Future of Thames Water

Mike Martin Excerpts

Tuesday 14th July 2026 Commons Chamber

[Charlie Maynard]

I completely agree, and Thames Water’s full-year accounts are out at 7 am tomorrow morning. We will see just what they tell us. It is going to be ugly, not least because the company’s equity is worthless. The largest equity shareholders wrote down their shareholding to zero value and withdrew their board members more than two years ago. When Thames Water’s creditors sought to take on another £3 billion of debt last year, I was given permission to intervene in the High Court and speak for the interests of Thames Water’s 16 million customers, who are paying all these outrageous costs and interest expenses, but would otherwise have had no voice in court.

This Labour Government have slow-peddled for the last two years, and have refused to draw a line under decades of Tory bad behaviour by putting Thames Water into special administration. This approach is costing customers an absolute fortune. Thames Water paid £338 million just in interest expenses in the six months to September 2025. That is £133 million more, just in interest expenses, than it paid in the same period the previous year.

Labour is taking this hands-off approach despite the company’s multiple breaches of its operating licence. Let me illustrate some of those breaches. As I have stated, the company has carried out more than 1,000 illegal spills over four years. It must hold two investment-grade credit ratings as a condition of its operating licence, but it last held any investment-grade credit rating two years ago, in July 2024, and it has undergone a change of ultimate controller; yet the Minister, the Secretary of State and Ofwat have repeatedly refused to answer on that point.

[Mike Martin (Tunbridge Wells) (LD)]

We have a similar problem with South East Water, which is probably the second-worst water company in the United Kingdom after Thames Water. With South East Water, too, this Labour Government have been too timid. Does my hon. Friend agree that the Government, by acting, or not acting, in the way that they are, they are privileging shareholders over consumers?

[Charlie Maynard]

Absolutely. The consumers are getting the raw deal, and there is no end in sight.

To qualify as an ultimate controller—it is a defined term—a party need only have material influence over Thames Water. The creditor consortium right now is negotiating bilaterally with the company, and has put in £3 billion, but somehow that does not make it meet the criterion. It is ridiculous, and frankly, seeing this failure play out was probably the single moment when I most despaired of government and the rule of law. I repeatedly ask the same question, and repeatedly do not get an answer. I find it really, really bad.

--- Later in debate ---

[Emma Hardy]

It is true that I feel angry on behalf of all our constituents who have been so badly let down by the system that we inherited, and that is exactly why we have taken the action that we have. There is, of course, lots more to do—nobody is saying there is not—but we have to acknowledge the dire straits and the mess that we inherited. We are going to bring forward a clean water Bill to deliver on our promise to clean up our rivers, lakes and seas, and not just for today but for generations to come. The reforms will create a single powerful water regulator to act, and we will ensure that it has teeth in the way that the current regulator does not.

Turning to some of the issues raised by the hon. Member for Witney about the consortiums proposal, regarding the recapitalisation proposal being negotiated between Thames Water, London & Valley Water Consortium—a group of Thames Water’s creditors—and Ofwat, I reiterate that this Government will always act in the national interest. Before I turn to the proposal itself, it is important to be clear about the respective roles and responsibilities of the parties involved, because there is so much misinformation and misunderstanding out there. I welcome the opportunity to at least introduce a few more facts into the argument about the proposals.

Ofwat, as the independent economic regulator, is responsible for assessing that proposal and deciding whether it meets the relevant regulatory and statutory requirements, including whether it is appropriate to take the proposal forward for consultation. However, section 2 of the Water Industry Act 1991 places a duty on both Ofwat and the Secretary of State to exercise their respective relevant functions in the manner best calculated to further or achieve certain objectives. This includes protecting customers, securing the proper delivery of water and sewerage services, ensuring that companies can finance those services and that statutory obligations are properly carried out.

[Mike Martin]

Does the Minister think that the Secretary of State exercised those duties well when, under the Blair Government, Macquarie was allowed to come into Thames Water and South East Water and asset strip those companies?

[Emma Hardy]

Quite clearly, some of the behaviour that we have seen in the past from water companies shows that the regulatory system did not work, and that is exactly why we are changing it. Of course, between Blair and the current Government there were 14 years of Tory Government and five years of coalition Government during which those Governments could have taken the actions that we are taking today.

On 16 June, the Secretary of State gave her preliminary views on the consortium’s proposal to Ofwat, with reference to section 2 duties of the Water Industry Act 1991. She was clear that she does not believe that the current proposal goes far enough to protect customers and the environment. She cited three particular concerns in line with her duties: unfair costs to customers, delays to infrastructure investment and delays to environmental improvements.

However, the decision on how to assess the proposal and whether to proceed with consultation ultimately rests with Ofwat as the independent regulator. It is therefore important that the Government respect those boundaries. While the Secretary of State may express views in accordance with her statutory duties, it would not be appropriate for the Government to direct Ofwat’s decision making, prejudge the outcome of its assessment or be seen to exert undue influence on an independent regulatory process.

We are working closely with Ofwat, which will engage with the consortium on any revised proposal. It is important to be clear that it is ultimately a matter for Ofwat to decide whether to consult on the consortium’s proposal. However, I reassure the House that while the company is stable, we stand ready for all eventualities and the Secretary of State takes her duties very seriously.

I will also use this debate as an opportunity to address some of the misconceptions that have developed about special administration. Too often, SAR is presented as a simple lever that the Government can pull whenever there are concerns about a water company’s performance, but that is simply not the case. The reality is that there is a high bar for the imposition of a special administration regime. A company can enter into a SAR only if it becomes insolvent, or if there has been such a serious breach of its principal statutory duties or an enforcement order that it is no longer appropriate for the company to retain its licence.

Where performance is concerned, any application for a special administration regime would have to be supported by a robust and compelling body of evidence and would ultimately need to satisfy the courts. Bringing a case forward without sufficient evidence would not only risk the failure of that case, but waste a huge amount of taxpayers’ money. For any case brought forward, the Government and Ofwat would need to be convinced that there was a robust and compelling body of evidence. That is quite different from what is presented out there too often—that this is just a button the Government can press at will.