Future of Thames Water
(2 days, 18 hours ago)
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Layla Moran (Oxford West and Abingdon) (LD)
I beg to move,
That this House has considered the future of Thames Water.
It is a pleasure to serve under your chairpersonship, Mrs Harris, and I thank the Minister for attending this debate to listen to my constituents’ concerns. What better way to start the year than to debate the future of Thames Water? But—let me be frank—I do not believe this company has a future. If Thames Water had been genuinely subject to market forces over the years, it would have collapsed many, many decades ago, but instead, a broken regulatory system and chronic mismanagement have repeatedly let businesses and customers down.
Consider this: last year, Robert, aged 81, from Abingdon, received a water bill for—wait for it—£39,000. Thames Water later revised it to £37,688.64. He and his partner Patricia said, quite understandably, that they had become ill from stress because of the bill. It took two months, an intervention and a BBC story to cancel the absurd charge. That case epitomises the incompetence and disregard for customers that has eroded public trust in this company.
Another example is 70-year-old Morna from Botley, who suffered repeated floods in her house due to a blocked Thames Water drain. I visited and saw for myself the strain it took for her to fight for over a year with Thames Water for it finally to unblock it. The delays and inaction are just unacceptable.
I have one last example: Len and Jenny are in their 80s and in frail health, and they lost basic sanitation to their home in 2023. A blocked pipe caused sewage to enter through air bricks and they were left with no toilet, no washing facilities and no power. All they had was a portaloo in their garden and a tanker to pump out sewage. Foul waste continued to bubble up through the basin in their bathroom. We are now in 2026, and Jenny and Len still do not have the recommended non-return valve, a firm date for the maintenance or compensation. If Thames Water cannot even do those basics, what can it do?
Jim Shannon (Strangford) (DUP)
I thank the hon. Lady for bringing this debate to Westminster Hall. Thames Water is £20 billion in debt, and it needs £20 billion to service the investment that is necessary. The chief executive has had substantial payouts and dividends. Is it not time for the Government to intervene, take over and get the job right?
Layla Moran
Thames Water’s repeated mismanagement is why the Liberal Democrats have long called for all of the water company bosses not to receive that level of payout. We will continue to campaign in that vein.
Locally, we have been campaigning on the issue for many years. Along with Safer Waters, Thames21 and local activists, we secured bathing water status for Port Meadow in Oxford, only the second inland site in the country. That has forced Thames Water to monitor and report on water quality there, but for the last three years, that rating has been “poor”. Residents in Oxford, like others across the country, continue to risk their health every time they swim.
One would think that poor quality would logically lead to action, but it seems not to have done. In a debate just two years ago, I called for legally binding targets on sewage pollution, so I was pleased when the Government promised last July to halve sewage pollution by 2030. Today, I urge the Minister and the Government to move faster and to take all legal and financial steps necessary to make that change happen, because, as we have heard, Thames Water customers experience poor service, flooding, sewage in their homes and sewage in their rivers, and for this, they are being asked to pay more—indeed, 31% more in 2025-26 than the year before.
Sarah Olney (Richmond Park) (LD)
My hon. Friend is giving an excellent speech on a topic that is very close to every Liberal Democrat heart. Thames Water is in £17 billion of debt, yet the company continues to progress with the Teddington direct river abstraction in my constituency, with a plant that would be operational for just six weeks a year at a cost of £1 billion. The project is strongly opposed locally on environmental, social and economic grounds. Does my hon. Friend agree that Thames Water should scrap the project and use that money to cut bills?
Layla Moran
I do not trust Thames Water to do anything, and I will come on to an example of an even bigger and even worse project. We want investment and change, but the problem we have is that there is no longer any trust that this company can do that on time and on budget, and in a way that is actually going to deliver real change. That is why 2,507 local residents across Oxfordshire backed a Lib Dem petition calling for these price hikes to be scrapped. If this were a proper private company, it would not be asking customers to pay more for this level of service, yet that is exactly what it has done, and it has frankly given them no say in the process.
While I am lambasting this company today, I am not having a go at its hard-working staff. We need to be clear that they are not to blame for the current woes and dismal performance. In July, I visited Abingdon sewage treatment works, and friendly and knowledgeable people who had worked there for decades told me how the system is supposed to work: tanks remove the sludge, microbes digest bacteria and clean water is discharged. It was so clean that I could have drunk from it there and then—in fact, a heron strutted around the wetland ponds showing exactly what would have been possible. Sadly, that summer idyll is all too frequently shattered when the rain falls, the floodgates open and raw sewage pours out.
At this point, I should acknowledge the role that we and the public can play in helping to reduce pressure on the system. We have seen with our own eyes those mountains of wet wipes being removed from the pipes, and that skip full of rubbish that should never have been flushed down the toilet in the first place. Do the Government have plans for a public information campaign on this matter—paid for, of course, by water company profits? If we saw as many adverts on this issue as we do on things such as fast food, it would help everyone in protecting our rivers.
