Lib Dems and Reform urge action on Thames and doubt its ability to deliver SESRO

(by Karma Loveday)

MPs piled pressure on the Government to take action on Thames Water, at one of the first Parliamentary debates of the year on 6 January.

Led by the Liberal Democrats, the debate hauled up a catalogue of indictments about the troubled company. These included on the familiar operational themes of leakage, pollutions, sewer flooding, poor service and price increases — as well as the now equally familiar financial themes of high debt, high costs, emergency funding, overseas investors and executive pay.

Project doubt

The MPs’ lack of trust in Thames also spilled over into criticism of its ability to handle major projects. This included:

• Oxford West and Abingdon MP Layla Moran said: “I do not trust Thames Water to do anything” – not least of which was to build the South East Strategic Reservoir Option (SESRO) in her constituents’ back yard. She challenged ministers: “Do they really trust Thames Water to get this done right? It is like running a bath when a hole has been punched through the plughole. I would not trust Thames Water to run a bath, let alone deliver a project of this size.”

• Freddie Van Mierlo, Henley and Thame MP, expressed scepticism that Thames can deliver the Oxford wastewater upgrades necessary to unlock promised new homes.

• Richmond Park MP Sarah Olney called for the Teddington Direct River Abstraction Project to be scrapped – “a plant that would be operational for just six weeks a year at a cost of £1bn. The project is strongly opposed locally on environmental, social and economic grounds”.

SAR sentiment

The Lib Dems called for Thames to be transformed into a public benefit company. Reform added its voice to the call action. Boston and Skegness MP Richard Tice cited caveat emptor and said: "Now is the time to say to those investors that enough is enough. The last thing we need is for the group to be bought by a substantial Chinese infrastructure group that is already the single biggest owner of all our utilities in the United Kingdom, and that takes over £1bn in dividends and interest on shareholder loans every single year… It is time to buy it back for a pound, make the investment that is required, with competent people to stop the outrageous leaks and mismanagement of the physical assets.”

Shadow EFRA Parliamentary undersecretary Neil Hudson begged to differ, arguing the temporary special administration regime (SAR) as well as permanent public ownership would cost the taxpayer. He called for a government update on a market-based solution.

Still pursuing a market solution

Responding on behalf of water minister Emma Hardy, Defra minster Angela Eagle said the Government continued to favour a market-based solution. She insisted: “This Government will always act in the national interest, and we will work to ensure that Thames Water acts in the best interests of customers and the environment. We are working closely with Ofwat, which is in conversation with the London & Valley Water consortium, a group of Thames Water’s creditors. Ofwat will only agree to a plan that will ensure the best possible outcomes for customers and the environment.”

Witney MP Charlie Maynard challenged that customers are already paying for 9.75% interest costs, “massive advisory fees” and £15m a month legal costs for the Class A creditors. “To say that this is not all hitting the customers is not true. Who else is paying for this, if it is not ultimately the customers?”

Eagle did not respond to that, but assured members that the Government would act, should Thames become insolvent, and has appointed FTI Consulting to contingency plan special administration. She argued Thames had not yet met the “high bar” for SAR: it was neither insolvent nor “in such a serious breach of its principle statutory duties or an enforcement order that it is inappropriate for the company to retain its licence”.

That was challenged by Tice, who argued: “Thames Water is not able to meet its financial obligations. The debt is trading at 5p in the pound. It says it is going to invest £20bn in the next five years; it does not have the money. It cannot meet its obligations. While all that is going on, it is not repairing or investing in the pipes. It is bust. It is not meeting its obligations. It does meet those criteria, minister.”

Maynard concurred and pressed Eagle to confirm that Class A creditors would not be forgiven any fines – a point on which she would not be drawn.