- 12:48 pm
- Before I begin, let me say that this is a solemn day, as we remember our dear friend and colleague Jo Cox—I got to know her when we were living in Brussels in our 20s. I pay tribute to her formidable sister and their family for all their vital work to honour her memory.I will make a statement regarding the position of Thames Water and the proposed recapitalisation package under consideration. This Government were elected with a clear mandate to clean up our rivers, lakes and seas, having inherited record levels of pollution incidents from water companies. Thames Water has underperformed for 15 years. It has regularly missed performance targets, it has unacceptable levels of serious pollution incidents, and the company is heavily indebted. This situation, which delivers poor outcomes for consumers and the environment, cannot continue.To fix this, over the course of the past two years, the company has been undertaking a recapitalisation process to seek vital long-term funding. The Government have been clear throughout that any investor will need to have a credible and robust turnaround plan, the implementation of which must be monitored by regulators and must restore the company’s financial resilience and operational performance. Ofwat, with the support of Government, have been in discussions with the London and Valley Water consortium—a group of Thames Water’s creditors—regarding the terms of a proposal. On 6 March, the consortium presented its proposal for Thames Water to both Ofwat and the Government. Ofwat has been continuing its discussions with the consortium since then, and I wanted to update the House on the next stage of the process.Ofwat is currently evaluating the consortium’s proposal and, as the independent regulator, is responsible for deciding whether to accept it. If Ofwat decides to accept the proposal, this would be subject to a public consultation and a court-sanctioned restructuring process. A recapitalisation process of this size is complex and will take time. As the Environment Secretary, I have several duties, set out in section 2 of the Water Industry Act 1991. These include protecting consumers, securing the proper delivery of water and sewerage services, and ensuring that companies can finance those services and that statutory obligations are properly carried out. Today, I can confirm that I have sent a letter to Iain Coucher, Ofwat’s chair, outlining my early views on the proposal linked to my section 2 duties. These should not be taken as, nor do they constitute, a direction from Government to Ofwat.I do not believe that the current proposal goes far enough to protect customers and the environment. I have three particular concerns about the proposal: the unfair cost to customers, delays to vital infrastructure investments, and delays to environmental improvements. The 16 million Thames Water customers are front and centre of my consideration, and I am primarily worried about the impact on them. There is an expectation in the proposal that customers will fund—and therefore bear an undue cost for—investment in the company.
- I thank the Secretary of State for coming to the House at the earliest opportunity to update Members before making announcements elsewhere. She is a shining example to her Cabinet colleagues of how this House should be treated.I call the shadow Secretary of State.
- 12:54 pm
- First, I echo the Secretary of State’s comments in remembrance of her dear colleague Jo Cox. Her loss was felt across the House and across party political lines, and I send all of our very best wishes to her loved ones and friends.I thank you, Mr Speaker, and I thank the Secretary of State for advance sight of her statement and for a briefing call on this announcement. As you know, I have been trying for months to coax the Secretary of State to the Dispatch Box to explain major events within her portfolio, from the Government’s EU handover negotiations to their lack of support for farmers. Finally, she emerges into the light. We all assumed that it would be to announce progress towards resolving the many issues facing Thames Water and its customers; instead, it is to make a statement about a letter to the regulator. There is nothing new in this statement—no change in the situation of Thames Water, and still no certainty for billpayers.Thames Water has repeatedly failed its customers and the environment with a record of pollution, leakage and chronic under-investment. The latest figures lay this bare. The company is responsible for around a third of the nation’s worst pollution incidents, even as billpayers face steep increases in their bills. These are not abstract failures; untreated sewage has been poured into the rivers and chalk streams that local communities cherish, while customers are asked to pay more for less. The priority now must be a financial arrangement that keeps the company afloat and protects billpayers and taxpayers. While the Secretary of State’s Government are in chaos, paralysed by the Prime Minister’s weakness and the Mayor of Greater Manchester’s leadership ambitions, Thames Water continues to fail. If no deal is reached, Thames Water could collapse—again, at enormous cost to taxpayers.
- I am always happy to receive brownie points, Mr Speaker, so thank you for what you said.The shadow Secretary of State rightly says that untreated sewage has poured into our waterways, and it did, in the long years that her party was in government. They cut the Environment Agency’s enforcement budget and moved to an approach where water companies marked their own homework—the so-called self-monitoring approach. She has some brass neck in lecturing us when we saw a series of failures under her Government.We are here today, and we as a Government inherited record levels of pollution in our waterways, because of the failure by the Government of the right hon. Lady to see what was happening before their eyes. It was a failure of regulation, a failure of the regulators and a failure of the previous Government.I am proud of what we have achieved in the two short years that we have been in power. I am proud of the Water (Special Measures) Act 2025. When did the Conservatives ever cap polluting water bosses’ bonuses? Never. The right hon. Lady lectures me about amendments to our Act. Our Act did more in less than a year than her party did in 14 years to ensure a fairer deal for customers and a better deal for the environment.The right hon. Lady asks about nationalisation. I gently say that a special administration regime is not the same as nationalisation. [Interruption.] I am just clarifying for the House; I do not wish to have an exchange with her across the ballot box—sorry, the Dispatch Box—if I can possibly help it. The ballot box might be at some other point. There is a difference between nationalisation and a special administration regime. With nationalisation, the Government would be taking ownership of the company. With a special administration regime, the Government would finance a special administrator appointed by the courts to run the company.