However, I do not want to downplay the institutional failings that we see in the company. We need additional capital investment; in Abingdon specifically, the staff were asking for another set of tanks to filter and clean the sewage to help that problem there, but it is the same everywhere. Last year, Thames Water admitted that £19 billion of its assets were deemed “poor” or “failed”, posing a risk to thousands of homes.
Freddie van Mierlo (Henley and Thame) (LD)
My hon. Friend speaks of the under-investment in sewage treatment works and other assets. Nowhere is that truer than in Oxford sewage treatment works, which serves residents in my constituency outside of Oxford city. The site already cannot cope with the amount of sewage that it has to deal with. Does my hon. Friend also find it strange that the Environment Agency suddenly dropped its objections to developments, days after receiving a letter from lobbying interests around Oxford? Does she share my scepticism that Thames Water can deliver on the upgrades before the homes are built?
Layla Moran
My scepticism about Thames Water is basically the theme of my entire speech, and I completely agree. We absolutely need more houses in and around Oxford—on that I am clear. However, if that work is one of the things stopping those homes from being built, we must of course ensure that it is done to the highest possible standard. It sounds like something has happened there, and I would love to understand better why the EA withdrew that objection with no further change.
More than half of sewage treatment facilities are operating below their required capacity, while raw sewage discharge doubled between 2023-24 and 2024-25. That is a symptom of chronic underinvestment, and we need serious capital to fix the problem. Instead, Thames Water chose to funnel profits into dividends. As recently as March 2024, the company paid £158.3 million out to shareholders. This is a company that is hanging on to a lifeline of creditor goodwill, having already raced through £1.5 billion of the emergency cash that was injected 11 months ago. The scale of the mismanagement is staggering.
No one doubts the need to take steps to secure our water supply for the future in the context of the climate change, but I now come to the local example that I promised my hon. Friend the Member for Richmond Park (Sarah Olney). Thames Water presides over leaks to the tune of over 592 million litres a day, which is nearly a quarter of all the water it manages—it is unbelievable. My residents have justified questions about the validity of the arguments underpinning the south-east strategic reservoir option, also known as SESRO, which lies just outside Abingdon. It is estimated to cost £7.5 billion and counting, and we should remember that it started at £2.2 billion, and barely nothing has changed since then. If such a major project must go ahead—the Government say it should, fine—then can the Minister tell me something that I just do not get? Do they really trust Thames Water to get this done right? It is like running a bath when a hole has been punched through the plughole. I would not trust Thames Water to run a bath, let alone deliver a project of this size.
Will the Government also make clear what residents can expect from this project, should it go ahead? Will there be genuine community benefit? As it stands, the company is promising lots of lovely things—sailing clubs and all sorts—but when questioned on the matter at a recent drop-in event, the promises seemed to be nothing more than an artist’s impression. Will the Minister therefore intervene to ensure that the local villages and towns that will have to suffer the disruption get something out of it, beyond higher bills?
Time and again, constituents are being let down by chronic under-investment. For decades, every Government of every colour have presided over some form of this mess. But I do not want to blame; I just want solutions. As a result, I have some questions. What are the Government doing to prepare for when Thames Water exhausts the £1.5 billion of emergency funding? Have they considered the Liberal Democrats’ plans to turn it into a public benefit company? That is not public ownership, which others call for. The taxpayer would not take on the debt, but the profits would be invested back into infrastructure and fixing the problem, not used to enrich the likes of Abu Dhabi Investment Authority and the China Investment Corporation.
Will the Government promise a full response to the Independent Water Commission report and the creation of the new regulator with teeth? When can we expect the White Paper? Will we all, together, make a new year’s resolution—that this is the year we sort out Thames Water’s mess, for the sake of people and our planet, once and for all?
Carolyn Harris (in the Chair)
I remind Members to bob if they wish to speak, so that we can ascertain whether we need a time limit. I will call the Front Benchers at 5.08 pm, with the Minister rising at 5.18 pm.
Daniel Francis (Bexleyheath and Crayford) (Lab)
It is a pleasure to serve under your chairship, Mrs Harris. I thank the hon. Member for Oxford West and Abingdon (Layla Moran) for securing the debate and for her comments. As she said, the issues have been caused by many years of under-investment. In my corner of south-east London, constituents in Bexleyheath and Crayford continue to experience many problems.
Of course, I support the measures in the Water (Special Measures) Act 2025, which this Government introduced following our election last year. However, as I have said on numerous occasions since my election 18 months ago, we continue to see the real impacts of a lack of investment in infrastructure over many years, particularly in Crayford town centre. We have now had four consecutive summers of major leaks in Crayford town centre. They have caused the closure of the road in the town centre for a week or two, impacting residents and businesses, and there is no real understanding of Thames Water’s long-term solution for these issues or how we will see investment in local infrastructure in the longer term.
