Cost of nationalising water industry would be £90 billion, warns think tank

The Social Market Foundation said the total sum would be equivalent to 10% of all current Whitehall spending and more than twice the NHS wage bill for 2015/16.

“By taking ownership of the water industry, the Government would acquire companies that are currently profitable, and future profits would be weighed against the immediate purchase price,” said the foundation.

“However, future profits depend on investment in water piping and other infrastructure, costs that would then fall on the Government.”

The SMF calculated that meeting the water industry’s current plans for investment would mean spending more than £100 billion in current prices by 2040.

As a result, spending on water infrastructure would be equivalent to more than 13% of the entire Government capital spending budget.

Future profits depend on investment in water piping and other infrastructure, costs that would then fall on the Government

Social Market Foundation

The think tank’s report follows increasing debate within the Labour Party over the benefits of water nationalisation, with Shadow chancellor John McDonnell citing concern over the operation of the privatised industry.

SMF director James Kirkup, said: “Taking ownership of water companies would mean taxpayers owned firms that are currently profitable, but maintaining those profits would require significant sums of public money to be spent on capital investment.

 “This study makes no comment whether the policy of water nationalisation is a good or bad idea, but simply sets out the likely costs of that policy. Equipped with this information, it is up to voters and politicians to decide whether those costs are a price worth paying.”

The SMF calculation of £90 billion cost was based on company accounts and followed valuation methods used by investment banks and fund managers.