Nationalise Thames Water, Not its Debt
Some nationalisations weaken capital; others strengthen it.
TL;DR
Starmer took British Steel off Jingye for nothing on 16 July. Burnham will not do the same to Thames Water’s bondholders, because Elliott and Apollo lend to the British state and a Chinese steel group does not.
The water and the debt are two different objects. Every deal on the table has the public taking the debt while capital keeps the water.
Mitterrand nationalised more than any government in postwar Europe, paid the shareholders in full, and was cutting wages within two years. Which way the risk travels is the thing. The ownership column tells you nothing.
Keir Starmer expropriated British Steel for nothing because a Chinese steel group has no purchase on the gilt market. Thames Water’s creditors do. That asymmetry, not any point of law, decides who carries the twenty billion.
I heard about the golden share on the radio on Tuesday last. The name was suspicious from the first. What a golden share usually means is a controlling interest: here, a controlling stake in a business carrying twenty billion pounds of debt. A controlling interest in a burning skip, which was not quite how the offer was being presented on the Today programme. Burnham had walked into Downing Street on Monday 20 July. By Tuesday morning Thames Water’s creditors had the proposal on the table, with some oversight for local authorities thrown in. Up before lunch. It took a moment to register what was actually being proposed, because a hundred distressed-debt funds do not volunteer public control of a water company out of civic feeling.
They call themselves London & Valley Water: Elliott, Apollo, BlackRock, Silver Point, Invesco, holding somewhere between fourteen and seventeen billion of the senior debt and in charge since the shareholders walked in 2024. Group debt hit £19.77 billion in the year to March. Their offer is to write off £9.4 billion of it, put in £3.35 billion of equity, lend up to £6.55 billion more, and keep the company out of public hands. If the government forces special administration anyway, they will bid for the repaired business when it comes up for sale. They have said so openly.
They are not resisting public ownership. They are pricing it.
Two different objects
There is the water, and there is the debt.
The water is the undertaking: reservoirs, mains, treatment works, abstraction licences, and a statutory monopoly over supply to sixteen million people, sitting under a regulator whose job is to keep the revenue coming. Worth a great deal. Five of the largest asset managers on earth want to put nine billion of new money into acquiring it, and they are not sentimental about drainage.
The debt is a pile of claims against a company that cannot service them. Worth nothing, which is why their holders will write off nine billion of it without visible distress.
Every version on the table has the public taking the worthless thing while somebody else keeps the valuable one. The golden share is what makes that presentable. At no cost whatever to Elliott, Burnham gets to announce public control of the nation’s water while the ownership sits exactly where it sat.
The precedent is a fortnight old
On 16 July the government took British Steel off Jingye and offered compensation to be independently determined and paid, if any. Jingye says what was offered was virtually zero and has gone to the China-United Kingdom investment treaty. Nobody in the Labour Party found this controversial.
It is not new. Northern Rock was nationalised in 2008 under a statute that told the valuer to assume state assistance had been withdrawn and the bank was in administration. The valuer returned nil. The courts upheld the scheme twice in 2009, on the ground that the rescue was categorically not meant to confer a benefit on shareholders. The Upper Tribunal confirmed the valuation in 2011, Strasbourg declared the shareholders’ claim inadmissible in July 2012, and the Court of Appeal saw off the last challenge, brought by a hedge fund, in 2013. The National Audit Office puts the eventual cost of the whole episode at around two billion pounds.
So the machinery exists, and it has been tested to Strasbourg and back. What varies is who loses. Jingye can complain to its Foreign Ministry and none of that moves a gilt yield. Elliott, Apollo and BlackRock sit inside the market that prices Britain’s debt, and a Prime Minister nine days into the job has to think about what a write-down at Thames does to every regulated utility in the country the following morning.
Burnham is not hesitating because the law changed in four days. He is not a cautious technocrat who stiffens under conflict: he is, as politicians go, an animal bred for it. What he fears is not a legal challenge but what the gilt markets do the morning after a government writes down five of the largest asset managers on earth. Think of the bond market as a salt circle of the kind the occult tradition draws to contain dangerous spirits: not a physical cage, but a set of lines within which everything must operate. Cross them and the yield curve spikes and you spend the rest of the parliament explaining it. This may prove the most expensive mistake of his first month in office. He can see the trap. He is walking into it anyway.
The demand
Nationalise the water. Do not nationalise the debt.
For a branch or a trades council, without amendment: take the undertaking into public ownership, pay nil compensation to shareholders and bondholders, refuse any part of the twenty billion, and sell nothing out of administration afterwards. That last clause is not decoration. Without it, winning nil compensation just means the public repairs the business and hands the result back to the people who broke it.
Notice what the demand does not contain. No workers’ control of the water industry, no community management. That is deliberate, but not because workers’ control lacks content. Fifty years ago, perhaps more, the trade union bureaucracy might have stood up for it. What the privatisation years made clear was something different: the unions’ double-dealing over the utilities was not about politics or strategy, it was about membership dues. Defend the right to collect them and the long-term interest of the communities the members lived in could manage itself. Workers’ control now surfaces in far-left meetings and nowhere else. Including it in the demand narrows the room immediately.
Alongside it, the entry-level version of the thing supposedly not on the agenda. Open the books. GMB and UNISON have members in every treatment works and pumping station in the Thames Valley and those members know which assets have been left to rot. An asset condition survey, published in full and verified by the unions rather than self-reported by the company, could be moved in a branch next month, and it is the only way anyone outside Thames finds out what the repair actually costs before agreeing to pay for it.
