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At the weekend, The Observer reported that the privatised water companies in England are expected to pay out £14.7 billion worth of dividends to shareholders by 2030. This comes only days after water executives promised to invest an extra £10 billion in upgrading the water system and expected customers to pay for it through higher water bills. This is a national scandal quite frankly. It is yet another demonstration of how a privatised natural monopoly operates. The profits are passed on to wealthy senior shareholders, while the risks and costs are passed on to customers. Things cannot go on like this.

So, where do Liberal Democrats stand on the age old divide between socialist statist nationalisations and Thatcherite privatisations? Firstly, a degree of pragmatism is required. Liberals should never be ideologically wedded to either nationalisation or privatisation. Some things are better off being run by the state (such as, the NHS and the education system), while other things are better off being in the private sector (for example, telecommunications and aviation). Secondly, it is important that liberals advocate for a third option, that being mutualisation.

Mutualisation is where a business, industry or organisation is transferred into mutual ownership. This can take several forms. It could take the form of a not-for-profit business model whereby a company’s profits are reinvested for the benefit of its customers. It may also take the form of customers receiving a share of the company’s profits themselves in the form of a dividend. Alternatively, it could take the form of a traditional co-operative that is owned by its customers and/or its workers. The important thing is that mutualisation would lead to a company treating all of its customers as stakeholders; therefore, it would have a social and economic responsibility to each of its customers. Mutualisation offers a distinctive alternative for Liberal Democrats, one that is more decentralised than nationalisation and more socially just than privatisation, while potentially being more democratic and accountable than either.

So how might this work in practice? England’s water industry is the only one in the UK that is still privatised. Scotland’s and Northern Ireland’s are already nationalised. However, it is to Wales that Liberal Democrat should turn to. In Wales, Welsh Water is mutualised and its profits are reinvested into the maintenance of the Welsh water system and into lowering bills for customers. Liberal Democrats in England should call for the mutualisation of the English water companies along similar lines to Welsh Water. We should learn from the example of Welsh Water, however even mutuals (or nationalised industries for that matter) require stricter legally binding environmental regulations and should not be treated as a panacea in and of themselves. We should also explore the possibility of making water mutualisation in England even more democratically accountable to customers than Welsh Water.

Where else could Liberal Democrats advocate for increased mutualisation? One option is in relation to the banking and finance sector. The Great British building society used to offer customers an alternative to traditional banks. From the 1980s onwards, the number of building societies declined rapidly as they were demutualised (and thus privatised) under Thatcherism. Liberal Democrats should promote and encourage the establishment of new building societies to give customers and businesses greater choice. We should also promote credit unions, which also represent a mutual alternative to traditional lending.