By James Wallace, CEO of River Action
Thames Water into the mainstream
Andy Burnham’s campaign in the Makerfield by-election has helped shift the political dial on the future of Thames Water, bringing the case for intervention firmly into the mainstream. That debate took a dramatic turn this week when the Environment Secretary opposed Thames Water’s latest market-led £10 billion rescue plan, warning that the proposals “don’t do enough to protect consumers and the environment”.
The Government is right to put the public interest first and now needs to follow these words with decisive action.
The UK’s largest water company is carrying almost £20 billion of debt. Thames Water remains locked in restructuring and refinancing negotiations with creditors and investors, including hedge funds and distressed asset investors who, like vultures picking over the bones, are searching for fresh flesh to enrich financiers at the cost of water quality and public health. Reports suggest up to £749 million could be paid in fees, interest and advisory costs to creditors, bankers and lawyers as part of the latest restructuring proposals.

This is not how a vital public utility should operate.
A company providing essential water and wastewater services to 16 million people should not be a money-making machine for international markets. Yet years of excessive borrowing, financial engineering and regulatory failure have left Thames Water in precisely that position.
At the same time, rivers continue to suffer. Since the start of this year, Top of the Poops estimates that Thames Water has discharged sewage into waterways for more than 123,000 hours across its catchments. It has repeatedly breached environmental standards and has had the cheek to ask Ofwat to let them pollute without further fines until 2030 as part of the current rescue deal being proposed by its creditors. Public trust has collapsed and still the Government fails to put an end to this charade.
Thames Water has been failing for years. The question is no longer whether intervention is needed, but why it has not happened already, and when will the Government take control?

The Special Administration Regime
Parliament anticipated circumstances like these when it created the Water Industry Special Administration Regime for the privatised water industry over 30 years ago. The regime was designed for situations where a water company is unable or likely to become unable to fulfill its obligations to customers and meet its statutory and regulatory responsibilities, including those relating to the environment.
Yet despite Thames Water’s financial instability, environmental failures, deteriorating performance and colossal debt pile, ministers and Ofwat have so far been unwilling to use the regime designed to protect customers and the public interest
Some have claimed special administration would amount to a taxpayer bailout or take money away from the NHS. That is simply wrong.
The Special Administration Regime was designed to protect customers, essential services and the public purse while a failing company is restructured. Thames Water would continue operating and generating revenue from customer bills throughout the process – it’s a geographic monopoly with guaranteed income. Water would still flow from taps and wastewater services would continue, and the abysmal sewage pollution track record can start to be reversed.
The real bailout is what we are seeing now: a failing company burdened with massive debt, desperately searching for new financing while creditors, bankers and advisers collect hundreds of millions of pounds in fees all at the expense of billpayers.
And to rub faecal matter into our weeping wounds, Thames Water investors are demanding leniency on their criminal pollution: no fines for years while they pollute and extract yet more pounds of flesh from this already emaciated utility. That amounts to a public subsidy for the destruction of our treasured river and the communities that depend upon it, all to make a few quid for faceless and unscrupulous money men.
Special administration shifts the priority away from private interests and financial engineering and back towards customers, infrastructure and the environment. It would give the utility the opportunity to stabilise, restructure and invest in the public interest rather than simply service ever-growing and expensive debt.
The debate should therefore not be framed around how creditors are repaid under special administration, particularly when administrators can write down much of the accumulated junk debt and the Treasury would be first in line to recover costs. It should focus on what structure for Thames Water would best secure public benefit and environmental protection in the future.

A New Future for Thames Water
The immediate priority is restoring accountability, public trust and critical infrastructure. If Thames Water enters and exits a Special Administration Regime, the Government would have choices about its future ownership and investment model. Those choices should be guided by Independent Water Commissioner Sir Jon Cunliffe’s recommendation to attract long-term, low-risk, low-return investors and could include mutual, municipal, not-for-profit or public ownership models. All of these options have been tried and tested across the world.
For too long, water companies have operated in a system where environmental damage has been tolerated, regulatory enforcement has been inadequate and investment in critical infrastructure has fallen short of what is needed. The consequences are visible in rivers, lakes and coastal waters across the country.
That is why River Action launched legal proceedings seeking clarity from the Government about when the Special Administration Regime will actually be used for a failing water company like Thames Water.
If not Thames Water, and if not now, then who and when?
Andy Burnham has helped bring this debate into the political mainstream. That is welcome.

The time for debate is running out.
The Government and Ofwat should act now to place Thames Water into a Special Administration Regime to protect customers, safeguard rivers and restore confidence that essential services are operated in the public interest. Clarifying the policy and triggers for the Special Administration Regime would also demonstrate to the wider industry that failing water companies will face meaningful intervention.
Parliament created the Special Administration Regime. Thames Water should be the first company to enter it.
The question now is whether ministers are prepared to use the powers they have or risk yet more outrage from an already disenfranchised electorate.
Find out more about our campaigning work for the River Thames here.

















