The Independent Water Commission has published an interim report on the state of the water industry in the UK, in which is confirms it is not considering public ownership of the UK’s water infrastructure.
This echoes previous statements by Steve Reed, Secretary of State for Environment, Food, and Rural Affairs, who said nationalising water would be prohibitively expensive and has not been proven to deliver improved outcomes for the public.
The Commission’s preliminary report found no causal link between the ownership model of a water company and its performance on a range of metrics. It noted, however, that is still evaluating the issue and will publish its full findings in the final report later this year.
“While the Commission is looking at lessons from other countries, it is not, in line with its Terms of Reference, exploring the public ownership models that have been suggested or the use of public funds to purchase water company assets or to compensate owners for the transfer of their assets to other ownership models,” the Commission said.
“In line with the scope of the Terms of Reference, the Commission is evaluating the benefits and risks of other forms of ownership models such as the Welsh Water not for-profit model or Community Interest Companies in cases where transfer can be achieved, as it was for Welsh Water, without the use of public funds and without detriment to users and to the public interest.”
The report noted that the options it was also examining the feasibility of Special Administration Regimes where private companies faced insolvency.
The alternative ownership models mentioned by the Commission are briefly defined below:
- Community Interest Company: A type of UK limited company designed to benefit the community rather than private shareholders. It operates as a business but with a primary focus on social objectives and community benefit, rather than solely maximising profits.
- Special Administration Regime: A modified insolvency process for public services companies, where the government takes over a failing company that provides a critical service to ensure its delivery is uninterrupted during the insolvency process.
The Community Interest Company approach has already been demonstrated by Dŵr Cymru Welsh Water, which is set up as a not-for-profit entity that does not have any shareholders; its profits are instead reinvested in the company to enhance service delivery.
When water companies face financial difficulties, such as those recently faced by Thames Water, the government may opt to intervene by imposing a Special Administration Regime on the company, effectively taking over operations to ensure public goods remain available even as the private company which supplies them undergoes insolvency.
A ‘fundamental reset’ for the water sector
Speaking on the findings of the interim report, Commission Chair Sir Jon Cunliffe said that solving the problem of the UK water sector requires a fundamental reset spanning several coordinated changes to the industry and regulation.
“There is no simple, single change, no matter how radical, that will deliver the fundamental reset that is needed for the water sector,” Cunliffe said.
“We have heard of deep-rooted, systemic and interlocking failures over the years – failure in Government’s strategy and planning for the future, failure in regulation to protect both the billpayer and the environment and failure by some water companies and their owners to act in the public, as well as their private, interest.”
“My view is that all of these issues need to be tackled to rebuild public trust and make the system fit for the future. We anticipate that this will require new legislation,” he added.
The Commission expects to publish its final report on the UK water sector this summer.
Leave a Reply