Many are calling for change in England’s private water sector. But what should replace it?
Is the answer the state buying back the water companies? Or would that simply land the public sector with the problems created by wealthy owners, who would walk away with a payout? And if nationalisation did come back on the table, as it did in Labour’s 2017 manifesto, how much compensation should be paid to English water’s current owners?
Compensation is a political choice, says David Hall, visiting professor at Greenwich University, who has written a key paper on the possibility of nationalising England’s water industry. Buying out all the shares of the water companies at market rate would come at a huge cost. But, he says, the state wouldn’t necessarily have to pay the market rate.
He cites UK appeal court judgments that affirm that public interest – including social justice – should be allowed to determine compensation when the state takes over private businesses.
People may remember the government buying out failed bank Northern Rock during the 2008 recession, but big state interventions have a much longer history, taking in Henry VIII’s stripping of window frames from Catholic monasteries and Britain’s bloodstained imperial rule in India. Hall’s paper explores a number of these precedents.
Here are five examples of what happened when the state intervened – and who got paid.
Henry VIII’s dissolution of the monasteries
When: 1530s
Who: Henry VIII.
What: Land and assets belonging to the Catholic church in England. Some scholars estimate that as much as one-third of the land in England was in church hands at this time. Henry had made himself head of the Church of England several years before. Wanting the land and assets of the wealthy monasteries for himself, he decided to seize them in the 1530s.
Enforcers went from monastery to monastery, taking everything from altar plates to window frames, items that were then sold off, with the cash given to the king. Some of the property went into yearly Crown revenues, other assets were sold immediately to fund military campaigns.
Who got paid: While Henry took all the money, compensation was paid to the monks and nuns who had lived in the dissolved establishments.
How much: Monks got a yearly pension of £5-6 a year, about the annual salary of a chaplain. Nuns received less, sometimes no more than £1 a year.
(source: English Heritage)
The nationalisation of the East India Company
When: 1858
Who: British parliament, under Liberal PM Lord Palmerston.
What: The East India Company. The largest corporation in the world at the start of the 1800s, controlling large areas of India and half of the world’s trade, their practices in India were partly responsible for triggering a rebellion in 1857 against the company and the British state, in which more than 100,000 Indians were killed. After the rebellion was crushed, the British government nationalised the East India Company, taking all its property and assets, as well as obligations and contracts.
Who got paid: East India Company shareholders. Despite the company becoming essentially defunct, shareholders continued to receive a hefty yearly dividend of 10.5% on their shareholdings for decades, as agreed in a deal with the British state. All this money came from Indian taxpayers.
How much: Payments totalled £12m (about £1.6bn today). It was estimated that interest on this debt continued to be paid by the people of India for 70 years.
(source: Hall, 2019)
The nationalisation of the telegraph companies
When: 1868
Who: British parliament, under Conservative PM Benjamin Disraeli.
What: The networks of the private telegraph companies. The first electric telecoms system, these companies were taken into public ownership by the Conservative government of Benjamin Disraeli. At the time, about 70% of the population had no or bad service, because, as academic Hardy Wickwar wrote, “[private] telegraph offices were concentrated where they could win most trade and earn most profit, and therefore did not offer the advantage of speedier communication with the outlying villages and suburbs”.
Parliament nationalised the telegraph companies and put them under the control of the Post Office. Within two years the number of telegrams sent had doubled, and the average price of a telegram fell by a third.
Who got paid: The owners of the telegraph companies.
How much: The British government paid out a sum equivalent to each company’s last 20 years of net profits. Net profit is money left over after all expenses, taxes and interest and dividend payments are taken out.
Initially, the cost of this compensation was £5.9m, but had expanded to £10m a decade later because of other acquisitions and lawsuits.
(source: Hall, 2019, Kieve)
The nationalisation of the telephone companies
When: 1911
Who: British parliament, under Liberal PM HH Asquith.
What: The new technology of the telephone was also nationalised by the Liberal government at the time, which stated “it would be wrong to leave a service which had become so essential to the social and commercial life of the country in private hands”. The Post Office took over the “piecemeal and planless” private networks “to build them up into a system that might better meet the nation’s needs”. It worked: “not only has a better and better service been provided, it has been provided at a lower cost … [and] could afford to give a town service to country subscribers.” (Hansard 1911)
Who got paid: The private telephone companies.
How much: Compensation was paid only for the physical assets, “no payment being made for goodwill, no payment being made for past or future profits, and no payment being made in respect of compulsory purchase”. (Hansard 1911)
The nationalisation of the railways
When: 1947
Who: British parliament, under Labour PM Clement Attlee.
What: Britain’s four big railways. After the second world war, the railways were bankrupt and their infrastructure was worn out and damaged. The Transport Act of 1947 bought the companies out from their shareholders with the intention of creating a publicly owned, centrally planned transport system, later named British Rail.
Who got paid: The shareholders of the railway companies.
How much: Shares in the railway companies were exchanged for British Transport Stock, with a guaranteed 3% return paid out by the new transport group, the British Transport Commission, for 40 years.
(source: Railways Archive)
