Renationalisation could cost households £960 on average

UK households could lose nearly £1000 on average under Labour’s nationalisation plans.

That is according to a study by consultancy firm NERA, which shows costs of bringing utilities under government ownership would hit pension pots and savings accounts across the country.

The report suggests that if a future government paid less than fair market value for water and energy networks along with Royal Mail, it would impact households by about £600 on average.

However, should the government choose not to compensate shareholders, the figure would be closer to £960.

The data from NERA calculated the overall cost of Labour’s plans would be £193 billion. Last month the CBI calculated the cost of nationalisation would be £196 billion, broken down as £90.4 billion for water sector, £89.1 billion for energy, £13.9 billion for railways and £2.6 billion for Royal Mail.

NERA was commissioned by Water UK to assess the financial impact that nationalisation would be likely to have for taxpayers, savers and pensions.

Its report also shows that households involved in water company share ownership schemes stand to lose more. Between half and three-quarters of staff employed by South West Water, Severn Trent and United Utilities own shares in their respective companies through employee share schemes. The researchers calculated that an employee with £10,000 invested in a publicly listed UK water network would face losses of around £2,600 if the networks are nationalised at net asset value.

Report author and NERA associate director James Grayburn said: “No matter which way you look at it, the cost of nationalisation is the same. Either the taxpayer foots the bill or there is a hit to savings and pensions but overall the cost is £193 billion, just split in different ways.” 

Commenting on the report, Water UK chief executive Michael Roberts said: “The evidence keeps growing, showing that water nationalisation is a bad idea with an eye-watering price tag. It would hurt pensioners and savers, and risks turning back the clock to the days when service and quality failures were far more common because cash-strapped governments wouldn’t pay for the improvements needed.”

Pension funds which would be hit include the 158,099 members of the UK Mineworkers Pension Scheme, the 370,142 people in the Greater Manchester scheme for local authority workers, and the 134,339 members of the Merseyside local authority pension fund. Around 350,000 workers at Tesco and more than 300,000 BT workers would also be affected by the impact of nationalisation.

Popularity of nationalisation plans appears to be dropping, based on survey results published by ComRes last month that showed 53 per cent of people surveyed oppose nationalisation. 27 per cent said they were in favour of the move.

The figures by NERA were calculated based on direct losses from pensions and savings, and indirect losses on holdings of other investments such as UK debt or gilts.