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Put Thames Water into special administration, Lib Dems tell ministers

Thames Water should be put into special administration by the government and reformed as a public benefit company, the Liberal Democrats have said.

Sarah Olney, the Lib Dems’ Treasury spokesperson, has called in a parliamentary debate for the biggest privatised English water company to be wound up under legislation that has recently been updated by ministers.

It makes the Lib Dems the first mainstream political party to say the struggling company must be taken over to secure water and sewerage services for 15 million people.

Thames Water is seeking a shareholder bailout of £2.5bn to the end of the decade to stay solvent, but it wants Ofwat, the water regulator, to allow it to increase customer bills by 40%, pay higher dividends and face lower fines for pollution in order to secure the shareholder investment.

Olney said in parliament: “Thames Water is no longer a functioning company and the government has a choice: either bail them out with taxpayer money or listen to our calls to put them into special administration to then be reformed into a company for the public benefit.

Thames Water declined to commit extra funds this week to a £180m industry-wide initiative to fast-track efforts to reduce sewage pollution in England’s waterways. Its parent company has been told by its auditors that it could run out of money by April if shareholders do not inject more cash into the company. It needs to repay a £190m loan due in April.

Special administration can be triggered if a company cannot pay its debts or is not performing its statutory requirements.

“The final straw was this week, when Thames Water bosses refused to stump up the cash for new sewage investments,” said Olney. “It was shocking that Conservative ministers just let them get away with it.”

The government is drawing up an emergency plan, known as Project Timber, in the event of the collapse of Thames Water. But Olney said ministers must use their recently updated water insolvency legislation to put the company into special administration.

This can be triggered by the secretary of state or Ofwat. Olney said with the company unable to pay its debts, and recusing itself from new sewage investments, the threshold for special administration had been met.

Under the updated water insolvency legislation the company can be taken over as a going concern to make sure that water and wastewater services continue for 15 million people. The taxpayer would not be liable for the debts, which would stay with the holding company, according to independent analysis of the updated legislation by the House of Commons library.

Olney said the company, once in special administration, could be reformed as a public benefit company, where “profit is no longer put above environmental goals”.

Olney asked the government to provide details of Project Timber. In response, Mark Spencer refused to comment specifically on Thames Water, citing “market sensitivities around private companies”. The environment minister said “the government does have a plan” to support companies in essential services such as utilities or banking “in moments of distress”.

He said: “The government’s priority is the ongoing provision of water and wastewater services.”

Thames Water admits in its latest business plan, which has been submitted to Ofwat for approval, that it has overseen the “sweating of assets” and allowed its infrastructure to decline over decades because it has stretched the life of the assets, repairing rather than replacing.

It is promising to invest £4.7bn to tackle the decline of its infrastructure but says to fully repair its sewers would cost £1.5bn and its sewage works £2.2bn. Thames says it will not be able to deliver the full extent of the investment into its ageing assets nor meet the environmental obligations it had wanted to meet by the end of the decade.

The company is also under investigation by Ofwat and the Environment Agency for suspected illegal sewage discharges from many of its treatment works. The Ofwat investigation, which is due to report within months, could impose multimillion-pound fines on Thames. The company admits that 157 treatment works are non-compliant.

Thames Water declined to comment.

A government spokesperson said: “Water companies are commercial entities and we do not comment on the financial situation of specific companies as it would not be appropriate. We prepare for a range of scenarios across our regulated industries – including water – as any responsible government would.”