Fight for socialist nationalisation
Editorial of The Socialist issue 1234
The Thames Water crisis has shone a light on the crazy world of privatised water in Britain today.
It’s just the latest example of how capitalism is systemically rigged — the rich get richer while we pay the price with a crisis of crumbling infrastructure and public services, and the rising cost of living.
The largest water supplier in the country currently hangs on the edge of collapse, with a debt pile of about £16 billion amid rumours that the government may have to step in and nationalise the company. But it is far from alone. All private water companies, and much of the other privatised utility services are, in most cases, ‘debt zombies’, kept alive by the ever-rising bills they are forcing on the suffering working class.
For the Tories and capitalist class, nationalisation would be an emergency temporary measure, only for the utility to be thrown back into the chaos of the free market for speculators and profiteers to continue racketeering.
The water industry was privatised in 1989, with £5 billion in debts written off by Thatcher in order to give a leg up to the new private companies. In the 30 or so years since they have managed to ‘gear themselves up’ with collective debts of about £60 billion.
Thames Water stands as the worst with a debt to equity ratio of over 80%. Only one of the 17 companies has a ratio of less than 50%.
Most of these debts are inflation linked and interest floating. Now of course, both have been rising at record rates. The cash raised was supposed to be used to invest in repairing infrastructure. Instead, the cash has been pocketed, all the while paying shareholders generous dividends.
Between 2007 and 2016, 95% of profits were paid out to shareholders while pipes burst and water pollution rapidly increased. Since privatisation, water profits total over £72 billion — for 13 of those years New Labour was in government!
Since the 2008 capitalist crisis, water companies and other privatised utilities have been seen by stock and bond investors as a secure big-returns bet, given their centrality to public infrastructure — easy public assets for them to leech off.
The end of cheap debt in the last year has seen interest payments skyrocket. Private companies have been all too keen to pass this on to the public, and working-class people have faced the largest increases in 18 years — jumping 8.9% in April. Since privatisation, household water bills have risen by 363% — over double the rate of inflation.
Even for the capitalist class, Thames Water’s record is an ‘environmental disgrace’. It currently loses 630 million litres of water — 252 Olympic-sized swimming pools a day! 20% of UK water leaks from the crumbling water systems each day.
The cost of sorting the sewage crisis is huge. A report by the Storm Overflows Taskforce raised that separating wastewater and stormwater systems would cost between £350 billion and £600 billion. Which, if passed onto households, would increase bills by as much as £999 a year.
On average, £1.5 billion a year has been paid out in interest on debts over 30+ years of private ownership, and new debts of £60 billion taken on, but little or nothing done about sewage treatment or drought resilience.
Under public pressure, the government has demanded water company shareholders invest to sort out the ever increasing wastage of water and raw sewage pollution.
Their solution — surprise, surprise — has been to turn to the debt markets once again to protect their profits and dividends!
Like something out of ‘The Sopranos’ or ‘The Godfather’, the combination of a public vital utility monopoly, cheap, easy-to-access debt and a weak regulator, made the water industry a perfect low-risk, high-return gamble for speculators. They have given themselves a holiday from investing in pipes, infrastructure and pollution prevention measures.
Complex webs of multilayered ownership have been created (Thames Water is made up of eight levels of companies and owners). Water company ownership now includes sovereign wealth funds and private equity. They have then used ‘whole business securitisation’ to take on huge amounts of complex debt through bonds, loans and swaps, using the safety and security of a public utility to give handouts to shareholders and private investors. It’s a wealth transfer from the working class to the rich.
The structures of debt are not dissimilar from the complex tranches of mortgage-backed securities and collateralised debt obligation, that stood behind the subprime mortgage crisis of 2008. They were based on the idea that people will always pay their mortgage. In this case, debt was sold and passed with confidence that they could get away without investing in water infrastructure, keep charging ordinary people, and pay themselves more than nicely.
