Burnham’s water nationalisation ‘risks costing taxpayers £140bn’
Bringing utility under state control would trigger compensation demand, creditors warn Treasury
SZU PING CHAN
Creditors of Thames Water have told the Treasury that taxpayers would face an immediate compensation bill of up to £144bn to nationalise the water sector.
This is far higher than the official estimate of £100bn produced by regulator Ofwat, as it includes funding existing investment commitments as well as increases in inflation.
The estimate, which was produced by consultancy Frontier Economics on behalf of creditors of Thames Water, has been handed to the Government as the Prime Minister plots more state control of public utilities.
Uncertainty also hangs over the future of Thames Water, the UK’s biggest water supplier, which faces running out of money by November unless creditors inject more cash. A rescue deal was effectively blocked in June by Emma Reynolds, the then environment secretary.
The report by Frontier Economics also warned that taxpayers would potentially be on the hook for hundreds of billions of pounds in extra costs over the coming decades if the water industry were to be nationalised. The sums would be needed to fund environmental obligations and infrastructure upgrades to support a rising population.
Ofwat’s official estimate of the cost of nationalising the water industry is based on the sector’s Regulatory Capital Value (RCV) – which forms the basis for how much water companies are allowed to charge customers.
Frontier Economics said its calculations were “driven primarily by the very substantial investment programmes” already agreed with the watchdog “that companies are undertaking and that private investors are financing”.
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The report warned: “Costs falling to the public sector will not end at the point of nationalisation.
“In 2023, water companies estimated that meeting government targets and environmental obligations, in the context of climate change and population growth over the 20 years from 2030 to 2050, would cost £270bn.”
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