MISSING: Policy for special administration (or is it?)
River Action’s legal challenge
In July, River Action launched its legal challenge over the Government’s failure to explain when it will trigger special administration for Thames Water and other failing water companies because of breaches of their performance duties.
That same month, the Independent Water Commission also recommended that a clearer policy for special administration be adopted.
Our legal challenge is simple: we say that the Environment Secretary has acted unlawfully by failing to publish a policy on when they will ask the High Court to put a water company in a special administration regime – a mechanism under existing legislation designed to enable the government to take action to deal with failing water companies.
What is special administration for water companies?
Special administration is a legal process for companies supplying essential services like water that are failing in terms of performance, finances or duties. It allows the government via an administrator to step in and take temporary control, ensuring operations keep running while offering a clean break from unsustainable debt and chronic underperformance.
Importantly, a special administration regime prioritises public interest – customer service, environmental protection and infrastructure investment – instead of existing shareholders and debt holders. By redirecting funds away from private profits and towards urgent improvements, it offers a route to restructure and refinance a water company for public benefit and long term sustainability.
The Government’s response
The Environment Secretary has now formally responded. Remarkably, it has been claimed again that a policy setting out the circumstances in which or the criteria by reference to which the Court would be asked to put a water company into special administration does not exist. The response simply states “There is nothing for the Defendant to publish”.
Evidence that a policy exists?
The Environment Secretary has maintained this position despite clear indications that a policy exists in some form. Most strikingly, in a recent Environment, Food and Rural Affairs committee hearing, the Minister for Water and Flooding was asked about the circumstances in which a water company would meet the threshold for special administration. She read out a “whole list” of thresholds that are apparently being used to determine whether special administration should be pursued by the government. This sounds remarkably like a policy; the very thing the government insists does not exist.
The Water Minister also said that “Thames Water has not met the threshold for special administration for going into special administration” on the “formal advice” she had been given.
Why transparency matters
Why is the government so reluctant to publish a policy on when it will use the regime specifically created to deal with water company failure? How much worse does it need to get at Thames Water before the government will trigger the process? The public has a right to know what policies and plans exist to protect bill payers, our rivers and the provision of essential water services.
This goes beyond Thames Water. It matters for the whole water sector. Having a clear policy on when special administration will be triggered means it will be seen as a credible tool that strengthens regulatory discipline, incentivises better water company performance and avoids political delays. This is crucial to restore public trust and provide certainty to investors. Everyone should know the rules and then they must be followed.
What next?
Now the High Court will decide whether to grant permission for our claim to proceed to a full hearing. In the meantime, River Action will continue to push for transparency around the government’s policy and plans for special administration when water companies fail – and for leadership when it comes to Thames Water.
