Thames Water: Government Support

Emma Hardy Excerpts

Thursday 3rd April 2025 Westminster Hall

[Charlie Maynard]

Yes, it does. I think Ofwat is doing exactly what the company’s creditors want it to do, and I wonder why that is happening, because it should not be.

Finally, there is a failure to innovate. There are a host of technologies out there, and far too often we hear the same old lines about Victorian sewers, cameras and how impossible it all is. There is a huge range of leak detection, pipeline monitoring, protective maintenance, trenchless pipe repair and pressure management technologies. I hear from Oxfordshire firms that it is easier to sell sewer technology solutions into the US and Europe than into the UK, so something is going seriously wrong. We could start by looking at whether the incentives are effectively aligned; I do not believe they are.

What are the consequences of this failure to act? It is easy to lay a lot of the blame at the last Government, but the Water (Special Measures) Act 2025 was more window dressing than action. I am new to Parliament, but I was particularly dismayed that not a single word of a single proposed amendment from any party was accepted by the Minister. I wish that in Parliament we all had enough confidence to accept good ideas where we found them—I live in hope.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

On that point, the hon. Gentleman is incorrect. Actually, compromise amendments were reached on a few occasions, so I want to gently push back on what he says. Cross-party amendments in the other place, where the Bill began, were discussed and accepted, so it is factually incorrect to say that no amendments were accepted.

[Charlie Maynard]

None of the 60 amendments in the Commons, or however many there were, was accepted. The rejected proposals included putting flow meters on the outflows of sewage treatment works, which is sort of logical; establishing targets to reduce pollution over time, using existing benchmarks of hours of spilled sewage; making sewage treatment works’ calculations more transparent; and bringing environmental experts and consumer representatives on to water boards.

The Labour Government are now allowing a public utility company to line the pockets of bankers and hedge funds at the expense of bill payers. As someone said in the Financial Times this week,

“with water, it’s a total monopoly and a total shambles. A shambopoly if you will”.

The Government’s support for Thames Water essentially amounts to unconditional support for the company’s creditors, at a direct and massive cost to its customers.

What do we need to do instead? First, we need to put the company out of its financial misery and put it into special administration. We should allow its debt to be massively written down to something like three times the cash flow or thereabouts. If the debt is reduced, the company will have a sufficiently strong balance sheet to allow it to invest in the infrastructure we desperately need and to spend our bill payments on fixing treatment works and pipe networks, rather than paying interest. We should allow water companies coming out of special administration to be mutually owned by their customers and professionally managed. We should set pollution baselines and pollution reduction targets and get serious about putting transparency targets and technology to work to clean up our rivers.

Special administration is clearly the most logical option at the moment, but I believe that the Government are shying away from it because of threats of legal action against them, phantasmagorical scenarios of financial Armageddon, or both. Please do not let Thames Water’s lobbyists, including Ruth Kelly, the ex-Labour Minister who is now chair of Water UK, to scaremonger you out of taking the action that 16 million consumers—your electorate—need. Those scenarios are patently not true, and it is best to ask Thames Water about that. As per page 92 of the independent expert report from Thames Water’s adviser, Teneo, the net cost to the Treasury of taking the company into special administration, even in the worst-case scenario, is zero—please look it up.

Instead, we now have this bizarre situation whereby a Labour Government are cheerleading the American hedge funds and private equity funds taking over our largest water company and making a massive profit out of its customers. What goes for Thames Water will very likely go for the rest of the sector, so the signal that you and your Government are sending the sector—

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

It is a real pleasure to see you in the Chair, Ms Lewell. I wish you, and anybody celebrating, a very happy Easter—I hope that it is a peaceful and enjoyable day. I thank the hon. Member for Sutton and Cheam (Luke Taylor) for securing this debate and giving us space and time to discuss this important issue.

