In the ongoing debate surrounding nationalization, Andy Burnham's stance on public ownership has sparked interest, especially with the recent return of one of the original privatized water companies to public hands. This article delves into the complexities and considerations surrounding Burnham's proposal for 'stronger public control' over water and energy sectors, offering a critical analysis and personal insights.
The Welsh Water Case Study
Welsh Water's journey back to public ownership serves as a fascinating case study. While it boasts high customer trust scores, its performance in bill management and environmental spill prevention leaves room for improvement. The recent enforcement package it received highlights the challenges that persist even under not-for-profit status. This prompts the question: Can a change in ownership truly solve all the sector's issues?
Burnham's Vague Vision
Burnham's calls for increased public control are intriguing, yet his plan lacks clarity. His commitment to nationalizing Thames Water is an example, but the specifics are hazy. Is he proposing a full, permanent nationalization, or a temporary special administration? The distinction is crucial, as it could mean a return to private ownership for Thames.
For the rest of the industry, Burnham seems to envision a gradual process, spanning a decade, with varying degrees of public ownership across different regions. This approach acknowledges the complexity and potential expense of a wholesale nationalization.
Financial and Legal Hurdles
Nationalizing solvent water and energy companies presents a different challenge. The financial implications are significant, with the state potentially facing hefty costs to acquire these companies at fair market value. Legal battles with institutional investors are a real possibility, especially if Burnham aims to keep them on board for future infrastructure projects.
The two FTSE 100 water companies alone are valued at almost £10 billion each, and adding their borrowings further increases the financial burden. While the state would acquire assets, the extra gilt issuance would still be substantial.
Complications and Deadlines
The complications extend beyond finances. The high-voltage transmission operators are in the midst of a £70 billion upgrade, and changing ownership mid-project could disrupt the timeline, potentially derailing Ed Miliband's 2030 clean power deadline.
Similarly, water companies are focused on overhauling aging infrastructure, and the state-managed HS2 project serves as a cautionary tale, highlighting the risks of heavy reliance on third-party contractors.
Lessons from Manchester's Buses
Comparisons to Burnham's successful reorganization of Manchester's buses fall short, as utilities require significant capital investment compared to the capital-lite Bee Network. The process of bringing train operators in-house also offers limited insight, as it was achieved at zero cost by waiting for franchises to expire, which is not an option for water companies with 25-year rolling licenses.
The Independent Water Commission's Take
Sir Jon Cunliffe's Independent Water Commission report, which forms the basis of the proposed clean water bill, offers a nuanced perspective. It compares outcomes in similar countries and concludes that no single ownership model is universally superior. Strong, evidence-based regulation, regardless of ownership, is key to protecting customers and the environment.
Burnham's Devolution Agenda
Burnham's emphasis on devolution and 'a sense of place' aligns with the commission's recommendation for more regional water planning. The report praises the partnership between the Greater Manchester Combined Authority, the Environment Agency, and United Utilities, highlighting the benefits of local input and collaboration.
The commission further suggests formalizing such partnerships through strategic boards with local political leaders. This approach could satisfy Burnham's desire for greater public control while avoiding the complexities and costs of full nationalization.
A Pragmatic Approach
In a fiscally constrained environment, Burnham's 'stronger public control' may evolve into a stronger role for local authorities in planning and directing the water system. This pragmatic approach could be a stepping stone towards more significant changes in the future, with the threat of harder measures looming.
Thames Water, as a unique case, may warrant separate consideration, with all options remaining on the table for a comprehensive fix.
Conclusion
While nationalization offers benefits, such as cheaper borrowing for the state, the path towards stronger public control is fraught with challenges. Burnham's vision, if realized, will likely take a more localized and collaborative approach, learning from the successes and failures of past reorganizations and the experiences of Welsh Water. The journey towards public control is complex, and the destination may not be as straightforward as initially envisioned.
