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There ought to be a rule to oblige politicians advocating “stronger public control” of an essential service or sector to say what, precisely, they mean. Public “ownership” is easy to understand – it’s nationalisation. But Andy Burnham, when he cites water and energy as targets for greater public control, seems to imply something else. What?
Would he, for instance, torpedo the government’s current plans for water, notably the “once-in-a-generation” reset of regulation in England and Wales via the clean water bill due in the autumn? Or is he merely saying Thames Water should be tipped into special administration, which may happen anyway without a shove from a new prime minister?
In energy-land, virtually nothing happens already without a command from above. The national energy system operator was nationalised in 2024. The body is in charge of planning the gas and electricity networks and is drawing up a “strategic spatial energy plan” that will dictate what infrastructure gets built and where until 2050. Nobody constructs a nuclear power station, or even a wind or solar farm, on a whim – they get state-backed price contracts. The Treasury can choose which energy levies go on bills and which are funded by general taxation.
Meanwhile, Ed Miliband, the energy secretary, established a unit literally called “Mission Control” to oversee his 2030 clean power plan. He was also free to change the entire structure of the electricity market, but chose not to adopt so-called “zonal pricing”. Miliband has also just completed a review of the role of Ofgem, the regulator answerable to parliament that sets price controls for transmission companies and energy distributors and effectively caps profit margins at suppliers at 2%. Short of nationalisation, what control levers are missing? Not many.
Water is probably more fertile territory because the future of Thames is up for grabs. It is now 12 months since the company’s creditors started talks with Ofwat, the regulator, on a controversial rescue package that would write off several billions-worth of debt in exchange for fresh financing and leniency on pollution fines for up to 10 years.
The very idea of a special deal for Thames that could see US hedge funds emerge as important owners is rotten, Burnham may feel. Fair enough: many of us have always been deeply suspicious, especially now the creditors have advanced three proposals and none has been accepted by Ofwat.
The alternative of special administration does not necessarily lead to greater public control, however. The process is often called “temporary nationalisation” as a shorthand, but the administrator would still have a formal duty to maximise value for creditors, which may involve selling to a private sector buyer. The government would be more free to interfere but Burnham should say how. At the moment, vague messaging will only stall the Thames talks further because ministers are highly unlikely to sign off on any proposal – recapitalisation or administration – until the leadership of the Labour party is clearer.
But Burnham’s thoughts on water clearly go wider than the calamity that is Thames. On the campaign trail in Makerfield this week, he accused water companies in general of “profiteering” and said United Utilities, the supplier in north-west England, should cancel its dividend payment to shareholders due in August, worth £266m, and use the money to lower customers’ bills.
The stock market took the comments in its stride, but it might be a different matter were Burnham to get to Downing Street and say the same. A prime minister overriding the independent regulator and trying to forbid dividends during a cost-of-living crisis? That would be a very big deal, and would plainly affect the price at which companies could raise capital. If Burnham’s ambitions really extend that far, it would be more logical for him to go all-in and argue for nationalisation. United Utilities, note, raised £800m in new equity in April on the basis that the regulatory outlook is more stable now that the clean water bill is in sight.
What does Burnham think of the bill? It is an obvious question to address because today’s Labour ministers could argue the proposed legislation is designed to produce what he’s talking about – tighter control. The bill will abolish Ofwat and create a new super-regulator that will absorb a few thousand staff from the Environment Agency. As the blurb of the King’s Speech put it, it will “shift the sector away from a system where water companies mark their own homework by putting in place stronger, active supervision and oversight through a powerful new regulator capable of integrated management of the water system.”
Does that description meet Burnham’s threshold for greater public control? Rather than deploy the term in the abstract, it would be more helpful if he said how his plans differ from what’s in place today, or what is already proposed. Does he have worked-up alternatives, or is he merely tapping into frustration over high bills and wishing Thatcher-era privatisations had never happened?
There are dangers in ambiguity and not only in confusing those voters who hear “public control” and assume it means nationalisation, which polls well. Capital markets may also demand clarity over what, in hard regulatory terms, is intended in water and energy under a PM Burnham. An answer on the flagship clean water bill would be revealing. Does he back it? It’s either yes or no.