As has been said, we have seen an enormous increase in bills this year. For many of my constituents, they have risen by 30% or 40%—my bill in fact went up by a higher percentage—but we continue to struggle to obtain information from Thames Water. I have told the company many times that, if we must have that level of increase, and we know the condition of the local infrastructure, it would be hugely helpful for me to be able to explain to my constituents why they are seeing that increase and to understand the programme of works for local infrastructure and where the money is being invested to put things right. It continues to prove very difficult to obtain that list.
I have supported the Government’s position, which is that they will continue to work to turn the company around in private ownership, but what will we do if the Government’s investment runs out? At what stage will we say to Thames Water that constituents cannot continue to see that level of increase and receive that lack of explanation on the local investment? At what stage will we say that enough is enough and we need to take a different direction?
Carolyn Harris (in the Chair)
I am imposing a three-minute time limit. Any interventions need to be short to allow all Members who are on the call list to speak.
Olly Glover (Didcot and Wantage) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. I commend my hon. Friend and constituency neighbour the Member for Oxford West and Abingdon (Layla Moran) for introducing the debate so eloquently. As she said, there is no question but that climate change and population growth are placing increasing strain on our water resources, and that we need the right infrastructure to accommodate a growing population. That is why, despite some aspects being controversial, I support new housing and road projects in my constituency.
Concern about some of Thames Water’s plans is widespread and impossible to ignore, because of Thames Water’s performance and track record. It is impossible to ignore the fact that Thames Water currently loses more than 600 million litres of water—nearly a quarter of the water in its network—to leaks every day. The ongoing failure to deal with those losses is one of the principal reasons why my constituents do not have faith in Thames Water’s enthusiasm for what it is now calling the White Horse reservoir.
Thames Water’s record of financial mismanagement and poor operational delivery is well documented and has badly eroded public trust. Against that background, it is extraordinary, but really ought not to surprise us, that the estimated cost of the proposed reservoir near Abingdon has risen from £2.2 billion to as much as £7.5 billion. That is no marginal increase: it is a threefold rise. At the same time, the size of the proposed reservoir has increased by 50% compared with what was once consulted on.
Despite the scale of the financial risk, it is bill payers—my constituents—not investors who are expected to foot the bill. This is not a fair allocation of risk, particularly when the company’s past decisions have contributed to its current financial fragility. We therefore urgently need an independent review and proper consideration of alternatives, such as the Severn-to-Thames transfer scheme, before irreversible commitments are made. Bill payers in Oxfordshire, and indeed across the region, deserve a proper solution that is effective, proportionate and fair. That means an urgent independent review of the south-east strategic reservoir option proposal, full transparency over costs, and serious consideration of alternatives, including leakage control, before any irreversible commitments are made.
Is the Minister really comfortable with the proposal landing on her desk in its current form, with such significant unanswered questions about cost, transparency and value for money? Is it right that bill payers will bear all the risk? It is interesting that Thames Water has decided to start calling it the White Horse reservoir, because there is a real risk that it will end up being the white elephant reservoir—and nobody wants that.
Richard Tice (Boston and Skegness) (Reform)
It is a pleasure to serve under your chairmanship, Mrs Harris. We have heard about Thames Water’s incompetent management of the physical pipes and networks. I want to touch on the mismanagement of its finances: the profit and loss and the balance sheet.
In 2007, Macquarie, a big private equity group, bought the company and loaded it up with so much debt that it could not cope. That is why we have ended up with the debt soaring from £6 billion to some £18 billion over the last 15 years or so, while the regulator was completely asleep at the wheel and allowed that to happen. The previous Conservative Government allowed it to happen.
We now have a situation in which the debt is trading on the markets at somewhere between 5p and 50p in the pound—in other words, the debt is not worth what the original holders provided. In Thames Water’s recent accounts there are four pages on whether or not the company is a going concern. That basically means it is not. It is effectively bust. As a genuine private company, it is not able to meet its financial or regulatory obligations. It is time to say that enough is enough.
In business there is an expression: caveat emptor. The private equity groups, the debt holders and the bond holders knew what they were doing. They were trying to make large private equity returns. That is fine—I believe in free markets—but when they mess it up, they have to pay the price. Now is the time to say to those investors that enough is enough.
The last thing we need is for the group to be bought by a substantial Chinese infrastructure group that is already the single biggest owner of all our utilities in the United Kingdom, and that takes over £1 billion in dividends and interest on shareholder loans every single year. No—now is the time for the Government to show some genuine courage and to say that enough is enough. It is time to buy it back for a pound, make the investment that is required, with competent people to stop the outrageous leaks and mismanagement of the physical assets. We will then have a worthwhile water company we can all be proud of.
Monica Harding (Esher and Walton) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. My constituency is a river community and has been badly affected by the failures of Thames Water, including sewage discharges into the River Thames and the River Mole. That goes to the heart of public trust in Thames Water, or the lack thereof, and exemplifies its failure, as well as the lack of regulation and accountability under the previous Government.
