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26 Mar 2025
Is private ownership of our critical infrastructure working? Cat Hobbs, founder and director of We Own It, argues privatisation has failed – so Labour ministers should think again.
“I just love utility companies… They give you resilience in portfolios, pretty monopolistic in nature… So, what they have is these cashflows, long-term, contractual… really, really powerful cashflows.”
These words are from the chief investment officer for fundamental equities at BlackRock, Helen Jewell, speaking recently on the corporation’s podcast. The “really, really powerful cashflows” in transport, power, water and waste are of course the reason BlackRock wants to be involved in the UK.
But when Keir Starmer welcomed BlackRock with open arms into the UK’s Infrastructure Taskforce, he ignored the reality of what has already happened to our country’s infrastructure: a 40-year failed privatisation experiment.
This is also the week Thames Water would have literally run out of money if it had not been bailed out, at great expense, by 16 million so-called customers who have no choice but to rely on this company.
It could have been brought into special administration and public ownership, like Railtrack was when it went bust under the Blair government, which took action to defend the public interest. Instead, We Own It calculates that every household in the Thames Water region will pay an extra £250 on top of existing bills. Already, these households are paying 33p in every £1 of water bills to service the company’s existing debt mountain. Now they will pay even more. A bill rise of 35 per cent has been approved – though Thames Water is unhappy with that and seeking a 53 per cent rise.
Thames Water provides crucial infrastructure for nearly a quarter of the population of the UK and is responsible for the network of sewers underneath London. After 36 years of privatisation, the company has £19bn of debt and will now add £3bn to that pile before it next runs out of money, which could be as soon as October.
Australian asset management firm Macquarie previously owned Thames Water. It was accused of asset-stripping and known as the “vampire kangaroo”, and has now moved on to become the majority owner of Southern Water, which is next in line to drown in its own debt. Except that the government’s green light to Thames means that it, and other private companies, may believe they too can expect to be endlessly bailed out by us, the households – the revenue stream that never dries up.
Thames Water highlights the absurdity in the government’s approach to infrastructure ownership. The bailout is the backdrop as Rachel Reeves casts around for private sector investment into UK infrastructure. Alongside this, she is introducing ‘zero-based’ budgeting with each government department required to look at budgets line by line. Meanwhile, businesses have been invited to give ideas for delivering public services more efficiently, while Starmer accuses the state of being “flabby”.
The message is clear: private sector good; public sector must do better. That is extraordinary, given we have been royally ripped off by private corporations (and publicly owned companies from other countries) ever since Margaret Thatcher handed over the keys to the kingdom.
Since privatisation of water in England in 1989, shareholders have extracted £78bn in dividends while building up debt of over £60bn at our expense. Investment has reduced overall, and every penny of that investment has come from our bills. From April our water bills will rise by 26 per cent.
Our energy transmission and distribution networks are unique in Europe in being almost entirely privately owned (although the Conservative government brought a bit of National Grid into public hands for planning purposes). Every year £1.6bn flows out of this privatised natural monopoly instead of being invested in upgrades. Our energy bills, meanwhile, have skyrocketed, and will go up 6.4 per cent again in April.
Labour will finally bring rail franchises into public ownership. Yet the rolling stock – the trains themselves – will stay privatised and profitable under Great British Railways while fares go up 4.6 per cent. On our chaotic, deregulated, privatised buses, fares are up 50 per cent while a quarter of all bus routes have been axed in the last 13 years alone. We have handed our Royal Mail to a Czech billionaire as stamp prices rise and deliveries fall. PFI schemes mean we pay for the same infrastructure three times over – while hospitals and schools are crumbling.
This massive extraction of value at the expense of UK households means public ownership is hugely popular. No wonder Reform is talking about nationalising water and energy.
There is something deeply unpatriotic about assuming that your own nation state must rely entirely on private investors mostly from abroad. The Labour government does not have to make this assumption. Economist Mariana Mazzucato says: “As anyone who has worked in the private sector knows, there are plenty of ‘bureaucratic’ and inert businesses. There is nothing in the DNA of the public sector that makes it less innovative than the private sector.”
Before rolling out the red carpet for yet more asset managers and foreign shareholders, the government should look at directly delivering the results they want with state institutions, at speed and at scale, with some chance of having an impact ahead of the next election. The irony is that the government’s aims of boosting the economy and eliminating waste could be most easily achieved by direct public ownership and investment.
Public ownership means dividends can be reinvested, borrowing costs are lower and the state can directly take action to deliver results. Public assets mean more levers to pull, more control over public missions, and the ability to protect citizens from global shocks. Other countries understand this potential.
European countries like Switzerland that deliver excellent, co-ordinated public transport do so using the tool of public ownership and public control. Over 90 per cent of the world’s cities run water in public ownership, including the countries with the cleanest rivers and seas – yet Environment Secretary Steve Reed refuses to consider this option in the biggest review of the water industry since privatisation.
Back in 2022, we pointed out that nine out of 10 countries leading on the green transition have a state-owned renewables company. The government has now created Great British Energy. Unfortunately, its £8.3bn budget should be around 10 times bigger to start to catch up with the likes of Sweden’s Vattenfall, Norway’s Statkraft or Denmark’s Ørsted. Without more money, all it can do is hold a tiny public stake in private projects. The institution is already hamstrung; any further cuts from the Treasury would be beyond short-sighted.
GBE also needs a retail wing so that households can directly benefit from bill reductions. When energy prices spiralled in 2021, France used its publicly owned EDF to cap bill rises to protect households and limit inflation, and Norway used its sovereign wealth fund to pay 80 per cent of people’s bills above a capped price.
If you look at the individuals sitting on the government’s new Infrastructure Taskforce, it might remind you of Thames Water. A Canadian pension fund and an Australian asset management fund are represented alongside BlackRock.
As Brett Christophers claims in his book Our Lives In Their Portfolios, BlackRock has a track record across the globe of making sure the public sector takes the risk while the company takes the profit. UK households and taxpayers shouldn’t have to go down this road again. Instead of going, begging bowl in hand, to the private sector, the government should start by taking back our essential public infrastructure and natural monopolies. Then those “really, really powerful cashflows” can work for us.
Adapted from the original article published in Politics Home
