A Labour Government could pay less than half the market value to renationalise water firms, it has emerged.
Leaked documents show that Labour would pay £20billion to buy out the private water firms despite an estimated value of £44billion.
Shadow chancellor John McDonnell has given an even lower figure but said it was up to Parliament to decide.
The plans have triggered fears over pension funds which are invested in the utility companies but Labour say their plans will save households £100 per year.
The documents, obtained by The Sunday Times, speak of a ‘political process of negotiation with shareholders’ if Labour wins power.
Water UK chief executive Michael Roberts said: ‘It would be an absolutely devastating blow for millions of pensioners if the water industry was subject to a smash and grab raid by a future government paying well below market value for it.
‘More than five million pensioners have funds invested in the water industry – including very many public sector workers – and they would lose thousands of pounds each under these leaked plans.
‘As well as hurting pensioners it would land taxpayers with a multi-billion pound bill, both for the purchase of the industry and the extra £100 billion that needs to be invested in the sector over the next decade.’
The £20billion estimate is based on the amount invested by shareholders, rather than the company’s market value, it is reported.
‘We think this is a better place to start than market values because it reflects how much shareholders have actually put into a company, and doesn’t incorporate future expected profits,’ the Labour document says.
Speaking on the BBC’s Andrew Marr Show today, Mr McDonnell gave an even lower figure of around £14.8billion.
He said: ‘It will all depend what price Parliament puts on it. That money will be borrowed.
‘Water is a successful company in terms of the income it raises. The income that we will manage more effectively will cover the borrowing so there’ll be no net cost.’
Asked about shareholders, he said: ‘They’ll be protected. They will get the appropriate payment that Parliament will decide.’
A Labour spokesman said today: ‘Water bills have risen 40 per cent in real terms since privatisation.
‘In the last ten years, water companies have paid 1,000 times more in dividends to their shareholders than in tax.
‘Some have even paid more in dividends than they have made in profit, running up debts that are passed on to bill payers.
‘Labour will fix this broken system by bringing the water companies back into public ownership, saving households £100 per year on their bills.’
The Conservative-leaning Centre for Policy Studies has warned of a ‘slump in business investment’ if Labour pays less than the market price.
‘Labour has tried to argue that there would in fact be no cost to renationalisation, because the profits from the firms acquired would cover the borrowing,’ it has said.
‘Yet it has also promised to use the same profits to cut household bills by £220 per household – and to run many of these industries in a fashion that is likely to increase their costs.’
The water industry was privatised in the 1980s in line with many other industries under Margaret Thatcher’s Conservative government.
Jeremy Corbyn’s Labour has pledged to restore energy, water and the railways to public ownership if it wins an election.