While my constituents bear a 31% increase in their bills, all that goes towards is servicing £17 billion of debt. Yet Walton Rowing Club and the 1st Molesey Sea Scouts found 5,000 colony-forming units of E. coli per 100 ml in Walton, and 12,000 per 100 ml in Thames Ditton. Anything above 900 is classified as unsafe. We need investment in infrastructure, but until the Government take Thames Water into special administration, that cannot happen.
I want to speak briefly about the lived experience of my constituents near Thames Water’s Lower Green sewage plant in Esher, which exemplifies its casual disregard for the public. For decades, residents have endured persistent and unpleasant odours from the site. One resident from Farm Road in Esher described being forced to keep windows shut and avoid outdoor spaces, and worrying about the long-term impacts on wellbeing, air quality and property values. Nobody was interested—not the previous MP, nor Thames Water.
Residents told me that for decades their only interaction was Thames Water vans being driven at speed through the housing estate that borders the treatment plant. Residents’ complaints over decades were met with delay, deflection or silence. That experience is symptomatic of a wider failure: a water company that too often acts only when sustained pressure is applied, and a political class that does not hold the operators to account.
Last year, I met Thames Water representatives directly at the site. Following that visit, the company identified the cause: septicity driven by faulty equipment, which allowed bacteria to build up and produce a foul smell. Repairs were eventually made and preventive measures were introduced. Spare parts have now been stockpiled so that if the fault recurs, it can be fixed immediately rather than after weeks of delay. That should have happened 30 years ago. Residents should not have to wait decades, or rely on “novel” political pressure, for basic maintenance to be carried out.
The issues do not stop there. There have been incidents of sewage appearing on the nearby children’s recreation ground due to hydraulic overload. Thames Water says that this has been driven by changing weather patterns and ageing infrastructure. Again, it needs investment. Investigations after the fact are not enough when people are living with the consequences. It shows a deeply troubling national picture. Thames Water has been rated as a one-star, poor-performing company by the Environment Agency, and this is a firm that serves 16 million people—nearly a quarter of the UK population.
Monica Harding
I have very little time.
Without structural reform, we will continue firefighting rather than fixing. So let us replace the regulator that has failed us, put Thames Water out of its misery and transform it into a public benefit company, putting people, nature and long-term resilience ahead of shareholder payouts.
Charlie Maynard (Witney) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. West Oxfordshire is very much ground zero for Thames Water. We have the Thames itself, the Evenlode and the Windrush. West Oxfordshire district council has done great work in going after Thames Water. We have WASP—Windrush Against Sewage Pollution—and we, as a team, have also gone after Thames Water through the High Court and the Court of Appeal, all the way up to the Supreme Court. I thank the legal team that fought pro bono with us last year on behalf of the 16 million Thames Water customers who are being royally stiffed.
As my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) mentioned, the bills people are paying are completely outrageous. I have had constituents whose bills have gone up by 50% and 70%. Somebody got a 93% increase through the post. It is outrageous.
Helen Maguire (Epsom and Ewell) (LD)
One of my local residents has had their bills doubled, and a mains water pipe in West Hill has burst, causing major chaos for my constituents. Yet £2.5 million was given out in executive bonuses last April. It is disgraceful that the Labour Government have left our constituents to foot the bill for Thames Water’s shoddy performance. Does my hon. Friend agree that we should put the company into special administration?
Charlie Maynard
I completely agree—well said. What is so depressing is that the Labour Government have embraced the Conservative’s mistakes over Thames Water, and our water sector more broadly, and then doubled down on them. The Government have been and continue to be hoodwinked by a bunch of hedge-funds whispering about financial Armageddon into ears of the Department for Environment Food and Rural Affairs and Ofwat. They need to follow through on their regulatory obligations, because we need regulators that have teeth and backbone and will actually deliver. Instead, we have hedge-funds making vast fees with outrageous interest expenses, at the cost of us as consumers. It is not fair. It is a great shame, and it is also unnecessary, because the company’s financial and environmental positions are completely unsustainable. With every day that passes, this becomes more Labour’s problem.
We now need to cut the rope and put the company into special administration, on account of its many breaches of its licence obligations, so that its debt can be written down to around three times cash flow and it can come out of the special administration regime mutually owned by 16 million customers, and run on behalf of them and the environment, and with Government-guaranteed funding mechanisms in place to fund the investment required over the next three, five and 15 years.
Will the Government please answer my letter to the Minister responsible for sewage and flooding, sent at the start of October? I asked whether the Minister believes that Thames Water’s ad hoc group of class A creditors now exerts material influence over it, thereby meeting the “ultimate controller” criteria. I would really like an answer on that. Last February, a High Court judge found that they have material influence over the company, and it would be great to have a straight answer from the Secretary of State or the Minister on that point.
I would not like the Government to give Thames Water, or any other water company, a free pass on paying environmental fines in full. When there are breaches, we need regulators that enforce the fines that are in place. Similarly, given the extreme precarity of the company’s finances, as my hon. Friends have mentioned, the Government should not entrust it with delivering a huge and costly infrastructure project in Oxfordshire in the form of the south-east strategic reservoir option, about which my hon. Friends the Members for Didcot and Wantage (Olly Glover) and for Oxford West and Abingdon spoke in detail. Given all our constituents’ low level of faith in Thames Water, the future of which is precarious, to put it extremely mildly, it is no wonder that this is causing such alarm to residents in my constituency and those of my hon. Friends.
