The GMB's campaign to re-nationalise the water companies

Into our mailbox drops an insistence from the GMB that the water companies should be re-nationalised. The argument is - and this is all that's there too - that the capitalists are making lots and they shouldn't. This is to entirely ignore the point of prices of course, they're information to us, hugely valuable information: 

Dividends worth £1.4 billion were paid out in 2017 alone, GMB Union figures show

An investigation by GMB, the water union, has revealed the nine privatised water company shareholders have made more than £6.5 billion in just five years.

England’s privatised water companies showered their shareholders with a total of £1.4 billion in 2017 alone. [See note 1 for breakdown by Water Company and year]

The figures come from a joint investigation into the accounts by GMB and Corporate Watch [2] as part of GMB’s Take Back the Tap Campaign to bring England’s privatised water industry back into public ownership.

£1.4 billion isn't a lot here. The equity capital (no, not the regulated capital base, that includes that financed by debt) appears to be of the order of £20 billion. Average return on capital appears to be some 12 to 14%, depends upon the year. That's for non-financial companies as a whole across the economy. GMB and others tell us that the water companies are paying out near all of their profits as dividends, thus that return to shareholders is about the same as the return on capital.

As simple maths tells us, the water companies seem to be making about half the return on capital employed of the economy as a whole. Given their safe-ish status as utilities perhaps that's appropriate.

Which brings us to our point about prices. There should be a price paid for the use of capital. Doesn't matter whether it's the state allocating it or the market. We still need that information from prices to know that we're allocating it where it does the most good. No, we can't go and insist that the state can, through superior knowledge, allocate capital without prices. For that's the reason we privatised the water companies in the first place, the state wasn't allocating enough capital. For decades the UK government invested too little in that infrastructure - given political pressures to spend elsewhere - which is why there was a massive bolus of capital spending immediately following privatisation.

Re-nationalisation would change who received the dividends, certainly. For the simple reason that it would change who provides the capital itself. But it won't change that a return would be made, must be made, upon that capital, thus it's not going to change consumer prices by eliminating either profit or dividends. All this quite apart from the point that taxpayers investing in water companies would appear to bring them half the return they'd get from investing in the economy more generally. A most attractive deal we must all agree.

Oh, and why is the GMB campaigning on this issue? Because they think that re-nationalisation would mean better employment terms for more members of the GMB, obviously. And that's going to increase the return to taxpayers, lower prices to consumers, isn't it?