Thames Water: Contingency Plans

Sarah Olney Excerpts

Friday 15th March 2024 Commons Chamber

[Sarah Olney (Richmond Park) (LD)]

Thank you very much, Mr Deputy Speaker, for granting me the opportunity to have a debate on this important issue.

Since 2020, Thames Water has dumped over 72 billion litres of raw sewage into rivers in London, polluting our waterways and damaging our natural environments. It has done so while accruing billions of pounds of debt and increasingly failing to provide basic services to the nearly 25% of the country it supplies, including my constituents in Richmond Park. Despite this, Thames Water executives have paid themselves almost £8 million in bonuses over recent years, lining their pockets while the company they run continues to pollute our rivers and streams.

For my constituents in particular, the name Thames Water has understandably become a byword for poor quality, slapdash repair work, damaging environmental practices, and barely concealed contempt for its bill payers.

[Matt Rodda (Reading East) (Lab)]

I am grateful to the hon. Member for giving way. My constituents have suffered quite seriously from similar issues, including interruption to water supply to a large part of Reading recently and, indeed, considerable sewage discharges in the river, which, outrageously, are sometimes visible to passers-by who use our bridges and walk by the riverside.

[Sarah Olney]

The hon. Gentleman is absolutely right about sewage discharges. We have had a recent one in Teddington lock in my constituency, causing a great deal of distress to local people.

During my time as the MP for Richmond Park, I have received dozens of reports of Thames Water’s negligence. In 2020, more than 1,200 homes in Richmond were left without central heating or hot water for five days when water from a burst pipe ingressed the gas network. Last year, a burst water main on the Manor Circus roundabout went unattended for days, delaying the completion of roadworks that were causing chaos in the area. My residents in north Kingston have had to make their peace with constant congestion caused by an unending series of emergency repair works—all because this failing water giant cannot get its act together. That is just a mere snapshot of the chaos that Thames Water causes for my constituents every day.

To add insult to injury, Thames Water is now planning to build a pipeline across a nature reserve in my constituency. The controversial Teddington direct river abstraction project will allow Thames Water to take water from the Thames and replace it with treated sewage just above Teddington lock. The pipeline’s construction will put a rare and valuable ecosystem under threat and subject my residents in Ham and north Kingston to years of building work. This project is only necessary because Thames Water is losing hundreds of millions of litres of water a day through leaks in its system.

My constituents are yet again suffering, because the company has spent years paying out hundreds of millions of pounds in dividends to shareholders, instead of investing in its infrastructure. They have to live with the congestion on the streets, the threat of major construction in their parks and the sewage running through their river. Now, they are picking up the tab for Thames Water’s total mismanagement of its finances. I was recently contacted by a constituent who has seen his water bill rise by just over 60% between 2020 and 2024. Every year, more and more of my constituents’ income is going towards propping up a company that shows an utter disregard for them and their community.

It was therefore infuriating to see recent reports in the Financial Times that Thames Water has been lobbying the Government and the industry regulator, Ofwat, to let it increase bills further, pay dividends and face lower fines as it seeks to avoid financial collapse. This is despite Conservative Ministers already bending over backwards to avoid cracking down on polluting water companies. It is extraordinary that the country’s largest water company could be allowed by this Government to give its executives millions in bonuses while failing to fulfil its basic functions, but that is the situation that has been allowed to occur for far too long.

Over the past few weeks, I have therefore been calling on Conservative Ministers to publish their contingency plan, Project Timber, for what they will do if Thames Water goes bust. Frustratingly, my demands have continually been refused, with the response being that “it would not be appropriate” to publish the plan. This is despite what is now overwhelming public interest to do so.

With the news this week, however, that Thames Water was the only water firm that had refused to contribute to a new £180 million anti-pollution fund, the alarm bells became deafening about its financial status. And when I asked the Prime Minister at PMQs this week whether he could confirm that this broken company will still exist by the end of the year, he was unable to answer. That is why, today, I stand here to call not only for the publication of Project Timber, but for further, more drastic action.

Last month, the Government passed new legislation, which allows the High Court to appoint a special administrator to take over a failing water firm. With Thames Water clearly unable to pay its debts and with its latest refusal to contribute investment to combat sewage, I believe the threshold has now been met for the Government to take this as a course of action.