Who raises this demand? Anyone could: it is in the interest of taxpayers generally, not only of socialists. The Conservatives, the Liberals and Labour will not raise it, because they need investors to keep lending to the British state. That leaves the unions, Your Party, the Greens, and the organisations to the left of Labour. Logically it falls to the TUC. After quantitative easing put billions into investors’ hands with no measurable benefit to working people, the lesson is available: public money handed to bondholders is not public investment. The car scrappage scheme of the Brown years, for all its climate limitations, had a clearer economic return. The nil-compensation demand, moved in the branches closest to Thames Water, would also force a question that needs forcing: whether the Labour Party is a party of the unions or more loyal to the bond market than to the people who fund it.
Mitterrand paid in full
Someone will say that a visible reversal of privatisation is worth having in itself, and they are not wrong. People who have watched sewage go into their rivers for a decade would see the direction of travel change for the first time in forty years. That matters. The question is whether it can stand in for which way the wealth moves.
There is an English precedent before the French one. At the Friends Meeting House in central Manchester, four of us in a room and four on a screen were arguing over the Bee network a few weeks ago. Not about Thames Water: about buses. Transport for Greater Manchester now sets the routes, fares and timetables; it has taken ownership of some of the buses, the most expensive electric ones, and all of the depots. The improvements are real. A single ticketing system means your ticket home is valid for the bus that actually runs the route; a hopper fare means changing buses without paying twice. These things matter if you are trying to get from one part of Manchester to a part that is not the city centre. But what the Bee Network did not change is who carries the capital risk and who captures the revenue. Transport for Greater Manchester owns bus depots and electric buses: the expensive part, the infrastructure, the overheads that no private operator wanted on its balance sheet. The private operators, one of them backed by Deutsche Bank money, bid for franchise packages and are guaranteed the revenue from running the routes. Aesthetically, it reads as public ownership. Economically, the division of risk and return is the same as before, if not worse for the taxpayer.
The golden share offer goes further in the wrong direction. Under it, the UK government acquires a controlling share with veto rights over major decisions, while the creditors’ debt remains, unchanged, on the balance sheets as assets owed to them. The debt does not move. Elliott, Apollo and BlackRock are still owed it. The government, as controlling shareholder in a monopoly that cannot be allowed to fail, becomes liable for servicing those debts, not legally, since the structure is limited liability, but in every practical sense. The arrangement is sometimes called “too big to fail” in the context of banks. In utilities it is simpler than that: when the company cannot pay, the question of who covers the shortfall has already been answered by the fact that sixteen million people need water.
France answered it at scale.
In February 1982 the Mitterrand government took five industrial groups, two financial holding companies and thirty-six banks into public ownership. The largest nationalisation in Western Europe since 1945, carried out by a government of the left with Communist ministers in it. The shareholders were paid in full, and rather more than first intended: the Conseil constitutionnel struck down the original compensation terms that January as an inadequate indemnity, and the law had to be passed again in February at a higher price. Alain Krivine put the bill for the five industrial groups at 35 billion francs.
The form of the payment matters more than the figure. Former owners received listed bonds of the Caisse Nationale de l’Industrie, redeemed at par over fifteen years. Their equity became a state-guaranteed income. What they surrendered was the risk.
The LCR, today the NPA, saw it coming the summer before. Writing in Rouge in July 1981, translated in Intercontinental Press the following month, Pierre Rème refused the whole idea of a ‘fair’ price for firms that had spent years billing the state at cost plus 123 per cent, and went instead at who owned the stock: more than ninety per cent of shares in France, he wrote, were held by a very small number of capitalists. Refuse the compensation, with an exception for the genuinely small investors, and not a franc of public money for speculators.
Two years on, with the government deep into austerity, Jacques Kergoat named the thing in Quatrième Internationale. These were nationalisations with shareholder indemnity written in from the start, whose assigned purpose was not rupture with the market economy but, in his phrase, ‘to create the best conditions for the entrepreneurial spirit to flourish’.
Which gives us the distinction the tradition has never quite had a name for. There are nationalisations that weaken capital and nationalisations that strengthen it, and the ownership column will not tell you which one you are looking at. What tells you is the direction the risk and the return are travelling. Take the undertaking and refuse the claim, and a propertied class loses an income and keeps its losses. Take the undertaking and honour the claim in state paper, and the same class is relieved of every hazard of ownership while its income continues, with a fresh charge on the public account to fund it. Expropriation in the first case. In the second, insurance, underwritten by the people who use the service.
By March 1983 Mitterrand’s government was deflating wages to pay for what it had bought.
What nobody is proposing
Suppose we win the lot. Water taken, debt refused, creditors written to zero, nothing sold out of administration. The pipes are still not laid. Refusing a liability does not build a reservoir.
The money to repair English water was paid once already, in bills, and taken out again in dividends across three decades by owners now beyond reach. Getting it back means a windfall levy on cumulative distributions across the whole industry, not on the one company that happened to fail first. Nobody is proposing that. Nobody in Labour will.
Which is why it goes on the table before the settlement rather than after. Otherwise bills rise in April, the lesson learned is that public ownership costs the same and works no better, and Farage collects it. Thatcher did not invent that argument in 1979; she inherited it from people who thought public ownership was a matter of title deeds. The French left paid considerably more than she did to learn the same thing.
Burnham might do it, incidentally. A government wanting a cheap visible win could decide that writing down five asset managers is more popular than funding social care. If he does, we should say so, claim no credit, and move straight to the next demand.
The special administration decision may come within weeks. The demand is simple enough to move in every branch in the Thames Valley by the end of August. The unions have not prepared for it. The Green Party is already doing its Burnham coalition arithmetic. Your Party sort-of exists, limping along having driven away so many of its members. The argument about what these conditions add up to is one we might have in person, at ACR’s upcoming summer camp.
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