Mythbusting: A watertight solution for public control

Myths about mutualisation and cooperatives

1. “Ownership doesn’t change outcomes”

Reality: It does. A not-for-profit cooperative model will end the era of extraction where debt is loaded onto companies to pay out dividends to shareholders. Customers own the company and they are the priority with surpluses retained for customer priorities - investment, lower bills and better environmental outcomes. Voters from every party - from Reform to the Green Party - can see this and our evidence shows that when faced with the reality of the cost of nationalisation, they pick mutualisation as the answer for stronger public control.

Mutualisation can also deliver better governance, a better credit rating and it restores a democratic connection between the people and institutions that serve them. 

A change in ownership must be combined with a stronger regulatory model too, so that performance outcomes matter more than ever.

2. “A cooperative isn’t really public ownership, or a Labour solution”

Reality: The Cooperative movement is an inherent part of the Labour movement. The cooperative solution provides real democratic control, bringing ownership to customers directly with representation on the Board for workers and devolved authorities. Not-for-profit, customer owned water is a Labour solution - with strength in the idea that the people who depend on an institution should have a say and a stake in how it’s run.

3. “Mutualisation would restrict investment”

Reality: There is no evidence to support this. The existing privatised model has demonstrated how companies have piled on debt, extracted dividends and investment has been squeezed. Companies continue to underuse their investment allowance and replace pipes at a rate of 0.14% per year, far below the 0.4% rate provided for by the regulator. 

At the other end of the spectrum, were the companies to be publicly owned, they would face competition on financing from other public sector bodies such as health, schools and defence investment against the fiscal rules and there is no guarantee they would get the level of investment they need.

A non-profit cooperative would finance investment through debt and the use of surpluses. By putting an end to dividend extraction, this combination can cover the cost of the investment required. Existing mutuals demonstrate how that debt to support investment can easily be financed with the same, if not better, interest rates. Nationwide, Britain's biggest building society, carries stronger credit ratings than most shareholder-owned banks, and rating agencies have praised Welsh Water's mutual structure for over a decade, with the same or better credit ratings as the two largest publicly listed water companies while it invests record amounts over the next few years.

4. “Your dividend figures are misleading” 

Reality: The industry regulator, Ofwat, states that £53bn has already left this industry for shareholders since privatisation, on average £1.5bn a year since privatisation, while some independent estimates put this figure above £80bn in real terms. Mutualisation removes the shareholder entirely.

5. “Co-operatives don’t have a good track record” 

Reality: Mutualised companies have a long-standing record in the sectors they serve. Building societies like Nationwide, retailers like the John Lewis Partnership, and multi-sector companies like the Co-op Group have all outlasted plenty of shareholder-owned rivals that collapsed, got bailed out, or got sold out from under their customers. These companies proudly care about their customers and workers and have been cornerstones of the high street. The real track record of cooperative ownership in Britain is decades of stability that the water industry, under shareholders, has simply failed to match.

6. “Mutualisation won’t fix bills - they might even go up”

Reality: Nobody is promising bills will fall in the near term under any model. But under the current model they are projected to rise to £2,000 a year to finance the investment needed to fix the neglected capital. However, right now, rising bills aren’t used entirely for investment, but are instead diverted to shareholders through dividends. In the years since becoming a not-for-profit mutual, Welsh Water has brought its debt levels down significantly while also reducing bills in real terms between 2000 and 2020.

Under a mutual, dividend extraction ends, and could lower the cost of debt given ratings agencies have historically viewed mutuals favourably. Our modelling shows billpayers could save between £182 and £329 by 2050 compared with staying on the current privatised path.

7. “Welsh Water isn’t working - why would this?”

Reality: Our not-for-profit cooperative model goes further than Welsh Water ever has: every customer becomes a member with a vote, devolved bodies and unions get seats at the table, and a member council holds the board to account delivering local accountability, public control and a stronger regulatory framework.

Welsh Water clearly needs to improve on several performance metrics and a stronger regulator and regulation is needed to deliver that. But that alone is not a reason to throw the baby out with the bathwater. 

A not-for-profit mutual strikes shareholder payouts out of the equation meaning the focus is on customers and investment. Welsh Water hasn't paid dividends in over twenty years, and it was the only company to reduce prices in real terms between 2000 and 2020, while its privatised rivals raised prices and paid out tens of billions in dividends. 

Of course, there may have been a better balance for Welsh Water to have taken historically between investment and customer bills that may have resulted in better outcomes, while still keeping prices lower than its rivals and the regulator should learn from this.