Please do not be bamboozled by the hedge funds; instead, show some backbone—and do not own the Tories’ mistakes. That is the key thing, because this Government still have a chance to leave it with them. Please do so and put the company into a special administration regime.
Dr Roz Savage (South Cotswolds) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. I thank my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) for securing this very important debate.
Hindsight is a wonderful thing, and perhaps we can now see clearly that privatising water companies in a monopoly situation, with a toothless watchdog, was never going to be a good idea. Unfortunately, we do not have a time machine, but we can still put this right. For a long time now, the Lib Dems have been calling for Thames Water to be put into special administration and restructured as a public benefit company.
Through my mailbag and the flood summit I hosted last year, I have heard so many stories of sewage on farmland, in gardens, in people’s houses and on playgrounds. I do not want to go into specifics, because those homes and businesses have had their value and their business base affected by the awful pollution from Thames Water. It is adding insult to injury that many of those customers are now being asked to pay more and more, mostly to service Thames Water’s debt.
One of my constituents remarked:
“We are being treated as cash cows”.
It is just not fair. A Lib Dem freedom of information request found that Ofwat has failed to force water companies to pay any fines for sewage discharge cases since 2021. Meanwhile, water company bosses earned a collective total of over £20 million in the financial year to 2024. Some people might think MPs get paid too much, but the chief executive officer of Thames Water gets paid 10 times as much as we do as a base salary, with a bonus on top of that. That really is an insult to Thames Water’s customers.
Let us put Thames Water out of its misery and end the misery for its many customers. I beseech the Minister: please, take action on this. The best time to have seen what is going on would have been 40 years ago, but the second best time is now. We need urgent action.
Clive Jones (Wokingham) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. I thank my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) for securing this important debate.
Thames Water’s assets are in urgent need of repair, and the company is swamped in over £17 billion of debt, which it cannot repay. Thames Water customers, like my constituents in Wokingham, are suffering as a result, with a third of our bills servicing the company’s debt—debt that did not improve services, but largely went towards paying dividends. In return, Thames Water’s customers have to put up with a company pumping raw sewage into our waterways. In Wokingham that means Thames Water is actively harming waterways like our beautiful River Loddon, parts of which are important chalk streams.
I totally agree with my hon. Friend the Member for South Cotswolds (Dr Savage) that water companies should never have been privatised. Sadly, my predecessor in Wokingham was one of the architects of the privatisation of water. The Government must allow Thames Water to go into special administration to ensure that much of its debt can be written off rather than continuing to burden residents, and put the company on a stable financial footing, allowing it to update leaking pipes and reduce the huge amount of raw sewage that it pumps into our rivers. My residents in Wokingham and the environment just cannot afford for Thames Water to continue in its current state.
Freddie van Mierlo (Henley and Thame) (LD)
It is a pleasure to serve under your chairship, Mrs Harris. I thank my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) for securing this debate.
Every week my office is inundated with emails relating to Thames Water. Issues range from miscalculated and aggressive billing to the now ubiquitous sewage discharging into local rivers and streams, and indeed the flooding of homes and gardens with human waste. Members have spoken eloquently on those issues, so, in the interest of time, I will not repeat what they said.
Since being elected I have also been made aware of the issue of tankering in my constituency—in other words, tankers sitting next to overwhelmed pumping stations, ready to take sewage away to a treatment works. It should be a temporary stopgap, perhaps if there has been an unexpected surge in sewage, yet it has become institutionalised. Rather than upgrading pumping stations and stopping groundwater infiltration, which is the source of the problem, the company is taking the easy way out. In the village of Cuxham, my constituents have been forced to tolerate 24/7 tankering for over a decade. Staff have got so comfortable in Cuxham that they have created their own little camp, complete with a Portaloo for their own comfort. It is probably needed, but is nevertheless a sign of just how institutionalised the practice is.
Dr Al Pinkerton (Surrey Heath) (LD)
My hon. Friend describes the tankering of sewage from his constituency. In 2023, those tanks arrived in my constituency and the sewage was stored in open tanks on a Thames Water site for an entire summer, casting a stinky pall over the whole of Camberley town centre. It was an environmental crime and Thames Water promised to pay my constituents compensation, which they have never received. Does he agree that we need a far tougher regulator to bear down on these appalling environmental practices?
Freddie van Mierlo
I wholeheartedly agree that we need greater regulation. I can only apologise that my hon. Friend has been at the raw end of our tankers.
My staff and I have tried to influence the company to install the measures that are needed, particularly in Cuxham, to resolve the issue, but Thames Water tells us that further investigations are needed and it must do more reports. When we ask when they are going to take place, it tells us, “There’s too much water now because it is winter. We must do them in the summer.” When we get to summer, it tells us, “There’s no water in the pipes, so we’ll have to wait till winter.” It is a ridiculous case that highlights just how short-sighted Thames Water is and how incapable it is of taking a long-term view. It is clear that Thames Water is now in a state of complete, irrecoverable disrepair.
