Starmer plots to raise bills to fund Thames Water bailout
SIR KEIR STARMER is planning to allow water bills across the country to be raised to pay for a government bailout of Thames Water.
New legislation will let the Government charge all water companies the full £10billion cost if ministers decide to take over the struggling firm. These charges would probably be passed on to consumers in the form of higher bills.
It comes after the Government’s decision to scrap the winter fuel allowance for the vast majority of pensioners, cutting them off from help with their energy bills. Last night, ministers said the new powers were a last resort and would only be used if the Government could not find a buyer for the company who would agree to absorb the costs.
Thames Water has more than £15 billion of debt and said in July that it only had enough money to trade until the end of May 2025. Last month, the company said it needed to raise customer bills by nearly 60 per cent by 2030, despite the regulator Ofwat saying increases should be capped at 23 per cent.
Critics say that Ofwat is making the company “uninvestable”, meaning it is more likely that the Government will have to step in to take it over. It is believed such a bailout would cost £10billion over a decade. An industry source said: “Ministers are stepping up preparations to take over the running of Thames Water, with all bill payers in England set to pay the price. Letting Thames enter into special administration would defeat the stated purpose of Ofwat’s hardline approach, which is to protect consumers from higher bills.”
Although the Government has ruled out nationalising Thames Water, ministers could be forced to step in through a Special Administration Regime (SAR) if the company fails to attract the investment it needs to stay afloat. New powers in the Water (Special Measures) Bill will give ministers the power to pass the costs of the intervention on to other water companies. Supporting documentation makes it clear that the powers apply to all water companies, not just those taken into special administration. The new policy was not highlighted when the legislation was unveiled last week by Steve Reed, the Environment Secretary.
A source in the environment department said that the powers to pass costs on to the companies would be a last resort. They said that in the unlikely event that the Government could not get the full cost of the company in a private sale, it would consult on how to raise the money to pay for the shortfall. Analysis this month found that taking over Thames Water would cost the Government a third more than it has saved by cutting the winter fuel allowance – £10billion compared with £7.5billion over five years.
If the full £10 billion cost of intervention was fully transferred to bill payers, more than £200 could be added to the average bill over the five-year period.
A Defra spokesman said: “In the unlikely event of Special Administration Regime, these new measures in the Water Bill will protect taxpayers. This Government will always act to protect customers and the public.”