Photographer: Rupert Hartley/Bloomberg
Corbyn’s Message to Utilities: Paying Tax Won’t Save YouBy and
Three water companies scrap controversial offshore accounts
Lobbyist says Labour has replaced Brexit as key conversation
The U.K.’s opposition Labour Party warned utility companies they can’t escape its plans to put them back under government control and that their efforts to change financial habits were just cosmetic.
Moves by water executives to reorganize their tax and investment strategies are a response to the possibility of Labour coming to power, said the party’s business spokeswoman, Rebecca Long-Bailey. Yorkshire Water, Thames Water and Anglian Water have all announced plans to review or scrap their offshore banking arrangements.
“Labour has pledged to bring water back into public ownership," Long-Bailey said. The skeptical view is that the decision by some water companies to start paying taxes in the U.K. were "belated public relations maneuvers to paper over years of dysfunctionality and profiteering in a broken system,” she said.
Leader Jeremy Corbyn is stepping up attacks on vested interests in the financial and business world just as companies attempt to build ties with the party and the prospect of a Labour government occupies some executives more than Brexit. The party is level pegging with Prime Minister Theresa May’s Conservatives in opinion polls after unexpectedly erasing her majority in June’s election on a socialist platform.
While another vote isn’t scheduled until 2022, Labour is on election footing ready to oust May from power if her beleaguered administration fractures and falls as a result of its divisions over the negotiations with Europe.
Corbyn said last week that banks are “right” to see a government led by him as “a threat to a damaging and failing system that’s rigged for a few." Denouncing them as “speculators and gamblers,” he put them on notice that Labour would take action over high bonuses and avoided taxes.
Labour’s radical plans for the businesses are having such a dramatic impact that one lobbyist says the party has replaced Brexit as the number one topic of conversation. The person, who declined to be identified, said he is advising clients to make friends with the opposition party’s key figures on business.
"Unpopular utilities and service providers -- water, energy, rail and broadband providers -- could all be vulnerable to strong government action," said Stefan Stern, a visiting professor at Cass Business School in London. "No wonder some businesses such as Thames Water are changing their tune, and their behavior, pretty fast."
Thames Water, Yorkshire Water and Anglian Water have all in recent weeks announced plans to review or scrap their offshore banking arrangements following criticism, especially from Labour, about the low levels of taxation being paid by the industry.
Anglian Water Chief Executive Peter Simpson said its Cayman Islands subsidiary served no on-going purpose, while Thames Water’s decision to scrap its offshore banking arrangements was accompanied by a commitment to end dividend payments in favor of long-term investment.
“Every prudent company should be aware of the political environment,” Thames Water CEO Steve Robertson said in an email. “But the nature of our investment program means that Thames has to make strategic decisions based on the long-term interests of our customers over 25, 50 and even 75 years.”
Corbyn has pledged to renationalize Britain’s railways as well as water and energy companies to reverse the privatizations started under Conservative Prime Minister Margaret Thatcher. At the Labour Party conference in the fall, he was damning about the water companies, especially those owned by private equity and sovereign wealth funds.
With the industry in the spotlight, trade body Water UK has been urging members to speak up about their achievements since privatization.
One Labour lawmaker, who declined to be named because discussions have been private, said there have been meeting companies that are fearful of being nationalized. The lawmaker said reassurances were offered that nothing would be done in a rush.