The controversy surrounding the nationalisation of water bubbles on. The Department for Environment, Food and Rural Affairs (Defra) estimates that taking the industry into public ownership would cost around £100 billion. Opponents argue the state cannot afford this without raising taxes or cutting funding to the NHS and education. By contrast, campaigners argue the £100bn estimate uses outdated market values which ignore the fact that many companies are heavily indebted, meaning that their actual acquisition cost should be significantly lower.
But there is a larger issue that is constantly overlooked: the UK government is the monopoly supplier of its own currency, pounds sterling. It can always find the money if the political will is there, and the scare tactics surrounding fiscal rules, ‘fiscal black holes’, along with the false claim that ‘government budgets operate like household budgets’ needs to be confronted head on.
The UK government is the currency issuer
The UK government is the currency issuer, we – that is households and businesses are currency users. There is a world of difference.
Anyone who doubts this needs to look at what happened during covid. Faced with a pandemic that threatened to crash the economy, the NHS and inflict significant loss of life, the government ‘found’ roughly £400 billion in a matter of weeks to fund the furlough scheme, vaccine procurement, business loans and NHS expansion.
Where did the money come from?
The government went through the motions of ‘borrowing’ the money from the money markets through the sale of government bonds or gilts (IOU’s) in large volumes. At the same time, the Bank of England, a state institution ultimately accountable to Parliament, electronically created new money – that’s what money is now, it is digits on a screen when you open your banking app – and used it to buy back government debt equal to the amount being sold. Basically, one arm of the state (HM Treasury) sold government bonds (IOU’s) to the private sector while another arm of the state (Bank of England) bought it back.
Moreover the Bank of England made clear at the time that if the government was unable to raise money needed from financial markets, it would directly finance government borrowing on a temporary basis, something it did before during the Great Financial Crisis.
This convoluted process served as a fig leaf for the pretence that the government can only fund public services by either taxing or borrowing. The Covid pandemic exposed that myth.
But why do this? If the government has immense financial resources at its disposal, why does it pretend to borrow from the money markets or claim that it is dependent on tax revenue when it could fund public services and implement public ownership of water in the blink of an eye?
The answer is that all the main parties – including Reform UK – are wedded to the neoliberal dogma that has underpinned economic policy for the past fifty years. its basic premise is this:
“It is a political project that says the market knows best and that government is the problem, not the solution. It gives primacy to the market and seeks to destroy all social and political impediments to its rule, breaking the trade unions, and removing the market from democratic government.”
So when you take on the water companies you are not just taking on a collection of corrupt, profiteering businesses, you are taking on a whole system which rests on the false claim of ‘scarce government money’ and government as a problem rather than part of the solution. You cannot challenge one without the other.
In reality – a reality that has existed since we came off the gold standard – the UK government is a currency issuer that creates pounds when it spends, not a currency user that must ‘find the money’ first. When the Treasury buys water infrastructure, it simply credits bank accounts with new pounds — no need to drain money from the NHS or education budgets.
The real constraints
The real constraint isn’t the £100 billion price tag but the actual resources available – whether we have enough workers, materials, and equipment to deliver publicly owned cheap, safe drinking water without causing inflation. In short, you cannot simply throw money at the problem, you have to carefully assess the availability of dormant resources – unemployed engineers and idle construction capacity. The real budget is a resource budget, not a finance budget. If the resources are there – and this includes the engineers and other technical staff already employed by water companies – then the money can mobilise those resources without causing inflation.
The operational reality is that a government with its own sovereign currency such as the UK, spends money into existence, taxes destroy it, and the national debt represents our collective savings in pounds — it is just that those savings are disproportionately owned by the rich. Japan has run deficits for decades while maintaining both excellent public services and price stability, because they understand this monetary sovereignty – the same monetary sovereignty that we have if we choose to use it.
We desperately need an open adult public conversation about public finances. Until then governments will continue to count on public ignorance to run rings round us and scare us into silence. If you are interested in such a conversation then get back to me.
The New Kows 
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