Future of Thames Water

Angela Eagle Excerpts

Tuesday 6th January 2026 Westminster Hall

[The Minister for Food Security and Rural Affairs (Dame Angela Eagle)]

It is a great pleasure to serve under your chairmanship, Mrs Harris. I do not know whether it is down to you, but it is now much warmer in this room than it was in the last Parliament when I was chairing such debates. I regularly left thinking that I had developed frostbite, so whoever has managed to make that change has done a good job. I thank the hon. Member for Oxford West and Abingdon (Layla Moran) for securing this debate, and thank all hon. Members on both sides of the Chamber for the manner in which they have, very eloquently, made their important points in this debate. It is a pleasure to respond to it on behalf of the water Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), who sadly is unable to be here today.

This Government are committed to the transformation of the water sector. As the hon. Member for Epping Forest (Dr Hudson) has just said, the industry is spending £104 billion of private investment on upgrading our crumbling sewage pipes and cutting sewage pollution. Is it not a pity that some of that investment did not happen many years ago? That was promised as one of the advantages of a privatisation that, as many people have said in their various eloquent ways during today’s debate, has essentially not worked. Through the Water (Special Measures) Act, we have driven meaningful improvements in the performance and culture of the water industry, as a first step—only a first step—in enabling wider transformative change across the sector.

Following Sir Jon Cunliffe’s report, we have announced our intention to do three things: establish a new single regulator, create a water ombudsman, and stop water companies from marking their own homework when it comes to pollution. The water reform White Paper, which—I have to tantalise hon. Members—is due very shortly, will set out our vision for the sector. Members will not have to wait very long; that is all I am going to say. That White Paper will form the basis of new water legislation, which we will introduce as soon as we get a place in the parliamentary programme to do so. The reforms will secure better outcomes for customers, investors and the environment, and will make the water sector one of growth and opportunity.

Turning to Thames Water, this Government will always act in the national interest, and we will work to ensure that Thames Water acts in the best interests of customers and the environment. We are working closely with Ofwat, which is in conversation with the London & Valley Water consortium, a group of Thames Water’s creditors. Ofwat will only agree to a plan that will ensure the best possible outcomes for customers and the environment.

[James Naish]

I think it was more a turn of phrase than anything else, but it was suggested earlier that customers were being treated as cash cows for servicing the debt of Thames Water. Will the Minister confirm that that is not the case, either for Thames Water or for other companies, because investment is ringfenced under the new legislation, and therefore customer money is being put into the infrastructure that matters?

[Dame Angela Eagle]

I can confirm that, and it was one of the first things that this Labour Government, when we were incoming, put on to the statute book as a priority, in order to prevent that particular abuse. Thames Water is now under a cash lock-up arrangement; only Ofwat can approve any further dividend payments. That restriction will remain in place until credit ratings improve. Nothing that is happening at the moment will allow the kind of behaviour that we have seen in the past, from this company and others, to continue.

[Charlie Maynard]

We have interest costs of 9.75% being paid. We have massive advisory fees coming out of the company. All the class A creditors’ legal fees—£15 million a month, give or take—were being paid for by Thames Water. To say that this is not all hitting the customers is not true. Who else is paying for this, if it is not ultimately the customers?

[Dame Angela Eagle]

I was talking about the specific point that my hon. Friend the Member for Rushcliffe (James Naish) made about ringfencing for investment, not about some of the costs of the current impasse at Thames Water. To go back to that, the Government will always act in the interests of customers and the environment, and ensure that Thames Water acts in those best interests too.

We are working closely with Ofwat, which is currently in conversation with the London & Valley Water consortium, which is the group of creditors that was referred to. Ofwat will only agree to a plan that will ensure the best possible outcomes for customers and the environment. We will continue to support engagement between Ofwat and the consortium, with a view to supporting a market-led solution for Thames Water’s difficulties, while ensuring that customers and the environment are protected.

Many hon. Members in this debate have talked about the potential for a special administration regime. Should Thames Water become insolvent, we would not hesitate to apply to the court to place the company into a special administration regime, but as the hon. Member for Epping Forest pointed out, that is not a cost-free option. This would ensure that there is no increased disruption to customers’ water or waste-water services. In line with our preparations for a range of scenarios across regulated industries, including water, officials from the Department for Environment, Food and Rural Affairs have selected a firm, FTI Consulting, as an adviser to help with special administration regime contingency planning. That planning is going ahead.

[Charlie Maynard]

Will the Minister give way?

[Dame Angela Eagle]

No, I must make this point, which is quite important in the context of the debate. There is a high bar for the use of special administration regimes. The law states that special administration can be initiated only if the company becomes insolvent—while Thames Water is living fairly hand to mouth, it is not currently insolvent—or is in such a serious breach of its principle statutory duties or an enforcement order that it is inappropriate for the company to retain its licence. Those are the only two things than can lead to the application of a special administration regime.

[Richard Tice]

Thames Water is not able to meet its financial obligations. The debt is trading at 5p in the pound. It says it is going to invest £20 billion in the next five years; it does not have the money. It cannot meet its obligations. While all that is going on, it is not repairing or investing in the pipes. It is bust. It is not meeting its obligations. It does meet those criteria, Minister.

[Dame Angela Eagle]

There is a process going on between the creditors and the company that must be allowed to finish one way or another. I have just said that, should Thames Water become insolvent, we will not hesitate to apply to the court to place the company into a special administration regime. Hon. Members on both sides of this Chamber should be reassured by that. We will continue to work with Ofwat to help support a market-led solution to the company’s issues of financial resilience and operational delivery.

[Charlie Maynard]

I concur with those views from the hon. Member for Boston and Skegness (Richard Tice), but can the Minister confirm that those discussions with class A creditors will not involve forgiving the company for its fines?

[Dame Angela Eagle]

There is an ongoing process that I cannot and will not comment on from the sidelines. What I have said is that the Government will ensure that any resolution comes in the interests of the environment and customers, and that is the criteria that the Government will apply, but I will not commentate on rumours from outside of the process in this place. It is important that we allow the process to continue to its conclusion, whatever that may be. I hope that Members are reassured that the Government will be ready to act and use special administration if we have to, should we get to that circumstance—but we are not in that circumstance yet.

I conclude by reiterating that this Government will always act in the national interest. We are clear that Thames Water must always act in the best interests of customers and the environment. We expect it to do that, and we stand ready to act if it becomes clear that it cannot.