Folly of state ownership: Nationalising the water utilities would drain Britain dry, says ALEX BRUMMER

An immediate decision facing prospective Prime Minister Andy Burnham and his Cabinet, when in office, is the financial mess at Thames Water. 

Burnham favours state control over the water utilities and parts of the energy supply industry, with the National Grid reportedly also in his sights.

Thames Water is the knottiest problem. On the table is an offer from a consortium of creditors operating under the benign title of London & Valley Water, with a £10billion rescue package. 

In exchange, the creditors want to see a write-down of £9billion of debt.

Controversially, they are asking for a regulatory amnesty, which would require regulator Ofwat to overlook sewage spills and performance targets. 

The deal is opposed by Environment Secretary Emma Reynolds on the grounds that it fails to protect consumers and ecological interests.

Labour has been nervous about placing Thames into a Special Administration Regime, a temporary bankruptcy that would see much of its debt wiped out. 

If it were to act, there would be no shortage of buyers. These would include Hong Kong-based CK Group, controllers of Northumbrian Water.

The temptation for Burnham is to think that Thames Water would be better off in state hands.

It would be a gargantuan mistake. As badly run as it has been, an already bloated state balance sheet does not need Thames Water.

Nationalisation rarely works. Failing governments in Greece and Italy have been busy divesting themselves of state assets as part of a recovery agenda. It has worked: both have returned to growth and political stability.

Labour is busy fulfilling its manifesto promise to take the railways back into public ownership. The country is paying the price. 

Transport Secretary Heidi Alexander recently confessed to MPs that South Western Railway’s performance, since the Government renationalised it, ‘has not been up to scratch’. Delays have increased and cancellations are up 50 per cent.

What the utilities need is not government ownership, but robust enforcement. If the railways, water and grid had to compete with the NHS and welfare recipients for funding when the public finances are under so much pressure, they would come up short.

In 2024, National Grid raised £7billion from existing shareholders in an oversubscribed issue of shares to help fund upgrades for new nuclear, wind and solar generation.

A lurch back to the nationalisation enthusiasms of previous Labour governments would be a fiscal trauma in the making.

Farewell Maestro

As a Washington correspondent in the 1980s and a City Editor ever since, I found that Alan Greenspan, who has died at 100, loomed large in my journalistic life.

The thoughtful economic guru, who headed the Federal Reserve for nearly two decades, was a master of the political arts and a practical thinker whose judgements rested on his own data and instincts rather than just mathematics. 

Before arriving at the Fed, where he succeeded Paul Volcker, Greenspan developed his own statistical series built around early data, such as shipments and inventories sourced directly from corporate America.

His insights and corporate-led data served him well and he guided the US safely through the 1987 stock market collapse, the 1990-91 recession, the 1997-98 Asian financial crisis and the September 11 attacks on the World Trade Centre. 

Famously he warned of ‘irrational exuberance’ in 1996.

But in the end, it was Wall Street’s bundling of sub-prime mortgage debt on his watch which sullied his reputation.

Greenspan argued that because the debt securities had been distributed far and wide in the financial community, the risk was diminished.

It proved to be a cluster bomb that spread catastrophe far and wide in the Great Financial Crisis (GFC) of 2008.

Over the years, I interviewed the great man twice, first in Washington and later at Bloomberg in London.

He was courteous and his answers always elliptical. He regretted the failure to see the GFC coming. But so did almost everyone else in the financial world.

In his case everyone expected more.