Can the Minister explain why decisive action has not been taken to put Thames Water into special administration? Our constituents have no choice over who supplies their water, and it is down to the Government to protect them from being exploited. I hope that the Minister listens to the experiences of constituents that have been shared today, gains the confidence that a 174-seat majority should give her and takes bold action.
Tim Farron (Westmorland and Lonsdale) (LD)
It is a pleasure to serve under your guidance this afternoon, Mrs Harris. I pay tribute to my hon. Friend the Member for Oxford West and Abingdon (Layla Moran) for securing the debate, for leading it so brilliantly and for standing up for her community so well for so many years.
I also pay tribute to those who have contributed to the debate from all sides, but I am bound to observe the concentration of Liberal Democrat Members present, which shows how well we as a group stand up for our communities—particularly those labouring under the yoke of Thames Water, which is, as has been demonstrated, a failing company, both financially and in its primary mission to serve its customers. But in truth, this debate is about more than one failing company; it is about whether a vital public service is to be run in the interests of customers, communities and the environment, or whether the public will once again be left to pick up the bill for corporate failure while the Government fail to grasp the opportunity to make lasting changes.
Thames Water provides an essential service that none of its 16 million customers—those it is meant to serve—can opt out of. It is staggering that a company so central to public health, environmental protection and the decent stewardship of such a vital resource now stands on the brink of collapse. Thames Water is currently operating with more than £17 billion in debt, which it admits that it cannot repay. Around one third of every customer’s bill on average goes not towards fixing leaks or upgrading infrastructure, but towards servicing that debt. Much of Thames Water’s borrowing has paid for undeserved bonuses and dividends, while its infrastructure literally crumbles. That happened under the nose of the previous Conservative Government and the pitifully weak regulatory system that they created.
At the same time, customers have faced bill increases of up to 40%—indeed more, it would appear, in some circumstances. And what have customers received in return? Polluted rivers, record sewage spills and chronic under-investment. The Government’s own data confirms that sewage was pumped into the waterways of this country for more than 3.6 million hours in 2024 alone, while shareholders received £1.2 billion in dividends as a reward for that failure.
Thames Water alone was responsible for 300,000 hours of raw sewage pouring into rivers and streams. In May, the company was fined £122.7 million for breaching rules on sewage spills and on shareholder payouts. But for customers and communities who have already paid the price, that fine came far too late. The company now survives only because of emergency funding from its creditors—funding that will soon run out. The US private equity giant KKR has walked away from plans to buy Thames Water, meaning that the company is surely at the end of the road.
The question is no longer whether the current model has failed—it plainly has—but who should bear the cost of that failure, and what should happen next. For Liberal Democrats, the answer is obvious: the Government must bite the bullet and make those who are culpable pay the price. A well-planned special administration would allow much of Thames Water’s unsustainable debt to be written off and put the company on a stable financial footing while protecting essential services.
Administration must be a means to an end, not the end itself. We want Thames Water to emerge as a fundamentally different organisation, mutually owned by its 16 million customers. That should be the beginning of a wider transformation of our water industry, which could then begin to migrate to a new, public benefit model of ownership where water quality, supply and competent administration come first, instead of the amoral profiteering we have seen across the sector for the last 35 years.
This crisis also exposes a wider failure of regulation. The Independent Water Commission, which reported last summer, laid bare a system that allows companies to pollute and profit with effective impunity. Liberal Democrats have been clear for years that Ofwat should be scrapped and replaced with a tough new clean water authority that brings together financial and environmental regulation. Our current regulators are too weak, understaffed and fragmented; these huge water companies run rings around them and play them off against one another. Bring the regulators together and give them more power; let us have a regulator that the water companies actually fear.
We want strict limits on dividends and bonuses, binding targets to end sewage discharges, consistent national social tariffs, and serious investment in smart metering and infrastructure. We have led the fight, both in Parliament and in our communities, against the sewage scandal. My hon. Friend the Member for Witney (Charlie Maynard) and I tabled 44 amendments to the Water (Special Measures) Bill earlier in this Parliament, and we look forward to doing the same with a new Bill, so when can we expect that new Bill? When will we get the water White Paper that we were promised before Christmas and are still waiting for? Will the Bill be in the King’s Speech?
I am not from the Thames Water region, but our communities in Westmorland stand in solidarity, sympathy and empathy with the customers of Thames Water. Water is deeply personal to us. We are the wettest place in England, which is fine because we have to keep all our lakes topped up—the lakes and rivers that define our landscape, provide water for our region and underpin our ecology.
Dr Neil Hudson (Epping Forest) (Con)
It is a great pleasure to serve under your chairmanship, Mrs Harris. I congratulate the hon. Member for Oxford West and Abingdon (Layla Moran) on securing this important debate. We have heard many contributions from across the House.
