Labour/Co-op MPs and mayors have backed calls for water companies to be put under public control as not-for-profit co-ops, made in a report from the Good Growth Foundation.
The report, backed by politicians including Labour/Co-op MP Helena Dollimore and the Labour/Co-op mayor for West Yorkshire, Tracy Brabin, calls for the formation of new water co-operatives owned by customers, with democratic board representation.
“England’s water settlement has become a symbol of state failure for millions of billpayers who face sky-high bills while sewage spills into their rivers and coastlines,” it says. “But what is the solution when nationalisation comes with such an unfeasible price tag?
“The answer is to bring water companies back under public control as not-for-profit co-operatives, without taxpayers picking up the bill.
“Under a co-operative model, customers own and run the company. It is run for the benefit of the customers, not for profit. There are no shareholders, and therefore no dividends to fund, allowing reinvestment and a focus on customers and long-term performance, not short-term extraction and over-leveraged debt piles. The company remains off the government books.”
To bring about mutualisation, the report proposes legislation – starting with Thames Water – to “force the worst offenders into public control fast” by lowering the bar for the special administration regime, to “ensure shareholders and creditors, not the taxpayer, pay the price of failure”.
It also wants an “ultimatum” sent to the remaining shareholder-owned companies.
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“Unless they meet fierce new financial, environmental, consumer and resilience obligations, dividends will be banned outright. Alongside tougher oversight and fines, the sector will also be provided a path to mutualisation.
“They can come the easy way, by selling up at a fair price and handing the company to its customers in a share exchange scheme. Or the hard way, via the lowered bar for an enhanced special administration regime, where any failings will trigger a tougher settlement for shareholders and bondholders.
Other recommendations in the report include the abolition of regulator Ofwat in favour of restored ministerial decision making.
It also wants immediate tougher regulation of existing companies, with a ban on dividends, the prioritisation of investment; government-appointed observers in each company; and restrictions on bonuses and other remuneration.
Benefits of the reform, the report says, will include lower bills, better governance and regional representation and improved credit ratings and lower debt interest.
Dollimore, writing in the introduction, said: “The water industry is fundamentally broken. Our failing water infrastructure is a huge problem that must be a top priority for our Labour government.
“Nothing enrages voters more than watching their bills skyrocket to prop up failing companies, while executives and shareholders try to find ways to evade bonus bans as companies edge toward bankruptcy. We have already taken important steps to ramp up regulation but we must now go further to protect this vital national infrastructure, while always being fiscally responsible.
Pointing to problems including floods and, sewage release and plastic pollution, she added: “While the service keeps failing, our water bills keep rising. I know that people around the country face similar disasters, while water companies reap the profits.
“With Thames Water on the brink, Andy Burnham’s Labour government has a golden opportunity to fix this injustice. As climate change threatens our water resilience more than ever before, and growth engines like AI data centres demand more water too, there has never been a more important time to fix this vital national infrastructure.
“Moving the water industry to a co-operative model would be the radical shakeup the water industry desperately needs. The government would be able to take our most precious resource back into public control, without asking taxpayers to bankroll City executives’ debt. Taking on the water industry would prove the Prime Minister is serious about dismantling the economic model of the past 40 years and showing voters we are up for a fight.”
Brabin added: “Greater public control of water companies is the only way to protect our communities and environment for future generations. The Good Growth Foundation have set out a radical set of proposals that would do just that. Now is the time for change.”
Not everyone is convinced. Writing last month in Labour List, Compass deputy director Lena Swedlow warned that “mutuals” is “ a frustratingly large category of company structure”, with a wide range of suggestions in policies from the Co-op Party, the Lib Dems and Reform, adding that there is “almost no international precedent” for the plan.
And she asked: “After 37 years of the failed experiment of privatisation, why are we still searching for a third way instead of learning from what works almost everywhere else in the world?
“Around 90% of the world’s water systems are publicly owned. Mutualising a company the size of Thames Water would itself be one of the largest governance experiments ever attempted. The world’s biggest water co-operative, Saguapac in Bolivia, serves around 1.5 million people and does not operate sewerage services. Thames Water serves 16 million people.”
Swedlow also argued that mutualisation won’t end financial extraction, noting that Welsh Water operates as a non-profit but still loses around 41% of its annual revenue servicing debt.
Welsh Water was also ordered to pay £44.7m in March after the industry regulator found “serious and unacceptable” breaches in the supplier’s sewage and network services.
“Rebranding an organisation does not repair leaking pipes or unlock cheaper finance,” she said. “If infrastructure remains inside a corporate body rather than returning to public ownership, borrowing costs are likely to remain significantly higher than government-backed finance, while existing debts may simply be inherited.
“The danger is that we change the badge on the door while leaving the underlying economics largely untouched.”
Instead, she argues for a “feasibility study comparing every credible ownership model on cost, resilience, governance and long-term value” before legislating for whichever model is supported by evidence.
Mutualisation has long had its advocates, however, and backers of the new report include Surfers Against Sewage, South Yorkshire mayor Oliver Coppard, York and North Yorkshire mayor David Skaith, and the Co-operative Party general secretary Joe Fortune.
“Water is an essential utility that simply should not be farmed out to the private sector,” said Coppard. “That’s a lesson we’ve learned the hard way. A co-operative model would put control back in the hands of people, help keep bills as low as possible, and allow us to finally intervene in the inexorable dumping of sewage in our rivers.”
