Minister warns: Nationalisation of water supply will cost more than £99 billion

Baroness Hayman of Ullock said the estimate was based on Ofwat’s figures on regulatory capital value (RCV), the value of the regulated part of England’s water companies, but warned it would “take years to unravel the current ownership model”.

The Labour Party promised in its manifesto for the 2024 general election to “subject insolvent water companies to special measures to clean up our water”, while the Liberal Democrats proposed “converting water companies into not-for-profit companies and banning bonuses for water bosses until discharges and leaks end”.

The Conservatives also proposed a ban on bonuses “when a company has committed serious crimes” and promised to use the fines collected by water companies to invest in river restoration.

Green politicians proposed transferring the water supply companies into public ownership.

Green peer Baroness Jones of Moulsecoomb called on the government in a written question to the House of Lords to set a price for nationalisation.

Baroness Hayman replied: “If the entire water industry were nationalised, shareholders and creditors would have to be compensated, which is estimated to cost over £99 billion.”

“This is based on Ofwat’s 2024 regulatory capital value figures for firms in England and Wales.”

Both colleagues referred to a report published by the Social Market Foundation in 2018, which put the “takeover value” of regulated companies at £90 billion.

Baroness Hayman, minister at the Department for Environment, Food and Rural Affairs (Defra), said the new figure was “higher than the Social Market Foundation’s estimates for 2018, as the industry’s RCV has increased over the past six years as a result of new investment in infrastructure and RPI inflation”.

She added: “Given the significant costs involved, the Government has no intention of nationalising the water companies.

“It would take years to dismantle the current ownership model, and during that time the sector’s problems would only get worse. The government instead wants to get the situation under control as quickly as possible by improving the privatised, regulated model.

“That is why the Government has not only given regulators new powers to crack down harder and faster through the Water (Special Measures) Bill, but has also announced a major review of the water system. This will form the basis for further legislation that will fundamentally change the way the current system works and clean up our rivers, lakes and seas for good.”

Environment Agency data released earlier this year shows there were 464,056 sewage discharges in 2023, 54% more than the 301,091 in 2022, which the organisation said was partly due to England experiencing its sixth wettest year on record.