If the government needs to take over Thames Water, the burden of its enormous $14 billion debt will fall primarily on British taxpayers, a Labour MP has warned.
The largest water business in the UK is in negotiations to obtain additional cash to prevent total failure.
Thames Water, which provides services to a fourth of the UK’s population, has “significant issues to address,” including its “financial resilience,” according to water regulator Ofwat.
Following yesterday’s crisis negotiations, the government declared that should the corporation collapse under the weight of its debts, it is prepared for any scenario, including temporary state ownership.
But Labour MP Darren Jones, chair of the business and trade committee, warned the company is ‘too important to fail’ and if it does, ‘the taxpayer is going to have to take it on’.
He told BBC Breakfast: ‘We saw this happen last year with the energy supply companies and we’re now unfortunately seeing it with the water companies.
‘It means that taxpayers will be exposed to the debt and the running costs for a very large company in Thames Water.
‘We saw again with the energy supply companies that we have to take on the cost of running these failed businesses, which is why it’s so galling for taxpayers when they see that regulators and ministers have failed to spot this problem before it all blew up.’
Mr Jones blamed Thames Water’s failures on the way it has distributed its cash and further criticised government ministers and regulators for not taking responsibility sooner.
He said: ‘We can’t just keep having parliamentary committees looking at these issues once everything has gone wrong.
‘We need ministers to take some accountability for the quality of our regulators and the supervision that those regulators have over the executives running these companies.
‘If companies like Thames Water hadn’t indebted itself so much, taken out so much wealth from the business and given it to its overseas shareholders and rewarded its executives so handsomely, whilst not investing in the network, we wouldn’t be in this position in the first place.
‘Ministers and regulators should have known that before everything went wrong.’
The Consumer Council for Water (CCW) said Thames Water should be communicating more openly about its finances with customers.
CCW senior director Mike Keil said: ‘Thames Water made a commitment to its customers to make significant improvements through its turnaround plan and people need reassurance that is going to be delivered.
‘The company should be communicating more openly about its finances with its customers, who want to see a marked improvement in Thames’ customer service and wider performance.’
He added: ‘All water consumers should be reassured that there are robust regulatory safeguards in place to make sure people’s taps keep running and their services are protected.’
Tory health minister Neal O’Brien insists the government ‘does have contingency plans in place’ if the worst happens and urged customers not to worry about the situation.
He told Sky News: ‘Absolutely nothing is going to happen in terms of either their bills or their access to water.’
Business secretary Kemi Badenoch said she was ‘very concerned’ about the future of the company and said ‘we need to make sure it survives as an entity’.
Ofwat said Thames Water still has access to funds: ‘It recently received an additional £500m from shareholders and has £4.4bn of cash and committed funding.’
The regulator also said it would continue to keep water companies’ financial resilience ‘under close scrutiny and work with companies to ensure they take action to ensure that they have the financial backing to deliver for customers and the environment’.
On Tuesday Thames Water chief executive, Sarah Bentley, unexpectedly quit after two years in the job.
The company hasn’t given a reason for Sarah Bentley’s departure – though it came weeks after she was asked to give up her bonus over sewage spills.