Don’t water down our shares
LaBoUR’s plan to renationalise the UK’s water companies for half of their existing market value is astonishing in its audacity. and shocking in its naivety.
if carried out, labour’s proposal to take control at such a whopping discount would be a disaster for shareholders, millions of whom are pensioners, who would lose up to half of the value of their investments, but also customers who could face higher water bills.
More worryingly, labour’s plan to buy back the 32 water companies at less than £20bn – about half of their market value – is a red light to overseas investors wanting to invest in the UK. and a clear one: your money is not safe here.
legal experts are already warning that labour might be breaking the law too. its discount plan undermines the UK’s property rights but also contravenes international treaties and might lead to a flood of lawsuits. Yet this potential nightmare is like water off a duck’s back to the shadow chancellor, John McDonnell, Marxist architect of his latest smash-and-grab revolution.
He says shareholders should be compensated only for the money already invested, and not the estimated value of future profits which will not exist under public ownership. What naive nonsense.
McDonnell dismisses figures that suggest the market value of the UK’s water industry is £44bn – or £90bn if you include debt – as fantasy and the work of politically motivated think-tanks. But these are sound numbers from the Centre For policy studies, the social Market Foundation and other independent forecasters. More threatening, perhaps, is that McDonnell says parliament would decide the ‘appropriate’ amount that investors would receive.
Mps can’t even decide on Brexit, so you can imagine the mess they’d make of this.
WHeRelabour did have a point is that some of the water companies have behaved badly. Big dividends have been paid out to shareholders and there have been fines for leaks.
But most of these issues have either been fixed or are in the process of being fixed.
indeed, peter simpson, chief executive of anglian Water, says ofwat has clamped down so tightly that the days of big returns have gone. and water bills are set to come down later this year.
The UK has one of the highest standards
of water quality in the world. since privatisation, productivity has shot up 64pc and £130bn has been spent on upgrading water and sewage infrastructure. another £50bn will be invested over the next five years. Would any government be willing to put such sums on their books? Highly unlikely.
The industry also has an impressive record on the environment. as part of its social contract, the aim is for net zero carbon emissions by 2030. That’s 20 years ahead of the 2050 date set by the Committee on Climate Change for the rest of the country.
so you have to ask, what is the problem that labour wants to solve by nationalising the industry? if the industry could understand this, simpson says, they would crack that too without it having to cost the taxpayer billions in nationalisation.
There’s another question. Why is labour obsessed with water, which is running well, when there are other more critical issues, such as investing more in schools or manufacturing? McDonnell and Co should be made to explain why and how they can propose to steal from people’s pensions.