Water Industry: Financial Resilience

Lord Sikka Excerpts

Tuesday 4th July 2023 Lords Chamber

[Lord Benyon (Con)]

I welcome the fact that overseas investors want to invest in our regulated utilities sector. We must remember that actions that Governments take on one element of the regulated utilities sector can have impacts right across it, but I appreciate the comments from my noble friend. We have introduced new legislation to support our ambitions to bring into force stronger powers for our regulators to tackle pollution and improve transparency with the public so we can hold water companies and polluters to account. Through the Environment Act 2021, we have also introduced a statutory duty for water companies to achieve a progressive reduction in the adverse impacts of discharges from storm overflows. This is in addition to new, legally binding targets to significantly reduce pollution from farming, wastewater and abandoned metal mines; and the water demand target to reduce leakage, increase the resilience of supplies and leave more water in the environment.

[Lord Sikka (Lab)]

My Lords, I should be grateful if the Minister can clarify two points for me. In the other place, the Minister mentioned £190 billion of investment by water companies. That does not seem right, because it appears to me that companies are capitalising repair and maintenance costs, which is contrary to good accounting practice. Could the Minister check on that? Secondly, looking at the last two years’ accounts of Thames Water Utilities’ holding company, I see dividends of £70 million, plus £452 million interest paid on loans from other group undertakings. That sounds incredibly suspicious and is a form of profit-shifting and tax abuse. Please can the Minister get his colleagues, or his own department, to look at those things and report to the House.

[Lord Benyon (Con)]

The £190 billion is the amount water companies, with regulator approval, have invested in our water infrastructure. Thames Water has not paid out any dividends to its investors, but it has paid out dividends to its holding company to finance its borrowings. In 2017-18, it was £55 million; in 2021-22, it was £37 million; and it has since been, roughly speaking, around and between that. The figure is lower this year than it has been in the past. It has also recently secured from investors a further £500 million, and, as I said earlier, its liquidity, at about £4.4 billion, means that it is a viable trading company.