Stay informed with free updates
Simply sign up to the Utilities myFT Digest — delivered directly to your inbox.
The UK government should explore different models of ownership in the embattled water industry, including the potential renationalisation of privatised companies, a cross-party group of MPs said on Monday.
In a highly critical report, the House of Commons environment, food and rural affairs committee called for “root and branch” reform of the sector and urged ministers to consider bringing Thames Water under temporary state control.
“We see merits in the argument that the current models of ownership in the water industry may not be bringing about the culture the sector needs,” the MPs said.
The report comes weeks before the Independent Water Commission, a government-commissioned review, delivers its findings on the future of a sector that has been the subject of public anger over pollution and executive pay.
Billed as the biggest review into the industry since privatisation more than 30 years ago and led by Sir Jon Cunliffe, former Bank of England deputy governor, it has ruled out nationalisation and is likely to focus on a regulatory overhaul.
Although the MPs acknowledged issues with state-owned utilities, they urged the Independent Water Commission to consider “all water company potential ownership models to determine which are more likely to lead to a thriving and responsible culture”.
Alistair Carmichael, Liberal Democrat MP and chair of the Efra committee, said: “The Water Commission has got the opportunity to draw up the root and branch reforms necessary to ensure that the issues plaguing the sector are resolved. It must not shy away from bold proposals.”
With Thames Water teetering on the brink of bankruptcy, the MPs cautioned that a £3bn rescue plan proposed by its lenders could result in customers paying “more in the long run” in bridging loans than if the heavily indebted utility were to be brought under the government’s special administration scheme.
Special administration is where the government takes temporary ownership of a business and can recoup costs through its sale, as in the case of Bulb Energy and its eventual sale to Octopus Energy.
“While a special administration should be a last resort . . . it is unclear whether allowing a failing company to struggle on and accumulate progressively more debt is a better outcome than assuming temporary national control more quickly, with the associated costs that it could incur,” the MPs said.
Cat Hobbs, founder and director of We Own It, a campaign group, said that by demanding a “proper evaluation of different ownership models, the MPs were acknowledging public demands for renationalisation”.
“The report calls for ‘root and branch reform’ of the water sector. We all know the ‘root’ cause of the water crisis is privatisation. So by ignoring public ownership as a solution, we will only ever get reform of the ‘branches,” she added.
The Department for Environment, Food and Rural Affairs said it had secured “the largest investment into the water sector in history” and “banned unfair multi-million-pound bonuses for bosses”.
Water UK, which speaks for the sector, said: “Everyone agrees that the water system is not working, and we have been calling for fundamental reforms which allow investment to get quickly to where it needs to go.”
The Water Commission did not respond to a request for comment.
