Andy Burnham has discovered the cost of nationalisation

The buses would run on time. The trains would be cheaper. And perhaps most of all, the water companies would start providing a far better service. Andy Burnham was vague about most of his promises while campaigning to become Prime Minister. But he was very clear about one thing: back under greater public control, the utilities would start working for the whole country again, and not just for a handful of greedy shareholders. There is one catch. It is turning out to be far more expensive than he realised.

We learned today that Thames Water, probably the most chaotically mis-managed of all the privatised utilities, won’t be back in public ownership quite as quickly as expected. Plans to put the company into a ‘special administration regime’, effectively a form of state ownership, have been postponed. The reason? It could cost the government up to £2 billion, given that it would need to cover its funding costs for the next year, as well as open the government up to legal action from rival bidders. Indeed, if it stays under state ownership permanently, and if the reservoirs and pipes need lots of investment, it may cost ten times that amount. At a time when the Treasury is already struggling with a soaring deficit it is hard to find that kind of money. 

It turns out that taking Thames Water into a form of state ownership doesn’t magically make all its financial problems disappear. It still has huge debts, it needs cash to cover its day-to-day operations, and, after the driest summer of recent years, it urgently needs to rebuild its network. The longer it remains in limbo, the worse its challenges are likely to get. Burnham and his supporters complacently assumed that once rapacious shareholders were no longer sucking huge dividends out of the company it would start to improve. It turns out that is not actually true. Indeed, the plan of the proposed new board to keep the company afloat, and take no dividends for at least ten years until it can be re-listed on the stock market, does not look quite so bad. At least it will keep the taps running until something else turns up.

The real problem for Andy Burnham and his team is this. Previous governments said as little as possible about the water companies, and hoped the whole problem would just go away. By contrast, greater control of the utilities, and lower bills, was a central theme of the current Prime Minister’s bid for No. 10. If he can’t find a way of fixing Thames Water he is going to be in big trouble with his supporters.