It’s time for the Tories to nationalise Thames Water

As a sort of long-term real world experiment into the merits of running a basic utility in the private sector, the seemingly imminent emergency renationalisation of Thames Water suggests it was not a very good idea in the first place. Indeed, it may now be fairly judged as a failure – and an embarrassing one at that for the party responsible.

Other water companies are available, as they say, and are not in as sorry a state as old father Thames’ corporate emanation, but the best that can be said about this episode is that it proves that life for a water company as a joint stock concern owned by shareholders doesn’t necessarily guarantee clean rivers, superb customer service and, indeed, even a steady reliable income for the owners.

Most private companies that are, like Thames Water, loaded up with too much debt and lumbered with questionable management go bust, sadly, and the fate of staff, assets, shareholders and customers are left to market forces. Yet in the case of a water company, for obvious reasons of supply and sanitation, it cannot be left to just close down. As we discovered with the big banks during the global financial crisis, and later on with various bankrupted train operators, Thames Water is “too big to fail”, and has to be saved.

Perhaps Thames Water could have been retained in the private sector, if it had been better regulated by Ofwat. Thames Water “could”, under its a previous ownership by a bank, have been prevented from borrowing so much.

You have to wonder if it is the current ramping up of interest rates is making Thames’ £14bn debt impossible to service – or “remortgage” – hence provoking the current crisis.

At any rate, if it defaults, the British government cannot simply allow the taps and the toilets to be turned off in our capital city – a national humiliation piled on top of a Tory policy disaster. What will the managers at the Savoy tell their bemused if not distressed American, Saudi and Chinese guests when the showers stop working? Sorry, but Brexit Britain doesn’t run to sanitation anymore? Try Paris?

Thames Water, like its other regional counterparts, released into an environmentally under-supervised regime in 1989, could indeed have been subjected to much closer control over everything from sewage discharges, to leakages, to investment plans and on to setting customer charges, dividends, executive pay and bonuses – even the quality of the biscuits served during team meetings.

At which point you have to ask: what is the point of pretending that this is a company naturally suited to life in the private sector? In this respect, the water industry is very much like the railways have turned out to be; they were uneconomic and troubled monopolies when they were nationalised entities, with a poor reputation and inadequate investment, and those same fundamental flaws were carried over into private ownership.

Yes, we may well indeed ask what the country is coming to. Perhaps after a limbo period of “conservatorship” when a private sector solution is explored, the British state will pump the necessary funds in to keep the water running. In return they may take a large – possibly total – equity stake in Thames Water – no subsidies without the taxpayer getting something in return.

(That, by the way, was how Gordon Brown and Mervyn King saved the financial system in the banking crisis of 2008, and it is an admirably straightforward and fair solution).

Once Thames Water has been stabilised, we can consider its future once more, and whether the other suppliers also need to make “living wills” in case they too run into existential problems. Given the trend in interest rates, the Treasury and Bank of England might also usefully review once again the resilience of our pension funds, energy suppliers and others exposed to such volatility.

At any rate, the great water privatisation experiment is over. It has failed, at least in the case of Thames Water, to deliver the investment that Britain’s brilliant but crumbling Victorian water and sewage system – and the miles of plant and millions of pounds worth of processing plant tag will be needed to deal with our present needs – demands. Climate change and subsequent shortages of water in the south will add to the pressures.

In the end, it will be customers and taxpayers who’ll end up paying the bills, with water charges reportedly set to jump 40 per cent. Privatisation has left the UK a country which can’t even guarantee running clean water for its people – something that didn’t happen when the municipal waterworks were run by local councils.

In London, the water and sewage system was finally sorted out by state action when "The Great Stink" in the Thames forced parliament to take action, because MPs could no longer avoid the smell of failure. Now our government is in a similar – if less pungent – crisis thanks to the privatisation experiment. The Thatcherite idea that promised so much, but flopped. What does that say about the Conservative Party’s competence?

As things stand, the banks and pension companies that own Thames Water will soon rightly lose ownership and control of the company. The best thing going forward will be to have it brought compulsorily into public ownership, because we can’t lose clean water and sewage services in London.