Water firm shareholders should get no dividends for two years, with the industry forced to tackle leakage, campaigners say.
The radical plan could help cut the 3,183 million litres lost per day, claims Co-operative Party chairman Gareth Thomas.
It follows an Environment Agency warning that customers face the “jaws of death” as England will have too little water for its needs within 25 years.
At least £48million has been paid to shareholders in the 30 years since the industry was privatised.
Mr Thomas, a Labour and Co-operative MP, said: “That money should have been re-invested. The notion that privatisation has increased investment has proven to be a fallacy.”
Labour’s plan to renationalise the water industry could cost the government as little as £14.5bn, according to calculations for the Financial Times by Moody’s, the rating agency,- much less than previously suggested.
Mr Thomas, who is a Labour and Co-op MP, said: “We are steadily approaching a crisis in England’s water industry.
“Since 2015 alone almost £6 billion has been extracted from Water customers to fund dividend payments. “That money should have been re-invested to prevent the “Jaws of Death” scenario described by the Environment agency.
“Ofwat should suspend dividend payments for the next two years so that water companies are forced to tackle their leakage crisis.
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“The notion that privatisation has increased investment has proven to be a fallacy with annual investment in water supply infrastructure lower in 2018 than in 1990.”
The total amount lost through England’s pipes since 2010 is over 7.5 trillion litres, the equivalent to the total volume of Loch Ness.
Thames water alone is currently losing more than 20% of all its water through leakage.
Ofwat, who are currently negotiating with water companies over their plans for the next 3 years, has set a reduction target for water companies at 15% by 2025.
But the target has received widespread criticism for not being ambitious enough. Indeed, the Environment Select Committee suggested that a long-term target of reducing leakage by 50% by 2040 rather than 2050.
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Mr Thomas, who believes England’s Water companies to be democratically owned by their employees and customers using a model similar to Welsh Water, argues that Ofwat needs to prioritise the needs of customers rather than the desires of shareholders.
He said: “It is high time Ofwat forced English water companies to listen to their customers and use the profits they make to fix our broken water infrastructure instead of lining the pockets of wealthy, often distant, shareholders.”
