Thames Tideway Project: Contingent Guarantees

Lord Berkeley Excerpts

Tuesday 14th October 2014 Lords Chamber

Asked by

[Lord Berkeley]

To ask Her Majesty’s Government why they have indicated the availability of contingent guarantees in support of Thames Water; and whether this complies with their policies on offshore financial instruments, governance and taxation.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, to be clear, the Government are not providing a contingent guarantee to Thames Water. The Thames tideway tunnel project will be financed and delivered by a competitively tendered infrastructure provider which is an entirely separate entity to Thames Water. Details of a contingent government support package for this entity, which complies with all relevant government policies, were announced in a Written Ministerial Statement on 5 June.

[Lord Berkeley (Lab)]

My Lords, I am grateful to the Minister for that reply. Every week the Government tell us that they intend to outlaw aggressive taxation and leverage policies. The Minister says that Thames Water is not going to be in receipt of these funds but the Thames tideway tunnel project will be. Why are they allowing that to be financed in a tax haven while also promising it a government guarantee? Is there not a conflict of interest here somewhere?

[Lord De Mauley]

My Lords, I have comprehensively answered the noble Lord’s point about tax in earlier short debates on this subject. Perhaps we will come back to that later, but I will address his point about the appropriateness of offering a government support package. The contingencies covered by it are set out in the Written Ministerial Statement. It is common for Government to provide support of some kind to major infrastructure projects—for example, the PFI projects under the previous Government. The government support package here will cover low probability but high impact risks that the market could not take on at a reasonable cost to customers. The infrastructure provider will be incentivised not to call on it and it will exist only during the construction phase. The important thing to bear in mind is that the infrastructure provider will pay for the cover. Furthermore, the financing for the project is sought competitively to help minimise the cost—and that means the cost to customers.