New research by Corporate Watch in collaboration with We Own It has found that households across the UK could save £250 each on their electricity, gas and water bills and train fares if the services were publicly financed - with investor payouts costing the UK water sector £2 billion per year.

Private electricity, gas, water and rail companies pay out £12bn a year to investors and shareholders in interest and dividends.

The research suggests that in total, cheaper government borrowing rates could save the UK public £6.5bn: £4.2bn on energy, £2bn on water and £352m on rail.

Corporate Watch says a range of issues across the utilities sector have resulted in recent polls which show the majority of people in the UK support bringing energy, rail and water services into public ownership.

In response to the question whether the UK could afford to run vital utilities publicly, Corporate Watch said that both government and the companies that currently run the services give two major reasons why privatisation is better: it brings more investment and makes the services more efficient.

The argument behind the increased investment claim is that the companies that run privatised services can attract the money of investors from around the world – which they can use to maintain and improve those services. However, Corporate Watch said that in order to satisfy investor expectations, the bills and fares charged by the privatised companies continually outstrip inflation.

Between 2007 and 2013, household gas and electricity bills rose in real terms by 41% and 20% respectively. In real terms, water bills have increased by 50% since privatisation, while rail fares are 23% higher than they were in 1995.

By analysing the accounts of all of the UK's private water and rail companies, the electric and gas transmission and distribution companies and the 'Big Six' energy generation and supply companies, Corporate Watch has found that together they paid out more than £12.7bn to shareholders and lenders in dividends and interest in 2013. Similar amounts were paid out in previous years.

If the utilities were returned to public ownership, Corporate Watch argues that if the resulting savings were passed onto households, bills would be hundreds of pounds lower - with current interest rates on long term government gilts, £6.5bn would be saved if the supplies were publicly financed. Divided by the 26.4m households in the UK, this would mean an average saving of £248 per household.

Water customers would benefit from £2 billion saving

The water sector analysis shows that total interest and dividends paid out by water companies in 2013 was £3.8 billion. In comparison, total interest government would pay on newly-issued 30 year gilts of the same amount as in debt and equity currently held by companies is £1.8bn – i.e. a £2 billion saving which could be passed on to consumers.

Against the classic argument for privatisation that competition between a range of providers for customers forces them all to provide a better – and better value – service, Corporate Watch says water supplies, together with many of the railway routes and the electricity and gas transmission and distribution networks are 'natural monopolies'. The study makes the key point that just one company operates these services in a particular region, without competition, concluding:

“Overall, there is scant evidence that privatised services are more efficient. A 2014 report by the Public Services International Research Unit reviewed a range of studies from a number of countries looking at public and private sector efficiency in sectors including electricity, rail and water, and concluded:

“The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient.”

Growing worldwide trend to renationlize water services

Corporate Watch said there is also a growing trend across the world – from Paris to Argentina- to bring previously-privatised water services under the control of local municipal authorities (so-called 'remunicipalisation'). According to a recent book on the subject by Corporate Europe Observatory, Transnational Institute and the Municipal Services Project: “water services can be transferred from private to public ownership and management with little disruption of service and with extremely positive results.”

Concluding that the economic argument against privatisation is clear -  it costs - Corporate Watch contacted the Department for Energy and Climate Change, the Department for Transport, and the regulators Ofgem, Ofwat and the Office of Rail Regulation to comment on why in that case are we still paying for it.

A spokesperson for Ofgem said they have referred the market to the Competition Markets Authority for a full investigation as they found that competition is not working as well as it should.

An Ofwat spokesperson said:

“More than £120 billion has been invested since privatisation without a penny paid from the public purse. This is double the rate of investment pre-privatisation, with the benefits to customers including significant improvements in service and to the environment. How the sector is set up and run is a decision for government.”

“Our role is to make sure customers get a fair deal. Companies are monopolies providing an essential public service, so customer trust and confidence is vital. Building that trust is not just about what companies deliver, but also how they deliver it. That means providing the services customers want at a fair price, while also listening to their customers and acting in a fair, clear and open way.”

“If they can’t do that, we will step in to protect customers. And over the next five years, only companies who perform well and stretch themselves will earn fair returns. Those who don’t, will find it tough going.”

The Department for Energy and Climate Change did not respond. The Office for Rail Regulation directed Corporate Watch to the Department for Transport for comment, who also did not respond.

Click here to access the study online.