Labour’s attack on water is playing to the gallery

If you’ve been to any pan-utility industry event over the past year, you’ll have noticed that the water company representatives had a certain buoyancy, a visible sense of relief at escaping the worst of the witch hunt that has swirled around their cousins in energy. The water sector has shown a justifiable pride in pre-empting the affordability agenda, and reacting to public opinion by holding or cutting bills in a way that energy companies have failed to do.

For Labour, though, it hasn’t been enough. Shadow environment secretary Maria Eagle used last week’s party conference to pledge a mandatory national affordability scheme for water firms. This wasn’t a great surprise, as it rehashed Labour’s position during the debates on the Water Bill. However, she also promised – or threatened – to give Ofwat greater powers to change company licences. The speech contained no further detail on this and, asked to elaborate afterwards, Labour would say only that more detail would be forthcoming.
This sounds ominous. Having benefited from a bounce in the polls on announcing its energy price freeze pledge last year, it sounds as though Labour is planning further electioneering based on water bills. Certainly, Eagle’s side-swipe at water companies’ profits and tax payments indicated that water company finances will be coming under the political spotlight.
Given the potentially huge ramifications licence changes could have for water companies, it is irresponsible of Labour to dangle the prospect without providing detail. To do so inevitably raises suspicions that they are widening the scope of their successful utility-bashing campaign without clear and considered policies in place.
Indeed, the riposte to Eagle’s speech is that many of the things she calls for are already in place. Most water companies have or have proposed social tariffs, and Ofwat has been pushing the affordability agenda since 2012 at least. Most water companies did not take their allowed price rise this year, and the vast majority are keeping price rises below inflation throughout the next price review period.
Dividends and corporate governance are also firmly in the regulator’s sights. That’s not to say the water sector is perfect, or there aren’t issues to resolve around companies’ finances. There are – but Labour would do better to understand and co-operate with ongoing reform than make promises that grab headlines but carry little weight.