I hope that I can use this debate as an opportunity to address some of the concerns being voiced around Thames Water and the water industry. Since I am feeling rather positive and getting ready for Easter, instead of “10 things I hate about”, I would rather come up with 10 things that might give us reason for hope and renewal in the water industry. To give 10 reasons for hope, since we have been elected we have: one, introduced the Water (Special Measures) Act 2025 to ban bonuses; two, with the Water (Special Measures) Act, introduced criminal liability; three, introduced automatic penalties; four, set up the independent commission; five, changed the articles of association; six, ringfenced money for investment; seven, doubled the compensation for burst pipes, which has come up through the guaranteed standards scheme; eight, created customer panels for water companies; nine, passed bathing water reforms; 10, published storm overflow guidance just last week. And this new Labour Government have not even been in office for a year.

Thinking of fairness and justice, I generally have an aversion to criticising people who cannot be here to defend themselves, so I want to reflect on the comment made about Ruth Kelly. She works for Water UK; she does not work for Thames Water, so characterising her as a defender of Thames Water is not entirely correct.

[Charlie Maynard]

Will the Minister give way?

[Emma Hardy]

I am happy to, if the hon. Member wishes to retract his comment.

[Charlie Maynard]

To be clear, I said that Ruth Kelly is the chair of Water UK—I said exactly that.

[Emma Hardy]

Perhaps I misunderstood the hon. Member as also saying that she is a defender of, or a spokesperson for, Thames Water. I am happy for him to retract his comment.

[Charlie Maynard]

I said that she is the chair of Water UK, which is the trade body for water companies, so I think that follows.

[Emma Hardy]

I am pleased by what I believe I have heard: that no reference was made to Ruth Kelly with regard to Thames Water; instead, the comment was solely about her representing Water UK.

Further to my point about people who are not here and unable to defend themselves, as a trade unionist I want to talk about the people who work for water companies, including those who work for Thames Water and go out to fix the broken pipes, clean up sewage and deal with the sewage overspills. I have had reports from some unions that those people often face abuse for doing so. They are often on the frontline facing people angry with the company. I would like to say—and I hope we have unity on this point—that the people going out, cleaning up the mess and dealing with the difficulties are not responsible. They are not Thames Water; they are people who work for it. I thank them for the work that they do in incredibly difficult circumstances.

[Luke Taylor]

I think we would all agree on that. It was interesting to see, in the BBC documentary, that the people who work at Thames Water clearly wanted to do a good job. They wanted to improve things for residents—their neighbours, family and friends—but just did not have the chance to do so because of the structure of the company and the difficulties that it is in. This debate is about the need to help not only the customers—our residents—but the workers who want to be doing so much better and find it so dispiriting to be part of that failing organisation.

[Emma Hardy]

I completely agree. They are trying to do a good job. I add that it is a good industry to work in; the people in it have long careers and, I might add, excellent trade union representation. I am not sure that I will have complete support from everyone in the room on that point—just when I was doing so well—but I want to echo that it is not those people’s responsibility.

My hon. Friend the Member for Slough (Mr Dhesi), who is no longer in his place, was right to say that customers and the environment should be at the heart of reforms. As I mentioned, we changed the articles of association to put customers on to the boards. My hon. Friend is always incredibly caring about his residents, so I wanted to mention to him and to all the other hon. Members that we are holding the water companies to account to end water poverty by 2030. We are just about to consult—we have to wait for purdah—on changing the rules around WaterSure to extend eligibility for it.

I am pleased that my hon. Friend the Member for Clapham and Brixton Hill (Bell Ribeiro-Addy) enjoyed her three years in Yorkshire. It is a fine and wonderful part of the country, and she is always welcome to come back. She is an incredible champion for her community. I am sure that she will never need my assistance in standing up for that community, but I am always happy to give it if she does.

My hon. Friend the Member for Swindon North (Will Stone) highlighted the role that MPs can play. He showed what a good choice was made in the last election to send him here as a representative for his community. I thank him for his support for the Water (Special Measures) Act and for the further work that we are doing on regulators.

The hon. Members for Twickenham (Munira Wilson) and for Richmond Park (Sarah Olney) talked about the Teddington abstraction scheme. Without going into loads of detail, there will be a consultation, and they will be able to feed in the concerns of their residents and environmental concerns. But if either of the hon. Members feel that their concerns, or those of their residents, are not being listened to, I am happy to make arrangements for us to sit and have a longer conversation about that.