8. “Mutuals struggle to access funding at reasonable cost and Welsh Water has a high cost of finance”

Reality: Mutuals raise funds through retained revenues and through borrowing. Existing mutuals across the economy can easily access finance on the bond markets and credit ratings agencies look favourably upon them, noting their good governance and ability to retain surpluses rather than distribute funds as dividends. That includes well known mutuals such as the John Lewis Partnership, Nationwide and the Co-Op - in addition to Welsh Water - who all have long track records of raising funds through bonds markets.

Welsh Water has a comparable credit rating to the two publicly listed English water companies and it has reduced its regulatory gearing (levels of debt) from over 90% of its Regulatory Capital Value (RCV) to below 65%. 

While a 2025 University of Greenwich study indicated Welsh Water has a high cost of finance compared to others, this only compares the 2022/23 accounts where Welsh Water faced higher than usual finance costs due to its use of inflation linked gilts which coincided with a period of high inflation. That interest cost has historically and more recently been much lower. The same study notes that the requirement to pay dividends is a big part of the cost of finance for other companies and our proposal removes that cost.

9. “You need a regulator to ensure good behaviour”

Reality: The current regulatory model has failed. Bosses side-step bonus restrictions, self-reporting of sewage spills turns out to be criminally incorrect, boards pay out dividends based on their own views of their performance, and customers' bills keep rising in the hope of future investment that underdelivers.

An underpowered regulator and a self-regulatory system has proven not to work and people have lost faith. Stronger regulation is needed but so is the democratic link and that is why ministers should be back in the driving seat of the powers that matter. Bringing that power into Defra, under ministers who answer to Parliament and voters, doesn't weaken oversight; it strengthens it. The people who set the rules finally have to face the public if they get it wrong.

10. “Are there any international examples where this model has been used?”

Reality: Cooperative models are used in utilities across a range of countries, including Germany, Denmark and the United States. Denmark and Germany have had a significant uptake of cooperatives in clean power generation in wind and solar.

America's 830 energy distribution and 64 energy generation and transmission cooperatives are the clearest working example of the mutual model operating at a utility scale, serving 42 million people across 48 states and returning over $1 billion annually to their member-owners, rather than to external shareholders.

On consumer satisfaction, ACSI data consistently shows cooperatives as the top-scoring segment in the energy sector. According to the 2024 J.D. Power Electric Utility Residential Customer Satisfaction Study, co-ops took all top 10 spots with the highest average score of any ownership model. The electric cooperatives also performed strongly on financial health. Fitch affirmed Cooperative Energy's Long-Term Issuer Default Rating at 'A' in June 2025, citing very strong revenue defensibility, a strong operating risk profile from its low-cost, diversified generation mix and stable financials.

Together, these show the mutual model can deliver both higher consumer satisfaction and investment-grade market access, without government backing.

Myths about Delivery and Transition

11. “How does this not cost the taxpayer money?”

Reality: Regardless which route is taken to mutualise water companies in our model, taxpayers don’t foot the bill because the mutual is a separate, self-financing entity from day one; it borrows from the markets rather than being funded directly by taxpayers, both during the transition and afterwards. 

Under the current SAR process, taxpayer cost comes from the court taking months or years to decide a failing company's fate, during which the government covers its operational and investment costs. Our model removes that window entirely: the company transitions to a mutual very quickly via a bail-in mechanism to ensure debt is put on a sustainable footing and the mutual acquires the assets, where necessary through market borrowing or an equity-to-debt conversion, so the state never funds ongoing costs and the debts never touch the government balance sheet.

12. £100bn RCV valuation and the “cost of change”

Reality: We have demonstrated that the RCV numbers are not reflective of the real value of the companies. Even Defra's own paper concedes the number could be wide of the mark: it calls its estimate ‘illustrative’ and admits the true value ‘could indeed be higher or lower’.

Defra's own methodology also shows that a listed company's real, market-tested value can diverge sharply from the RCV, its paper points to enterprise value averaging close to RCV across three decades of a healthy sector. But today, on that same market test, our figures show quoted water companies trading 30-65% below RCV, and Thames Water's own rescue talks implied a price of under £8bn against an RCV of £22.7bn. That gap is the market pricing in thirty years of underinvestment and debt.

We use RCV-minus-debt as a proxy for the book value of the company as a commonly used and trusted way to estimate what a company is really worth, and by that measure, every major water company is worth a fraction of its RCV. 

These metrics provide a clear range of valuations which is significantly below the RCV.

13. “New legislation will scare the markets”

Reality: Markets are already marking this industry down; ratings agencies are downgrading water companies, investors are writing off their investments and market valuations are below RCV.

Our proposal provides certainty about where the bar for SAR is - where there is significant current uncertainty - and provides investors with an alternative and fair way out, so long as their companies keep up performance standards.