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Thames Water

My Lords, I thank the Minister for answering on this Statement in your Lordships’ House. Thames Water has scandalised our country while asking its customers to pay more for less. For the sake of customers and taxpayers, we now need stability, not uncertainty. This Statement has not announced any change to the situation of Thames Water. There is a recapitalisation proposal and Ofwat must evaluate it. All that the Statement has announced is that the Secretary of State has sent a letter to Ofwat’s chair outlining her own views, but she has made it clear that it does not count as direction from the Government. What, then, does this letter hope to achieve exactly? What specific changes to the proposal does the Secretary of State want? When do we expect Ofwat’s decision, and how long will the public consultation on it take?

I want to correct the record on one point that was made in the other place. It was in 2006, under this governing party’s last Government, that Thames Water investors acquired and leveraged the company. Why was action not taken then to prevent this happening?

During the passage of the Water (Special Measures) Act, we proposed strong action against those responsible for failings. Can the Minister confirm that the penalty regime will not be watered down as reforms to the water sector continue to be rolled out? In those debates, we sought assurances from the Government and attempted to amend the Bill such that, in the event of a special administration regime, consumers would be protected from any liability in a bailout and the Secretary of State could impose leverage limits on water companies to prevent a recurrence of this appalling situation. The Government did not accept these amendments. Does the Minister have any regrets or a change of view on these points?

The Minister has herself stated:

“Investors would not have the confidence to invest money if the special administration regime could be triggered without allowing a company to rectify any performance issues

”.—[Official Report, 4/11/24; col. 1373.]

Can the House have the same assurance again, and will it still stand after the Makerfield by-election result and any future leadership change?

A special administration of Thames Water risks making lenders to Thames Water whole. That could represent a 50% gain on the current traded value of Thames Water debt. Can the Minister clarify that, in the event there is a special administration, this would not be the case? It is important that this situation is clear so we can be confident that the creditors negotiating to recapitalise Thames Water do not stand to win if these negotiations are unsuccessful.

There are still reckless calls for nationalisation. That could cost the taxpayer £20 billion and would drive away investors. It is money that could and should be spent on our nation’s defence, the first duty of any Government. Further to that, would a nationalisation process increase the risk that lenders were made whole and generated a profit out of the failure of Thames Water?

We keenly await the upcoming water reform Bill to address the failings of regulators, not just companies. The Government hope to introduce a new single regulator, integrating the functions of Ofwat, the Environment Agency, Natural England and the Drinking Water Inspectorate. How can we be confident that Thames Water’s process will continue to operate smoothly with this organisational uncertainty? As we have seen this week in other areas of the Defra brief, we desperately need the Government to get a grip of arm’s-length bodies, and we will scrutinise the provisions in detail when the Bill comes to this House. In relation to this question, I declare an interest, as my daughter is an employee of one of the funds named in the press as a participant in the Thames Water recapitalisation.

I have asked quite a few questions of the Minister, and I hope she is in a position to answer them and elaborate on the purpose of this Statement. I very much look forward to her response.