A cross-party committee of MPs has said the government should reject the creditor bid for Thames Water and put the debt-laden utility into temporary public ownership before it runs out of cash.
The Environment, Food and Rural Affairs Committee said it did not believe the opaque consortium of 100 hedge funds behind the bid had the public's interests at heart. The MPs argued that handing the country's biggest water company to its creditors would entrench the financial engineering that caused the crisis in the first place, rewarding the very investors who loaded the company with debt.
Thames Water serves 16 million customers and owes about 20 billion pounds. It has been fined heavily for polluting rivers with sewage, and its debts have left it teetering on the edge of collapse. The regulator Ofwat has been under pressure throughout the saga, with critics saying it failed to prevent the company borrowing heavily while paying out dividends, and that the regulatory system itself needs fundamental reform.
The committee's intervention is significant. Temporary public ownership, through a special administration regime, would allow the government to stabilise the company while a long-term solution is found. Supporters say it is the only way to protect customers and the environment; opponents warn it would leave taxpayers exposed to billions in liabilities and set a dangerous precedent for other struggling utilities.
The creditor bid has been shrouded in secrecy, and MPs said the lack of transparency was itself a reason to reject it. A consortium of hedge funds, they argued, would prioritise returns to investors over investment in pipes, reservoirs and sewage treatment, and would have little incentive to fix the pollution crisis that has so damaged the company's reputation.
Ministers have so far resisted calls for nationalisation, but the pressure is growing with every new revelation. With the company's cash reserves dwindling, a decision can no longer be put off. The committee's report makes clear that Parliament expects the government to act in the public interest, not the creditors' interest, and the coming weeks are likely to decide the fate of the country's most troubled utility.
The special administration regime the MPs favour has been used before for essential services, and supporters argue it is the cleanest way to reset the company's finances without rewarding failure. The government has so far preferred to let the market find a solution, but the committee's report increases the political pressure significantly. With an election cycle always in mind, ministers will be wary of being seen to bail out hedge funds. The coming months are likely to bring the issue to a head, one way or another, and the fate of the country's most troubled utility hangs in the balance.