A ten-year plan for taking utility companies back into common ownership
16 Oct 2017A challenge is presented to Britain’s mutual organisations today by Frank Field MP, to meet the public’s wishes for utility markets to be brought back into common ownership.
Addressing the Association of Financial Mutuals conference in Stratford-upon-Avon, Frank will say:
‘Privatisation of the utilities has undoubtedly attracted investment in the country’s energy and water systems. But it has also turned out to be a vehicle for mega, mega profits. The combined pre-tax profits of the “big six” energy companies reached £2 billion last year. The equivalent sum for the country’s ten largest water companies was £2.9 billion.
‘The “Tell Sid” campaign for ordinary people to have shares in British Gas seems like a distant memory: EDF Energy is a subsidiary of the French Government; E.ON and Npower are German-owned companies; and ScottishPower is a Spanish subsidiary.
‘The public have increasingly come to feel that the big utility companies are taking them for a ride. They see prices going up and up and up, seemingly to inflate profits still further every year, but not necessarily to give us a better service.
‘Just as strong is the feeling around what needs to be done to counter this injustice: among recent respondents to a poll conducted by the Legatum Institute, 83% wanted water to be renationalised; 77% said likewise for electricity and gas.
‘Labour have cottoned onto this sentiment, as now have the Scottish Nationalists. But current proposals for renationalisation would likely add to the public debt.
‘So the challenge I present today is for proposals to be submitted to the Government on how a public interest non-profit mutual can be built up, to take the utilities back into common ownership, and to do so without adding a penny to the public debt.
‘Crucially the public will expect this mutual to offer a fair, single tariff which treats every single household on a level playing field, while allowing sufficient sums to be set aside for investment. That should be our challenge.
‘The challenge for the Government is to provide a route map for the build-up of this mutual. My suggestion would be for the Government to require equity equivalent to each year’s annual profits to be surrendered to the new mutual. On current trends, it would take a decade for that mutual to build up a controlling stake in each company, thereby meeting the public’s wishes for common ownership of the industry.’
As an example, in 2016, SSE had turnover of £29 billion and a pre-tax profit of £593 million; the current market capitalisation is around £14 billion. Therefore, 2016 profits were worth about 4% of the current market capitalisation, and it would take approximately 12 years to reach half of the current market capitalisation.