Public ownership ‘not the answer' says Reed after Thames Water deal collapse
Keeping Thames Water and other utility firms afloat through public ownership could draw money away from the NHS, the Environment Secretary has warned.
Steve Reed said nationalisation was 'not the answer' to a failed bid to rescue the debt-laden utility, after private equity giant KKR pulled out of a deal which would have seen around £4 billion of new equity invested into the firm.
At the despatch box, Conservative shadow environment secretary Victoria Atkins accused ministers of having 'talked themselves out of' a rescue plan.
Thames Water faces around £19 billion of debt and the company's chairman Sir Adrian Montague previously warned the Commons Environment, Food and Rural Affairs Committee that there were 'hair-raising' moments in the last year when the firm had five weeks' worth of cash left before going bust.
At the despatch box, Mr Reed told MPs: 'The Government stands ready for any eventuality and will take action as required.
'We are not looking at nationalisation because it would cost over £100 billion of public money that would have had to be taken away from other public services like the National Health Service to be given to the owners of the water companies.
'It will take years to unpick the current model of ownership, during which time pollution would get worse and we know that nationalisation is not the answer – you only have to look at the situation in Scotland to see that.'
In his question, Labour MP for Norwich South Clive Lewis had earlier told the Commons: 'The collapse of KKR's rescue deal isn't a blip, it's a reckoning – a moment that exposes the complete bankruptcy of the privatised water model.
'This morning's interim (Sir Jon) Cunliffe review into the water sector confirms the scale of the crisis. He describes our water system, a regulated statutory monopoly, as now too risky for investors.
'Too risky – but it didn't seem too risky when shareholders were siphoning off billions in dividends while letting the pipes rot, rivers choke and the debt pile up.'
Mr Lewis urged the Government to 'stop fiddling, put Thames Water into special administration, strip out the debt, and begin the job of returning our water system – not just Thames – back into public ownership'.
Sir Jon recommended that 'to attract such long-term investors' into water companies, risks 'need to be lower than they are presently', ahead of a final report later in summer.
Mr Reed earlier said that 'the Government will respond in full to the (Independent Water) Commission's final report in due course and outline further steps to benefit customers, attract investment and clean up our waterways'.
Ms Atkins said Thames Water's 16 million water supply and sewage customers throughout London and southern England 'will be concerned at the news this morning that private equity firm KKR have pulled out of their rescue deal with Thames Water'.
She continued: 'According to a source close to KKR, one of the reasons they pulled out was because they were concerned about negative rhetoric directed at Thames Water and the rest of the industry in recent weeks by the Secretary of State and other ministers; in other words, the Secretary of State and his ministers have talked themselves out of this rescue deal.'
Ms Atkins asked whether the Government's options 'include a plan for temporary renationalisation', which she warned could dent Mr Reed's environment, food and rural affairs budget by up to £4 billion.
Mr Reed replied that it was not 'particularly clever to stand at the despatch box opposite and make up figures to attack', and continued: 'This Government stands ready for all eventualities but I will make no apology for tackling the poor behaviour of water companies and water company executives that took place under the previous government and that we are correcting.
'I mean, we even had stories that have been confirmed by water companies of previous Conservative secretaries of state shouting and screaming at water company bosses but not actually changing the law to do anything about the bonuses that they were able to pay themselves.'
The minister said the Government was working with customers, companies and investors to 'ensure that we have a successful water sector that works for the environment and for customers and for investors'.
Liberal Democrat environment spokesman Tim Farron said the company should go into special administration and emerge 'as a public interest company'.
He added: 'Thames Water's customers have been left in the lurch, and the Conservatives seem to think it's all because we've all been a bit too mean about Thames Water. The price must not be paid by the customers.
'Will he ensure that those who are responsible for making dreadful decisions rightly bear the cost instead?'
Mr Reed replied: 'There is a procedure to be followed for special administration.
'We stand ready should that be required in this case, or in any other case with regulated industries.'
Elsewhere in the debate, Labour MP for Eltham and Chislehurst Clive Efford suggested the Government should 'put this company out of its misery'.
Reform UK deputy leader Richard Tice proposed a plan to 'buy it for a pound – it's a good deal for the taxpayer – then it won't have to pay huge, egregious rates of interest, and the taxpayer and the customers will be the beneficiaries'.
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