not of the company itself. All financial liabilities of Thames Water would be left for the old company to settle. The government should not acquire them.
The new company needed to be structured within days, said Murphy. Moody’s has estimated a one-off cost of £14.5bn in 2019 to bring water into public ownership. But privatisation, said McGaughey, would cost up to £22bn extra for bill payers from 2025 to 2030, or £176 a household a year, in returns on capital to shareholders and banks, as set by Ofwat’s price review.
McGaughey believes that this year public ownership of failed water companies will cost closer to £0, using the special administration procedure within the 1991 Water Industry Act. The higher the repair bills, the less that creditors or shareholders deserve under UK law, international law and our investment treaties, he said. He advises Burnham to prepare to go to court – creditors will probably sue – but they have no reasonable prospect of success.
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