Thames Water is a distressing example that brings to light several serious issues that require ongoing attention from the Government and regulators. During the passage of the Water (Special Measures) Act 2025, His Majesty’s official Opposition tabled many sensible amendments that would have ensured that companies did not leverage too much debt. Puzzlingly, and disappointingly, the Government failed to support those amendments.
Companies should be held to the highest standards, and the last Conservative Government took a range of measures to try to do exactly that. Only 7% of storm overflows were monitored when the previous Labour Government departed office in 2010; the Conservatives took that to 100%. Our landmark Environment Act 2021 delivered our plan for cutting plastic pollution and holding water companies to account. We had our ambitious plan for water and took strong action on water companies that were illegally dumping sewage into our waters. We also banned water company bosses from receiving bonuses if the company had committed serious criminal breaches that damaged the environment.
Quite rightly, there is huge frustration that Thames Water has been wrung dry of capital over the years. It has failed to invest to expand its supply and to clean up its sewage spills. His Majesty’s official Opposition have been clear that we do not want to see Thames Water fold, because, although water supply would continue, it would carry the serious risk of higher bills for customers and would not solve any of the issues facing the company. Bizarrely, the third party led legal action that could have sunk the company, and, with it, Reform appears to be happy for the company to go under, exposing the taxpayer to billions and pushing consumer water bills sky high. If the company were taken into a temporary special administration regime or permanent public ownership, the taxpayer would ultimately end up paying the price. That cannot happen, it should not happen, and the parties calling for it seem to be in denial about what it would mean for the British taxpayer.
Ofwat, as the independent regulator for the sector—for now—has responsibility for the sector’s financial resilience and must continue to work closely with Thames Water. In the 2025 to 2030 price review, Ofwat challenged the efficiency of Thames Water’s proposed spending. That led to Thames Water being expected to deliver all schemes that it had proposed, but for £491 million less than it put forward and without any reductions in scale or standard. While Thames Water had initially proposed to appeal Ofwat’s final determinations for 2025 to 2030, it has deferred the appeal while it seeks to secure a rescue proposal.
Talking of spending, the Government have repeatedly made it a talking point that they have secured £104 billion of investment in the water system. They are not telling us, however, that £93 billion of that investment had been submitted by water companies in October 2023, while the Conservatives were in office.
Dr Hudson
I have to finish—I only have a certain amount of time. Can the Minister outline what action the Government are taking to help find a market-based solution for a Thames Water rescue deal, specifically in the light of reports that current lenders are preventing or shutting out competitors? What are the Government doing to encourage fair competition that puts the long-term interests of the company and customers first, rather than the interests of those seeking to minimise losses?
We are all agreed that Thames Water is in urgent need of a rescue plan. It must be a market-based solution that protects the taxpayer and customers. With the alarming example of Thames Water, which we are discussing today, and with the Cunliffe review’s clear call for improved financial responsibility, His Majesty’s official Opposition continue to urge the Government to rethink their approach and adopt sensible measures to put water companies on a more stable and secure financial footing, in order to protect water, the environment and the British taxpayer.
The Minister for Food Security and Rural Affairs (Dame Angela Eagle)
It is a great pleasure to serve under your chairmanship, Mrs Harris. I do not know whether it is down to you, but it is now much warmer in this room than it was in the last Parliament when I was chairing such debates. I regularly left thinking that I had developed frostbite, so whoever has managed to make that change has done a good job. I thank the hon. Member for Oxford West and Abingdon (Layla Moran) for securing this debate, and thank all hon. Members on both sides of the Chamber for the manner in which they have, very eloquently, made their important points in this debate. It is a pleasure to respond to it on behalf of the water Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), who sadly is unable to be here today.
This Government are committed to the transformation of the water sector. As the hon. Member for Epping Forest (Dr Hudson) has just said, the industry is spending £104 billion of private investment on upgrading our crumbling sewage pipes and cutting sewage pollution. Is it not a pity that some of that investment did not happen many years ago? That was promised as one of the advantages of a privatisation that, as many people have said in their various eloquent ways during today’s debate, has essentially not worked. Through the Water (Special Measures) Act, we have driven meaningful improvements in the performance and culture of the water industry, as a first step—only a first step—in enabling wider transformative change across the sector.
Following Sir Jon Cunliffe’s report, we have announced our intention to do three things: establish a new single regulator, create a water ombudsman, and stop water companies from marking their own homework when it comes to pollution. The water reform White Paper, which—I have to tantalise hon. Members—is due very shortly, will set out our vision for the sector. Members will not have to wait very long; that is all I am going to say. That White Paper will form the basis of new water legislation, which we will introduce as soon as we get a place in the parliamentary programme to do so. The reforms will secure better outcomes for customers, investors and the environment, and will make the water sector one of growth and opportunity.
