Why isn't Labour nationalising water?

New Statesman​

22-07-2025

Photo byYesterday morning (21 July), in Kingfisher Wharf in Fulham, Steve Reed announced the start of the 'water revolution'. Following the findings of the Independent Water Commission, led by Sir Jon Cunliffe, the Environment Secretary outlined what is now being dubbed the 'Reed Reforms'. The water regulator Ofwat will be abolished and a new consolidated body will be set up in its stead, intended to 'prevent the abuses of the past'.
Speaking in Parliament later that day, Reed confirmed the Government would take up five other recommendations included in Cunliffe's review. These include: a new statutory ombudsman to help customers resolve complaints, an end to companies monitoring their own pollution, and region-specific operations within the new regulator. This is all part of Reed's plan to cut sewage pollution by 50 per cent by 2030. However, full nationalisation of the water industry is off the table.
This is partly because the possibility of nationalisation was not part of the remit given to Cunliffe for his review. His 88 recommendations instead covered how the British water system is regulated, how to manage competing demands on water, and how to maintain the resilience of critical infrastructure. But the response to the review's findings from outraged sewage campaigners suggests that perhaps nationalisation should also have been included in the scope of Cunliffe's report.
The symbolism of the waterfront location chosen by Reed was somewhat lost on the assembled journalists: the studio's blinds were closed, effectively blocking the Thames from view. But Reed remained buoyant as he stepped up to the lectern to answer journalists' questions afterwards. Insiders at the Department for Environment, Food and Rural Affairs recently told me that water has monopolised the work of the department, ranking consistently highly among voters.
In the huddle following his speech Reed ruled out nationalisation. 'The reason that nationalisation wasn't included is because, first of all, it would cost £100bn, according to figures produced by my department,' he said. 'That money would have to be taken away from the NHS and from schools, to be given to the people who have polluted our rivers.' This justification makes sense. The country currently finds itself in a tricky financial position; Rachel Reeves's welfare cuts have been defeated and she will likely be forced to raise taxes in the autumn. Making big political spending commitments is unlikely to be at the top of the Government's agenda.
But regardless of cost, nationalisation remains popular with voters. A poll from last year showed that 82 per cent of the public said they thought water should be brought back into public ownership. The UK is a European outlier in its privatised status quo, and water is an emotive issue. Ruling the measure out leaves Labour exposed on left – but increasingly on the right, and it is already being challenged on the issue by Nigel Farage and Reform. Farage said on Sunday that his party would nationalise 50 per cent of the water industry (although when asked where he would find the money from, the MP for Clacton couldn't answer).
Reed's response to Farage was to point out this £50bn unfunded commitment would come alongside an additional £80bn worth of unfunded commitments Reform has already made. 'That's more than double the amount that Liz Truss committed when she crashed the economy,' Reed said. 'It looks like Nigel Farage is offering us a rerun of Liz Truss.' Still, voters may be more likely to believe intention over detail – the stridency of Farage and his deputy Richard Tice on public ownership sets them clearly apart from Labour.
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These reforms have been received sceptically by the robust camp of anti-sewage campaigners. Feargal Sharkey, the former lead singer of the Undertones and the most best-known of the group called on Reed to resign. Sharkey, who campaigned alongside Labour MPs in the run up to the general election told LBC, 'He's made it worse!' (When asked if he would heed Sharkey's call, Reed said: 'Fergal has been campaigning for cleaner rivers, and I'm cleaning up the rivers.')
Others have expressed regret at the government's rejection of nationalisation. Matt Staniek, who leads the Save Windermere campaign said the fact the Cunliffe review did not include nationalisation meant it was 'not a root and branch review'. Save Windermere is currently calling on the Government to make it unlawful to release any kind of sewage (treated or untreated) into the Lake. He was unimpressed by the Reed reforms and pointed out that tinkering with the regulator would not fix the fundamental problem with the UK's water system: privatisation.
It is accepted that the UK's water infrastructure has fallen into such disrepair because the money which should have gone back into improving the system has instead gone to shareholders in dividends. This, coupled with the Conservatives' preventing water companies from raising consumer bills fast enough, has created a vicious cycle (ending with the 30 per cent increase to bills customers saw at the end of April). 'If you remove the profit motive, remove shareholders and owners, you are left with 100 per cent of a customer's bill being able to go back into fixing the water system,' Staniek said.
Cunliffe's review included the admission that water bills will still need to rise in the short-term to patch up the UK's leaky system. But in the middle of a cost-of-living crisis in which voters have been sold the idea that this Labour government was elected to cut their bills, such a reality is politically dangerous for the government. Staniek said that when it comes to water, the rise in bills is not necessarily the issue: it is what they will go towards which will make an electoral difference. 'People have been paying for a service that has never been fully provided,' Staniek said. 'Why is it fair that the customer has to pick up the bill?'
Reed is walking a fine line here; between keeping disgruntled voters onside by cleaning up Britain's rivers, and doing so within an ongoing political and fiscal framework which prevents radical changes being brought from the Labour benches. But people are already furious about this affront to nature and politics, one which unites voters of all persuasions. If, by 2029 Britain's rivers remain polluted, they will take their support elsewhere.
[Further reading: Will Labour's water 'revolution' work?]
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