Stop Sewage – Actions Not Fines

Does the public support this?

Yes! Our recent poll with Survation showed that not only do 65% of us support punishing polluting water companies with stock stripping (rather than cash fines), but only 5% of the public oppose it!

How will “actions, not fines” help stop sewage?

There are three main ways to discipline water companies by taking their shares, rather than cash fines, to help clean up our rivers and seas:

(1) It provides a stronger deterrent to pollute — the shareholders know that they will lose control of their company if they do not invest in stopping the sewers.

(2) It increases their responsibility — the public will have a say in the companies’ plans, giving you the power to accelerate the cleaning of our waterways.

(3) It is cheaper to invest in infrastructure — the public will have an increasing stake in the business, reducing the demand to make profits or pay dividends, leaving more money to reinvest in the business and stop pollution.

We explore these questions in the next three questions.

How will it discourage pollution?

Instead of feeling immune, sshareholders will know that they can lose control of their business if they don’t invest in stopping the sewers.

Cash fines have failed to deter private water companies from letting sewage into our rivers and seas. Currently, it is better to pollute than to modernize infrastructures.

But if they’re forced to give us a stake in the business instead, that may be more of an incentive to invest in stopping the sewers. Clean or pay!

How will this give me more power to stop the sewers?

Under this proposal, if water companies fail to improve, we – the public – will get a seat at the table and can push for more action on wastewater.

This will make water more responsible, providing REAL regulation. Currently, the boards of water companies reflect the interests of their shareholders. Under public ownership, councils could be designed to represent you and your community.

In our “When we own itIn the report, we suggest a role for elected councillors, consumer/citizen representatives, workers and civil society. These representatives would sit at board meetings, have access to data, and advocate for the public and the planet.

Civil society could include, for example, environmental campaign groups like Surfers Against Sewage and the clean rivers groups across the country who have done so much to highlight the problem of sewage in our rivers and seas.

While time should see the public gain a large enough proportion of corporate shares to allow them meaningful representation, a decision could be made to prioritize public accountability from the outset.

Any shares transferred under this policy may come with additional rights of access to board meetings or key decisions. This would be similar to the increased voting rights granted to the British public through their golden share in air traffic control provider NATS.

How will this make shutting down sewers cheaper?

Over time, if companies continue to pollute, more and more of them will be under public ownership and control. This proposal facilitates public ownership (the ultimate goal) at no cost to the public purse.

Currently, with privatization, water companies have a legal obligation to make money for their shareholders. So water bosses are prioritizing profits over stopping sewers.

As the public becomes a shareholder, this dynamic will change: we don’t want polluted water, so we’ll stop dividends and reinvest profits in preventing waste water.

We know public ownership can deliver. Take Scottish Water which passed £72 more per household per year (35% more) than English water companies. If England had invested at this rate, £28 billion extra would have invested in infrastructure to fix things like sewers.

Don’t we just need better regulation?

Successive governments have spent 34 years trying to regulate private water companies to clean up our water. It just doesn’t work.

Since 2020, private water companies in England have discharged raw sewage into our rivers and seas for over 7 million hours.

Over the past four decades, investments by private water companies have decreased by 15% while their debt has increased to over £54 billion.

The researchers found that “the regulator is caught in an impossible impasse in responding to the conflicting and contested interests of investors, end users and the state”.

Even when regulators impose fines on water companies, private bosses see them as the cost of doing business.

In 2021-22 Northumbrian Water received fines totaling nearly £800,000 for sewage pollution. Fines had little impact on company payment £100 MILLION in dividends last year and having its water rating downgraded by the Environment Agency.

Shouldn’t we just nationalize the English water companies?

Yes! The acquisition of the English water companies is an excellent investment, payback in about 6 years. However, offering “shares not fines” would allow us to start building a water system based on democratic public ownership now, at no cost to the public, without waiting for parties in Westminster to support nationalization. Learn more about how to take action here.

Who will hold the new public shares?

Water companies are natural monopolies, each serving a different region. They must belong to the people they serve. It’s the normal way to get water flowing all over the world, with even the United States with municipal companies provide 85% of water services.

Local councils should create and own regional companies that are ready to take shares in the privatized company (or to step in if the private companies completely collapse).

How will “actions, not fines” work?

Parliament will need to pass a new law to put in place the new “actions not fines” enforcement mechanism and create new regional water utilities ready to take those actions. It may be a specific Stop the sewer bill or proposed by Labor Take back control bill.

The proposals would likely follow a pattern similar to the current sanctions process, with the Environment Agency going to court to punish water companies for pollution.

If found guilty, judges would no longer require water companies to pay fines in cash, but would require them to issue shares to new regional water companies at a notional cost (e.g. £1), thereby reducing current shareholders’ overall stake in the company as punishment for polluting.

What is the reasonable amount of equity to impose a fine?

The biggest cash fine to date was £90million for polluting sewage by Southern Water. The book value of all the water companies is around £14.5 billion. Assuming each water company is worth the same (eg £1.6bn), a £90m fine is worth around 5% of turnover.

Judges should be offered a range of options to the size of the share would be proportional to the extent of the pollution – for example, 1% of activity for small offenses ; 5% for moderate breaches; and up to 10% for major breaches.

How to ensure that water policies are equitable?

Our water system has been failing for over 30 years. Many of the existing regulators are beyond repair. We need to review how it works to put people and planet before profit.

A new Consumers’ Union should be created, with all water users eligible to join free of charge. Members would elect representatives and also have space for direct participation. See our “When We Own It” report for more details.

Consumers Union should oversee the design of a new system and the transition to balance community needs (such as between UK pensions and consumers or to protect the interests of water company workers — a group that sometimes owns a small number of shares). It will also hold the industry to account at the national political level and through representation on company boards.

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