Turning to Thames Water, this Government will always act in the national interest, and we will work to ensure that Thames Water acts in the best interests of customers and the environment. We are working closely with Ofwat, which is in conversation with the London & Valley Water consortium, a group of Thames Water’s creditors. Ofwat will only agree to a plan that will ensure the best possible outcomes for customers and the environment.
James Naish
I think it was more a turn of phrase than anything else, but it was suggested earlier that customers were being treated as cash cows for servicing the debt of Thames Water. Will the Minister confirm that that is not the case, either for Thames Water or for other companies, because investment is ringfenced under the new legislation, and therefore customer money is being put into the infrastructure that matters?
Dame Angela Eagle
I can confirm that, and it was one of the first things that this Labour Government, when we were incoming, put on to the statute book as a priority, in order to prevent that particular abuse. Thames Water is now under a cash lock-up arrangement; only Ofwat can approve any further dividend payments. That restriction will remain in place until credit ratings improve. Nothing that is happening at the moment will allow the kind of behaviour that we have seen in the past, from this company and others, to continue.
Charlie Maynard
We have interest costs of 9.75% being paid. We have massive advisory fees coming out of the company. All the class A creditors’ legal fees—£15 million a month, give or take—were being paid for by Thames Water. To say that this is not all hitting the customers is not true. Who else is paying for this, if it is not ultimately the customers?
Dame Angela Eagle
I was talking about the specific point that my hon. Friend the Member for Rushcliffe (James Naish) made about ringfencing for investment, not about some of the costs of the current impasse at Thames Water. To go back to that, the Government will always act in the interests of customers and the environment, and ensure that Thames Water acts in those best interests too.
We are working closely with Ofwat, which is currently in conversation with the London & Valley Water consortium, which is the group of creditors that was referred to. Ofwat will only agree to a plan that will ensure the best possible outcomes for customers and the environment. We will continue to support engagement between Ofwat and the consortium, with a view to supporting a market-led solution for Thames Water’s difficulties, while ensuring that customers and the environment are protected.
Many hon. Members in this debate have talked about the potential for a special administration regime. Should Thames Water become insolvent, we would not hesitate to apply to the court to place the company into a special administration regime, but as the hon. Member for Epping Forest pointed out, that is not a cost-free option. This would ensure that there is no increased disruption to customers’ water or waste-water services. In line with our preparations for a range of scenarios across regulated industries, including water, officials from the Department for Environment, Food and Rural Affairs have selected a firm, FTI Consulting, as an adviser to help with special administration regime contingency planning. That planning is going ahead.
Dame Angela Eagle
No, I must make this point, which is quite important in the context of the debate. There is a high bar for the use of special administration regimes. The law states that special administration can be initiated only if the company becomes insolvent—while Thames Water is living fairly hand to mouth, it is not currently insolvent—or is in such a serious breach of its principle statutory duties or an enforcement order that it is inappropriate for the company to retain its licence. Those are the only two things than can lead to the application of a special administration regime.
Richard Tice
Thames Water is not able to meet its financial obligations. The debt is trading at 5p in the pound. It says it is going to invest £20 billion in the next five years; it does not have the money. It cannot meet its obligations. While all that is going on, it is not repairing or investing in the pipes. It is bust. It is not meeting its obligations. It does meet those criteria, Minister.
Dame Angela Eagle
There is a process going on between the creditors and the company that must be allowed to finish one way or another. I have just said that, should Thames Water become insolvent, we will not hesitate to apply to the court to place the company into a special administration regime. Hon. Members on both sides of this Chamber should be reassured by that. We will continue to work with Ofwat to help support a market-led solution to the company’s issues of financial resilience and operational delivery.
Charlie Maynard
I concur with those views from the hon. Member for Boston and Skegness (Richard Tice), but can the Minister confirm that those discussions with class A creditors will not involve forgiving the company for its fines?
Dame Angela Eagle
There is an ongoing process that I cannot and will not comment on from the sidelines. What I have said is that the Government will ensure that any resolution comes in the interests of the environment and customers, and that is the criteria that the Government will apply, but I will not commentate on rumours from outside of the process in this place. It is important that we allow the process to continue to its conclusion, whatever that may be. I hope that Members are reassured that the Government will be ready to act and use special administration if we have to, should we get to that circumstance—but we are not in that circumstance yet.
I conclude by reiterating that this Government will always act in the national interest. We are clear that Thames Water must always act in the best interests of customers and the environment. We expect it to do that, and we stand ready to act if it becomes clear that it cannot.
Layla Moran
I thank you, Mrs Harris, and all Members for their contributions to the debate. I am not totally sure we got all the answers we were hoping for. Soon, I hope, means soon. I look forward to seeing the detail of what is in the White Paper, where many of the answers will be.
I am sure the Minister and the officials will have heard that the scepticism on both sides of the House is pretty strong. I would argue that the company is not and has not been meeting its obligations for quite some time now, either financially or to its customers. We will see what the conclusions will be. I rather suspect that, sooner rather than later, they will land on the place where we have been for quite some time. I thank all Members for participating.
Question put and agreed to.
Resolved,
That this House has considered the future of Thames Water.