There is no free lunch to nationalize the water company, says Lord Howard

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Lord Michael Howard told the BBC: “There is no free lunch” when it comes to financing public companies such as Thames Water.

The company, which has billions of pounds in debt, is facing a crisis, which has led to new calls for its nationalization.

Howard, who led the privatization of the water industry more than 30 years ago, denied the plan had failed.

Caroline Lucas of the Green Party said water companies should be brought into the public domain.

Thames Water, which serves a quarter of the UK’s population, has faced heavy criticism over its performance in the wake of a series of sewage discharges and leaks, with its chief executive resigning last week.

Lord Howard, who was the minister in charge of water privatization under industry under Margaret Thatcher’s government, told BBC Radio 4’s Today program that long-term investments in infrastructure required significant investment.

“You can pay for it by borrowing, in which case interest must be paid to the lenders, or you can pay for it by raising private capital, in which case dividends must be paid to the people who provide that capital,” he said.

“This is the only option available, there is no free lunch.”

He said industries under public ownership should “compete for resources” with the likes of health, education and the police, saying that when water was nationalized it was “down the queue”.

“When you launch it in the private sector, you turn to private capital – you can make the investment that is required,” said Lord Howard, who was also the former leader of the Conservative Party.

However, he accepted in hindsight that some companies should have raised more of their capital through an equity issue.

“I think it’s arguable that companies are allowed to take on too much debt,” he said.

“Failed experiment”

Ms Lucas, a Greens MP and former party leader, told the same program that when privatization happened, water companies were “given a monopoly”. It accused them of “loading up debt to pay their dividends to shareholders”.

“This is an experiment that completely failed – water is still in the public domain in most other countries for good reason,” she said.

“We must give priority to public needs and environmental protection, not private profit.”

Lord Howard described her remarks as a “diatribe”.

Under the plans, they will not be re-nationalized, but the water regulator will force them to work for the benefit of the environment, as well as for the sake of profit.

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