- Order. Can I just say to the shadow Secretary of State that I want to hear the Secretary of State? We do not need a running commentary all the way through. I made sure that those on the Government Front Bench listened to her.
- I am not surprised that there are not many Opposition Back Benchers here, given the Conservatives’ terrible record on the water industry. In our clean water Bill, which we will introduce later in the Session, we will take forward a desperately needed, once-in-a-generation reform of the water sector to introduce a powerful single regulator that holds water companies to account.
- I call the Chair of the Environmental Audit Committee.
- Thames Water customers are paying the price for the incompetent regulation that allowed Macquarie to saddle the company with eye-watering debts at the same time as its environmental performance was so disgraceful. That debt ultimately led to shareholders writing the equity value down to zero. Those who bought the debt are now making this proposal. I entirely understand why the Secretary of State would not want customers to receive a service that was failing in its environmental responsibilities while they paid higher bills, but what assessment has she made as to whether Thames Water is a viable business? We have been told that this is the final offer from the company. Is there a viable business there that will deliver long-term investment within a reasonable cost window for billpayers? If there is not, at what point does public administration become inevitable?
- As I set out in my letter to the regulator, Ofwat, I am concerned that the proposal will mean delays to environmental improvements and to improvements to water infrastructure, with, as my hon. Friend rightly says, unfair cost being laid at the door of Thames Water customers. He asks whether it is a viable business and about next steps. This is a stage in the process where I have given my early views on this proposal. It is now for Ofwat to decide what to do next, and we wait to see what happens.
- I call the Liberal Democrat spokesperson.
- I start by associating myself closely with the Secretary of State’s remarks about Jo Cox. It was a privilege to serve alongside her in this place, and we still miss her deeply.I am grateful to the Secretary of State for advance sight of the statement and for the helpful briefing that I received earlier. Since Conservative privatisation more than 35 years ago, some £85 billion of billpayers’ money has flowed out like a torrent into the pockets of mostly overseas shareholders and executives paying themselves unearned bonuses. That money could and should have gone into cleaning up our waterways and modernising infrastructure. Instead, sewage was released into our lakes, rivers and seas for 1.8 million hours last year, and more than 100,000 of those were in the Thames region alone. Some 20% of our water leaks out of its pipes before it even reaches our homes. For Thames Water, the figure is even worse, with 25% of that water wasted.Now Thames Water’s investors are asking for more time for more opportunity to take money before they inevitably run. The Secretary of State is right, then, that the creditors’ offer is a disgrace. They get to keep making money, and Thames Water billpayers get to pay even more to keep them going, while getting the privilege of seeing long-overdue infrastructure improvements delayed for yet another decade. Thames Water is taking the mickey. The Liberal Democrats say, “No more, and no thanks.”
- I thank the hon. Gentleman, I think, for his support for my statement today, although it was slightly half-hearted. He is right to say that there have been serious pollution incidents in different water companies, but especially in the Thames, and that is of grave concern to the public and to Thames Water’s customers in particular. I point out to him that there are two types of special administration regime. An insolvency SAR is an insolvency process and is for the company directors to determine. A performance SAR would be triggered if a company was in serious breach of its statutory duties or if the company breaches an enforcement order in a way that is so serious that it is inappropriate for the company to retain its licence. The Government stand ready for all eventualities, including a SAR.
- Will the Secretary of State confirm that, in the event of a special administration regime, any compensation would be based on appropriate value as set out in the case of Lithgow v. the UK, not on regulated capital value, as suggested by the shadow Secretary of State. For Thames Water, appropriate value would take account of the £23 billion in infrastructure repairs needed to meet condition P of its licence and comply with its statutory obligation, as well as the £13 billion of dividend and debt interest already paid to creditors. Appropriate value would therefore be nil. The Secretary of State said that Ofwat is responsible for taking the decision to modify the licence. I urge her to read section 12A(7) of the Water Industry Act 1991, because she has the power to overrule.
- I think there were a number of questions there. As I have said, there is obviously a difference between a special administration regime and nationalisation. My hon. Friend refers to regulatory capital value, and he is right to suggest that the price of any company is a complicated matter, but in the event of a special administration regime, the state would seek to recoup the investment it had made upon SAR exit. Nationalisation would be a different matter.
- What assurances can the Government give my constituents across Bexley that the £88 million of investment that is under way in our community to secure our fresh drinking water supply for the next 50 years is not derailed by this Government announcement, which means further uncertainty for Thames Water and its customers?
- I think it is right that both the regulator and the Government hold Thames Water to account, and I find the hon. Gentleman’s question slightly bizarre. I can reassure his constituents, and other customers of Thames Water, that the Government will always ensure continuity of service, but I make no apology for ensuring that customers are at the front and centre of my consideration of this proposal.