Thames Water: Contingency Plans

Debate between Sarah Olney and Mark Spencer

Friday 15th March 2024 Commons Chamber

[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.