Water (Special Measures) Bill [Lords]

Charlie Maynard Excerpts

2nd reading
Monday 16th December 2024 Commons Chamber

[Steve Reed]

I have to say to the hon. Gentleman that there is very little point in monitoring sewage in the water if all you do is watch the sewage increase and keep on flowing into our rivers, lakes and seas. The Conservatives seem to be satisfied with the failure they presided over. The Labour party will fix the problem that they left behind.

If you find cracks in the wall of your house and ignore it for years, the problem gets worse and the cost of putting it right escalates. That is exactly what the Conservatives did to our water system. They refused to bring in the investment early enough, so ageing infrastructure crumbled even further and the cost to bill payers has rocketed.

[Charlie Maynard (Witney) (LD)]

We are about a month away from Thames Water signing up for another £3 billion of debt. If that happens, 46% of the bills of every customer in that catchment will be spent on interest expenses, and that is without even paying down the £20 billion of debt. How is that helping anyone?

[Steve Reed]

I thank the hon. Gentleman for his intervention. One of the reasons the Government commissioned a review into governance and regulation is because of the failure of the current system that the previous Government allowed to continue.

I share customers’ anger about the scale of water bill rises they seem likely to face. They are rightly furious at being left to pay the price of Conservative failure. I am grateful that the party opposite has indicated support for the Bill. It is just a shame its support has come so late. In December last year, while they were still in government, I called a vote on introducing a ban on unjustified bonuses for water bosses, but they refused to do it. They could have acted at any point over the past 14 years, but they would not do it. There have been many times in history when Labour has had to clean up the Tories’ mess, but rarely quite so literally as cleaning up the raw sewage polluting our country’s waterways.

--- Later in debate ---

[Charlie Maynard (Witney) (LD)]

I believe that this Bill is disappointing. It almost totally ignores the financials of the companies, and that is the root of the problem. Unless we fix the financials, we will not fix the problem. Thames Water, for example, has £17 billion of debt, and it is currently expected to have a further £3 billion of debt by the end of January. If that happens, it will cost Thames Water an extra £334 million a year, which means that 46% of the bill of every single one of the 15 million bill payers will be funding interest payments—before the £20 billion of debt that the company will have is paid down. How does that make sense? How do we get this working again? That is not the route to a solution.

The reason Thames Water is not in special administration is that, officially, it is unable, or unlikely to be able, to pay its debts. You do not need a GCSE in business to know that if a company currently has £16 billion of debt and £1.2 billion of cash flows, it is unlikely to be able to pay its debts. I believe that our Government are running scared. They are worried about being sued by big bad American vulture investors, and that is why they are not putting Thames Water into the special administration regime—a regime that was explicitly set up for exactly this purpose. I say to the Government, “Please, do not let Ofwat approve a price rise for Thames Water. Put the company into special administration and start to deal with the problems, because we will not be able to deal with them until we deal with the financials.”

I have one minute and 17 seconds in which to ask the Government to steal some of these ideas. Yes, they should reform the three regulators, by putting them all together. In respect of clauses 10 and 11, why should consumers pay for financial losses following Government financial assistance? Why should not creditors and shareholders pay for those losses? It seems pretty weird to me. Pollution baselines should be established for each catchment; we should get that straight. Environment Agency permits for individual sewage treatment works should be reset. The capacity for each STW should be established, and the agency’s Environment Agency 3.0 multiplier should be applied to every one of them. There should also be volumetric flow meters, for which clause 3 does not provide—we are not getting them. I invite Members to read clause 3 themselves. We are getting event duration monitors but not flow meters, and that means we are back in the same place where we have been for the last 14 years. We need flow meters, so please can we insist on that? Finally, we need to haircut the debt: we need to get that £20 billion down to £5 billion. That should be the key focus, because then we will be back on a stable footing and able to invest as we need to.

Storm Bert

Charlie Maynard Excerpts

Monday 25th November 2024 Commons Chamber

[Steve Reed]

It is always wise to follow the advice that is given for people’s safety. We are in regular contact with colleagues in the Department for Transport and other parts of Government to make sure that we are doing everything we can to keep people safe.

[Charlie Maynard (Witney) (LD)]

My constituency of Witney has the Windrush, the Evenlode and the Thames, all of which have really impacted constituents today. We have just lost out on some FiPL—farming in protected landscapes—funding to produce modelling of the Windrush, which is upstream of Witney, our key market town in the constituency. That means that we are unable to forecast how we can lower and slow the flood crest through Witney, which would make it safer. Will the Secretary of State please look into providing better funding or enlarging the funding for such modelling, so that we can keep towns such as Witney safe on rivers like the Windrush?