For the capitalist class, there is clear panic that this latest crisis is further eroding any confidence or belief in the very basics of their system. Combined with rising support for basic socialist policies like nationalisation, a Bloomberg article recently commented: “Discontent with the privatisation of state-owned industry, regarded as one of Margaret Thatcher’s crowning achievements and copied all over the world, has mushroomed in the land of its birth. The latest opinion polls reveal that 70% of voters, and even a majority of Tories, would like to take water back into government control.
“At the last general election, voters decisively rejected the far-left Labour leader Jeremy Corbyn, but polls show that in theory they approved of his socialist plan to renationalise huge swathes of private industry — water, the energy supply network, Royal Mail (privatised in 2013 after 500 years of state ownership) and the railways.”
Unsurprisingly, nationalisation is not on the agenda of the Tory party at all, but neither is it for Starmer’s New Labour Mark 2. After already abandoning plans from the 2019 Corbyn manifesto for nationalisation of energy and mail, a Labour spokesperson said on water nationalisation: “It’s not something we are looking to do”.
The workers in these companies, many no doubt low-paid, should demand that the company books be opened to inspection by democratically elected trade union bodies to see where the money is going. This would inevitably give rise to demands for a return to public ownership of water processing and distribution.
The huge support that developed for socialist policies, included in Corbyn’s manifesto while Labour leader, created panic for private owners in water and energy in particular. As Bloomberg highlighted last week, Thames Water created a new clause covering £560 million of its debt that would enforce full repayment, including accrued interest, immediately after nationalisation.
This adds to the argument, often repeated by right-wing Labour politicians, that nationalisation would be ‘too expensive’. But why would the fat cats responsible for this mess be compensated, why should such debt repayment clauses be honoured?
Not a penny should be paid to them, compensation should only be paid on the basis of proven need.
Capitalists claim that ‘nationalisation means pensioners will suffer’, as many pension fund investments depend on water company shares (the UK lecturers and BT pension funds are both invested in Thames Water, alongside many foreign public sector workers’ pension funds). The value of these workers’ pensions should be secured.
This disaster shows why gambling pensions on the stock and bond markets is madness. That’s why we fight for a publicly owned and democratic, working class-controlled, nationalised banking system that includes democratic public ownership of the entire pension funds ‘industry’ to protect workers’ savings and deliver living pensions for all.
For that reason, among many, it is not just the water system that needs nationalising. We need all public services, including the banks, to be brought under democratic workers’ control.
But, as with all the other public industries and services swept up in the Tories’ privatisation mania, the ‘renationalisation’ often talked about in the capitalist media in itself is not sufficient. In Scotland, water is a state-owned enterprise, yet the figure for untreated sewage is rising and the highest since records began!
Genuine nationalisation and public ownership must be combined with democratic management and control by the working class, so services and industries could be planned and run in the interests of working-class people. Not the ’nationalisation-lite’ applied to the banks in 2008, that left all the power and control in the hands of the very bankers, spivs and speculators that sparked the crisis, while ordinary people were made to pay.
Only a minority of people think water should be in private hands — but all the major parties support this policy! Working-class people need a new workers’ party that stands up for us.
That’s why the Socialist Party is part of the Trade Unionist and Socialist Coalition (TUSC), set up to enable trade unionists, community campaigners and socialists to stand together at the ballot box against the pro-austerity establishment parties. It is a beginning, a step towards the kind of party we need to deliver a socialist alternative to austerity.
The dire water crises that have developed in Britain and elsewhere in the world make the fight for a socialist alternative to capitalism more urgent than ever before. The current system has failed to adequately address the issue of water scarcity across the globe, and it is only through a socialist system that we can ensure that everyone has access to clean water. A socialist system would prioritise the needs of the people over the profits of corporations, and it would invest in sustainable water management, treatment and distribution. Such planning could be combined with a revolutionised sustainable energy and food production, among many other things. It is time to build a socialist future that is based on justice and equality, and which ensures that everyone has access to the basic necessities of life, including clean water.