My hon. Friend the Member for Bexleyheath and Crayford (Daniel Francis) mentioned a family of four struggling with their water bill. I again highlight WaterSure. We are looking to expand eligibility for it, but at the moment, if a family has three or more children under the age of 18 living at the property and they claim child benefit, they will be eligible for WaterSure, so I urge my hon. Friend to pass that information on to his constituents. I thank him for his support for the Water (Special Measures) Act, the commission and our desire to introduce change.

Before turning to Thames Water, I want to emphasise that as a Government we recognise that the water sector is facing many challenges, and we have set out ambitious plans to tackle those challenges head-on, but it is important also to emphasise that resolving them will require long-term and transformative change. One thing mentioned here—I think by the loyal Opposition—is that there is no silver bullet or quick fix for some of the problems that we face.

We recently took the Water (Special Measures) Act through Parliament; it was amended in the other place. It will drive meaningful improvements in the performance and culture of the water industry and act as a first step in enabling wider and transformative change across the water sector. The Act delivers on the Government’s manifesto commitments by blocking bonuses for executives who pollute our waterways, enabling the bringing of criminal charges against persistent lawbreakers, enabling automatic and severe fines for wrongdoing, and ensuring monitoring of every sewage outlet.

In October we launched, in collaboration with the Welsh Government, an independent commission on the water sector regulatory system. This is the largest review of the water industry since privatisation. The commission will report in the middle of this year and make recommendations on how to tackle systemic issues in the water sector to help restore our rivers, lakes and seas to good health, meet the challenges of the future and contribute to economic growth. Those recommendations will form the basis of further legislation to attract long-term investment and clean up our waters for good.

I now turn to Thames Water specifically before moving on to the sector as a whole. I will say as much as I am able to about Thames Water, bearing in mind that it is going through a confidential process. I completely understand what has been said. Let me say at the beginning that I am not here as the hon. Member for Thames Water, and I am not here to defend the actions of Thames Water. I want to reassure and, I hope, send a message to the general public that we are monitoring the situation and the company remains stable. In the event of special administration, the taps will still function and the sewage will still be taken—I want that message to be heard by the general public—so there is no need for alarm. The people working for the company will continue to be paid in the event of special administration. As a responsible Government, we are preparing for every eventuality. However, at the moment the company remains stable.

I think it is incorrect to say that we are “resisting” special administration. That would be a total mischaracterisation of what special administration is and the process of entering the special administration regime. It is not that we are resisting anything. A special administration order is a well-established mechanism to ensure that the company continues to operate and that customers continue to receive their water and wastewater services, so customers need not be concerned about any disruption to their water supply or wastewater services because of the financial position of their water company. The provision of water and wastewater services will continue.

Special administration is the ultimate enforcement tool in the regulatory toolkit, and as such, the bar is set high. The law is clear—this obviously links to insolvency legislation—and states that special administration can be initiated only if the company becomes insolvent, can no longer fulfil its statutory duties or seriously breaches an enforcement order. Only in that scenario does the Secretary of State for Environment, Food and Rural Affairs or Ofwat—crucially, with the consent of the Secretary of State—have the power to request the court to place a company in a special administration regime. If that situation arises, the court must be satisfied that there is sufficient evidence to demonstrate that the water company in question is insolvent, can no longer seriously fulfil its primary statutory duties, or has seriously breached an enforcement order. It will then make a special administration order, appointing a special administrator.

That is a hypothetical situation. It is not, I stress, the situation that we are talking about now, but let us say that somebody said, “We want to put this company into special administration”; the decision then would be made by the court, and the court would need to be satisfied that there is the evidence to put that company into special administration.

[Bell Ribeiro-Addy]

I thank the Minister for her attention to this situation, but I have to ask on behalf of my constituents, how much more does Thames Water have to fail before we decide that it is no longer fit to operate? The level of failure is so high that, although I appreciate what the Minister says about following the letter of the law, people simply will not understand.