That is why I now speak on behalf of the Liberal Democrats in calling on the Government to put Thames Water into special administration. Under these new proposals, the taxpayer would not be liable for any debts, and the special administrator could restructure this failing firm into a company for the public benefit. That would ensure no interruption in service for millions of households across the capital and the south of England, while allowing the company to be stabilised—no longer relying on its failing board. Further, by enacting those special measures, Thames Water could restart efforts to stop harmful sewage discharges into rivers and lakes. This would also guarantee no further executive bonuses are paid, following the near millions which have been paid to senior officials in recent years. We therefore face two options: to continue allowing Thames Water slowly sink into financial ruin, or to act now to restructure this failed company and start getting it working again for the public benefit.

To conclude, after years of letting Thames Water pollute our rivers, fail to perform basic functions and charge customers higher and higher bills, enough is enough. Rather than continue to let the asset strippers run Thames Water into the ground, the Liberal Democrats are clear: we cannot let this situation continue. Thames Water is no longer a functioning company, and the Government have a choice: either bail them out with taxpayer money, or listen to our calls to put it into special administration to then be reformed into a company for the public benefit. After years of Conservative Ministers refusing to take action, this vital step is needed to safeguard customers, steady the ship and get our country’s largest water company functioning again.

[The Minister for Food, Farming and Fisheries (Mark Spencer)]

I congratulate the hon. Lady on securing the debate. I am delighted to respond on behalf of the Government.

Water is what makes life possible on our planet. It is essential for our health and wellbeing, our economy, the production of food and, of course, clean energy. I want to make it clear from the outset that no matter the individual circumstances of their water or waste water company, the public will always continue to receive those vital services. The Government are committed to ensuring that water companies deliver the performance and environmental outcomes bill payers expect and deserve. Our plan for water will transform our management of the water system, delivering cleaner water for nature and people, as well as securing plentiful supply. The plan is delivering more investment, stronger regulation and tougher enforcement, with water companies investing £7.1 billion in environmental improvements between 2020 and 2025, and an estimated £60 million in capital investment by 2050 to meet storm overflow reduction plan targets.

I want to reassure the House that the Government are prepared for a range of scenarios across all our regulated industries, including across all water companies, as any Government should be. The Government’s key priority is the ongoing provision of water and waste water services. There are plans in place to ensure that there will be no disruption to customers’ water or waste water services, and that any incidents that may occur will continue to be quickly addressed, no matter the financial situation of one’s water or waste water company.

Regarding contingency plans as they specifically relate to Thames Water, as noted to the House previously, Ofwat monitors the financial position of all water companies, including Thames Water, and takes action when water companies and their investors need to strengthen their long-term financial resilience. However, it is important to make clear that it is for the company and its investors to manage the company’s financial resilience within the context of its licence and broader statutory obligations. The Government are confident that Ofwat, as the economic regulator of the water industry, is working closely with all water companies, including Thames Water, and ensuring that action is taken when financial resilience needs to be improved.

Although a wide range of options is available to water companies, such as the injection of new equity when they are required to strengthen their financial resilience, I know that both Parliament and the public will want reassurance that should the worst happen regarding any water company, water and waste water services will continue to be provided. Should a water company become insolvent—when it is unable to pay its debts, or when its liabilities are greater than its assets, or when a company is in such serious breach of its principal statutory duties or an enforcement order—it would enter special administration following a court application. Should a special administration order ever be needed for any water company, the statutory purpose of the order would be to ensure that the company continues to operate and that customers continue to receive their water and waste water services.

The existence of the water industry special administration regime is not a secret. It is set out in statute, and there are similar regimes in place for other regulated sectors such as banking and energy. These powers were agreed by Parliament over 30 years ago in the Water Industry Act 1991. I hope the existence of the water industry special administration regime will provide reassurance that, no matter the circumstances of their water company or waste water company, customers will continue to receive these vital public services.

[Sarah Olney]

The Minister says it is not a secret that these regulations exist, but what is currently a secret is Project Timber, which I understand is a contingency plan should Thames Water be unable to operate. Could he say a little more about that?

[Mark Spencer]

I do not want to be drawn into the specific cases of specific companies because there are market sensitivities, but it is clear that these regulations exist for all bodies that provide us with energy, banking, water and all those vital services that our constituents expect not to fall over. The Government have a plan to support those vital sectors in moments of distress. The Government’s priority is the ongoing provision of water and waste water services.