‘Labour can be bold and electable. And our water industry demands boldness’

Dan Jarvis
© Yau Ming Low/Shutterstock.com

From climate to the cost of living, Labour is called on to be bold. Yet always there is the argument: bold policies are worth nothing if you cannot get elected. That tension cuts to the heart of Labour’s internal debates and it defines the hard business of governing. So where should we draw the line? 

For me, it’s about three things. First, ambition. Labour must offer policies matching the challenges we face. In the face of NHS crisis or climate collapse, moderation cannot mean half-measures. 

Second, rigour. We must be ruthless about what works, about costs and how to pay them. But rigour cuts both ways: we must consider costs across society and across time, not just the short-term and easily measurable. We learn the lessons of PFI.

Third, we need to reconcile this with the harsh realities of politics. There is room for flexibility on presentation and around the means of policy, so long as it still delivers on the ends. But we should be acutely aware of the cost of compromise, because we’re in politics to change things, not just get into office.

Having been rigorous, then we can – and must – stand and fight our case. Because people respect a party with the courage of its convictions, if they are based on values and rigour rather than untethered ideology. And because if we don’t, the middle ground of politics will drift ever rightwards.

Our privatised water industry is failing consumers and the environment

But the real test is how this balance is struck in practice. A very good example is water. Since 1990, privatisation has allowed mostly foreign owners to extract at least £66bn in dividends alone, mainly by loading companies with £60bn in debt. That money comes from our own pockets; servicing debt already contributes 20% of the average bill.

What did £66bn get us? Very little. Investors were not taking a fair cut of savings from better management: efficiency is no greater than publicly-owned providers. The government claims privatisation increased investment, but the rise actually came from a 40% real-terms increase in household bills. Privatisation just provided political cover.

Now companies reportedly want another 40% – asking customers to pay again – because in fact their investment was still utterly inadequate. English companies released raw sewage for 2.7 million hours in 2021. They are woefully underprepared for climate change. Around three billion litres leaks from the pipes every day. £66bn would have covered the spending companies say is needed six times over.

Nationalisation may be the answer. But we should explore all options

So surely the answer is re-nationalisation? It may well be – but we still need rigour and flexibility. For a start, the price of nationalisation varies according to the approach. The question is how little you can fairly pay without successful legal challenge or major economic side-effects. Even a significant price tag could be justified if it could be shown to pay for itself within a reasonable period (and remember, that price procures an asset). 

The largest cost, that £60bn debt, comes with revenues that already cover its servicing, so the national credit rating would likely be unaffected (especially as the government would pay lower interest). 

But, of course, there are always limits – and competing demands on public debt. So it is worth considering ways to achieve transformation more cheaply. There may be some: most promisingly, circumstances – fines, legal actions, interest rates etc – might push companies into crisis (as happened with Thames Water), allowing much cheaper nationalisation. Zero concessions should be made to help them. On the contrary, they should be held much more strictly accountable.

We must find the best long-term model – and then act without fear

Indeed, we should test the limits of regulation more widely – its potential to end the premium paid for private ownership. Even if it is only a stop-gap measure, we should try to vastly restrict dividends and to claw back the underspend on infrastructure and overspend on dividends since 1990.

That includes auditing the actual state of the water network and making shareholders pay for any shortfall on their obligations. Critically, we also need to ensure owners don’t unfairly benefit from asset values rising following investment paid for by consumers. 

We should consider alternative models: an arms-length company or cooperative working for public benefit or the Scottish model of full public ownership plus regulator. Whatever else, we need a strategic regulator answerable for environment and resilience as well as economic issues.

There are questions that still need answers. But the approach is clear. We look hard at costs – but across society, not just at short-term debt. We look for every advantage, at crisis acquisitions and stronger regulation, but with rigour – we count the cost of compromise or delay. Above all, we look without fear for the best structure for the long term, with a timeframe measured in decades, not news cycles. 

My expectation is that public ownership makes sense, can be done at reasonable cost and should happen sooner rather than later. But given the mess the Tories have made of the public finances, it is right we explore the various paths that could help transform the sector more cheaply or better. We should do that urgently, then act without fear. Because transform it we must. 

Labour can take bold action without endangering our electability

If we do, then the politics are clear. We throw the argument of responsibility back at the Tories. We stress the utter profligacy, and cost to families, of their approach. We show we will deploy public debt responsibly and have aggressively minimised costs. We contrast that with Tory willingness to see the public pay billions to hedge funds.

We create a narrative of Labour being willing to act boldly where it is needed, but also willing to look hard and imaginatively before it does. We lead and shape opinion rather than fearing and following it. With nationalisation already popular, there is huge opportunity here, and that calculation applies far beyond water – climate being a key example. 

We cannot dismiss the inevitable right-wing media reaction, but if we appease them, they will continue until we surrender. The way through is to address the concerns that might actually have some merit and be unapologetic about the rest. 

Voters have welcomed boldness from Labour when circumstances demanded it – and they thought we were credible. My argument is that with the right mix of ambition, rigour and politics, we don’t have to choose between timid inaction and unelectable irresponsibility. We can find a way both to win power – and to serve our country’s needs when we do.

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