[Emma Hardy]

I want to stress that although that is the legal process for entering special administration, that does not mean for one second that we are satisfied with the performance of the company as a whole. But there is a wealth of difference between the court-sanctioned process of going into special administration and the Government taking action. There are many things on which we want to take action. In fact, the whole purpose of the commission is to look at the way in which companies are set up and how we got into this position in the first place. It might interest the Opposition that some of the rules and regulations around Ofwat were relaxed in 2014—under the coalition Government.

It is not as though we are completely satisfied with everything, and that is why we are not doing SA. What I am saying is that SA is an ultimate enforcement tool; it is a serious step to take and it is sanctioned by the courts, but that does not mean that we are not doing anything else in between. We are taking a lot of other actions, but I wanted to address the specific point around why we are not pushing the company into special administration.

[Charlie Maynard]

I want to play back what the Minster just said. It is up to either Ofwat or the Secretary of State to apply to the court to put the company into special administration. As the Minister wrote to me last July or September, one of those conditions is whether the company is unable, or likely to be unable, to pay its debts. Given that the company has come out and said that it has only £39 million, with £19.5 billion of debt, and it is going to run out of money by 24 March, I think that we have passed that benchmark pretty clearly. The idea that we have not is simply not true. It is therefore up to Ofwat or the Secretary of State, who continues to decline—maybe that is a better word than resist—to ask the court to consider.

[Emma Hardy]

With respect, I think that we have different interpretations of the truth. We are saying that the company can enter SA if it is insolvent. Thames Water is not at the point of insolvency. My message to the public and to people working in the company is that the company remains stable at the moment; however, as a responsible Government, we are preparing for every eventuality.

I want to talk about broader commitments to financial stability and the independent commission. For me, this debate highlights how important it is to address the financial resilience of the water sector. We are talking specifically about Thames Water, but that does not mean that everything else is a bed of roses. Some historical decisions made by companies on debt levels have left them badly financially exposed. Those decisions often coincided with moves towards more complex ownership structures and the involvement of firms with shorter-term horizons.

We recognise that the Government have an important role to play in setting a regulatory framework that encourages a stable water sector. In hindsight, many might question the 2014 changes to make Ofwat a lighter-touch regulator. The Independent Water Commission is exploring how the Government could provide the regulatory structure that most people in the Chamber recognise that we need. The call for evidence is currently live, seeking views from stakeholders on improvements that could be made to economic regulation across a number of areas. As always, we welcome contributions from everybody across the House. The call for evidence closes on 23 April, and I encourage all interested parties to respond to the commission’s questions on these topics via DEFRA’s online consultation tool, Citizen Space.

I conclude by reiterating that both the Government and Ofwat are carefully monitoring the situation with Thames Water.

[John Lamont]

I want to pick up on my point about Scotland. Some Members have been advocating for nationalisation. Does the Minister have any thoughts on that, and have the current Government looked at what is happening in Scotland? Scottish Water, by many standards, is performing even less well than Thames Water. But Scottish Water is state-owned. Its chief executive is paid £290,000. The model in Scotland is not something that I would encourage the Minister to look at—I am not saying that she is—but I would be keen to have her reflections.

[Emma Hardy]

Water is devolved, and I completely respect the autonomy of the Scottish Parliament to make those decisions. The Government have been clear that we are not looking at nationalisation, simply because of the cost, the time it would take and the legal complications. My focus is quite simply on what I can do to improve the situation that we currently face. There is a lot of consensus around looking at regulation and how effective, or not, it is at the moment, and what can be changed. That is where I have put all my focus. Nationalisation was ruled out of the Independent Water Commission; however, all other forms of ownership are allowed within the terms of reference.

It is for the companies to resolve their financial resilience issues within the context of their licence and broader statutory obligations. However, I must be clear: the Government are prepared for all scenarios across our regulated industries, as any responsible Government would be. This new Government are committed to turning around the water sector—I refer back to my 10 reasons for hope before Easter—which will be achieved through practical measures to clean up illegal sewage dumping and attracting major private sector investment to upgrade infrastructure while prioritising the interests, as we have mentioned, of customers and our beautiful environment.