[Steve Reed]

I recognise the hon. Gentleman’s point. We will make announcements on FiPL early in the new year.

Water Companies: Regulation and Financial Stability

Charlie Maynard Excerpts

Wednesday 23rd October 2024 Westminster Hall

[Charlie Maynard (Witney) (LD)]

I am honoured to serve under your chairmanship, Mr Pritchard. I thank my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) for letting me wrap up this debate, and I thank all the speakers who spoke so well and eloquently about the places they represent and love.

I am the Liberal Democrat MP for Witney and a West Oxfordshire district councillor. Our area is a ground zero for pollution. The Windrush flows through Witney, the Evenlode flows through to the north, and Shill brook flows to the south. All flow into the Thames. All are repeatedly and heavily polluted. I work closely with Windrush Against Sewage Pollution, one of the best advocacy groups in the country, to get to grips with this problem. I have learned a lot from that group and from many of the other parish councils and community groups that work so hard locally, and I am grateful for everything they have taught me.

I will focus on financial stability, or the lack thereof, and on Thames Water, as it is the largest and the most unstable of the water companies. First, I will give some context. Thames Water has six holding companies stacked one on top of the other. Some of them are offshore; some are onshore. The top holding company, Kemble, has £1.2 billion of operating cash flows—that is, money coming in—and £18 billion of debt. Roughly £13 billion of the £18 billion is held by class-A bondholders, and Members will hear a bit more about them. This debt is expensive, and more than a third of all our customers’ bills are being spent on servicing the debt.

In July, S&P and Moody’s cut the credit ratings of the class-A bonds to junk and two notches below that. That action put the company in breach of its operating licence. Ofwat waved some limp celery at Thames Water and did very little. That opens up moral hazard because it means that other water companies and other companies in regulated sectors can do the same. On 5 August, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Kingston upon Hull West and Haltemprice (Emma Hardy), stated in reply to my written question that Thames Water’s financial position “remains stable”.

In early September, it became public that various funds, including the notorious Elliott Management, which pillaged Argentina and Peru, had bought large amounts of class-A debt at very discounted prices. On 13 September, the Under-Secretary of State replied to me again, saying that Thames Water “remains stable”. She noted that special administration was an option if any of three conditions were met, with one of the conditions being if

“the company is or is likely to be unable to pay its debts”

—pretty simple. On 26 September, both S&P and Moody’s slashed Thames Water’s class-A debt again. It was already two notches below junk; this time it went down a further five and six notches respectively. The words “death spiral” spring to mind.

A week ago, it was reported that Ofwat is meeting a creditor group representing the class-A shareholders to discuss restructuring the company’s debt. The condition that

“the company is or is likely to be unable to pay its debts”

has most definitely been met. The company’s cash burn is faster than previously forecast, and the company as is will likely run out of cash by December. Its class-A bondholders are desperate to avoid special administration as that would crystallise their loss and result in much of their debt being written off. However, the creditors are now negotiating with Ofwat to inject a relatively small amount of new capital in, cram down the other debt classes, resulting in perhaps a 20% to 30% debt write-down, flip some of their debt into equity, and then sell the company on to another buyer within 12 months, making a huge profit.

If the Government allow such a restructuring, they are effectively rescuing a group of lenders, including vulture funds, not the company. Instead of the bondholders having to write off billions of pounds of worthless debts, the Government will be giving ownership of the company to the vulture funds, which will then flip it at a profit. Such a route is neither sensible nor equitable for the company, the Government or our country. It is a lazy, short-term fix from which the Government can repent at leisure over the course of the parliamentary term. No one will be fooled by the Government claiming that in the short-term the market has fixed it, and no one should be panicked by bankers claiming Armageddon but, in reality, just driving their own agenda.

The special administration regime was set up for exactly this scenario. The Government should make use of it and place Thames Water into special administration, allowing for an orderly restructuring and reorganisation resulting in the sale of a clean company on the open market; whether that is nationally, mutually or privately is, of course, up to the Government, but that will allow a clean company to be in place. To be investable again as a sector, we need a clear regulatory framework that is transparent and enforceable against, where companies that make bad decisions know they will have to take the consequences. That will allow investors to fund water companies’ balance sheets so they can handle the very substantial investment spend that will be required over the next 10 years.