River Action is calling for the urgent use of special administration procedures for Thames Water.
Clean water campaigners launch legal action against Environment Secretary Steve Reed (Image: Getty)
Clean water campaigners have launched a legal challenge over Steve Reed’s alleged failure to explain when he will trigger special administration for Thames Water. River Action alleges the Environment Secretary acted unlawfully by failing to have or publish a policy on when he will use his power to ask the High Court to put a water company in the special administration regime (SAR).
This comes amid the deepening crisis at Thames Water, which is on the brink of collapse with £20 billion in debt. Emma Dearnaley, River Action’s head of legal, said: “Enough is enough. Why hasn’t the Secretary of State used special administration to fix the water sector, starting with Thames Water? The Government has the power but won’t use it, or even explain when it might trigger this process.
“Apparently, the Government has no policy at all. That’s a fundamental failure of transparency and accountability – and it’s unlawful.”
Special administration is a temporary insolvency and restructuring process for companies that provide essential public services like water, energy or transport.
It is designed to ensure continuity of service while the company is stabilised and restructured.
There is a bespoke SAR for the water industry, created in 1991 and designed to prioritise customers and services, putting financial interests second.
But special administration has never been used for the sector.
Ms Dearnaley said: “We need water companies that serve customers and protect our rivers, not prioritise financial returns to investors.
“Special administration creates the space for a fundamental redesign of the water industry with public benefit and environmental protection put at its heart.
“The Government should act decisively and use its powers to stabilise and reset, rather than continue to let Thames Water dig an ever deeper and costly hole.”
Mr Reed announced in a speech last week that regulator Ofwat would be scrapped, as part of measures to pull overlapping water regulation by four different bodies into one “single, powerful” regulator responsible for the whole sector.
He made the announcement in response to an independent review by Sir Jon Cunliffe which called for the move, as one of 88 measures to tackle problems in the water sector.
The review was commissioned by the Government to answer public fury over pollution in rivers, lakes and seas, soaring bills, shareholder payouts and bosses’ bonuses.
Leigh Day solicitor Carol Day said: “Our client has tried to understand the circumstances in which the Secretary of State would exercise his powers to bring the company, and others, into special administration.
“However, there would appear to be no policy, or if there is one then the Secretary of State won’t be transparent about it.
“Thames Water provides essential water and wastewater services to over 15 million customers – yet the Secretary of State seems to be operating in a vacuum on this important public interest issue.”
A spokeswoman for thge Department for Environment, Food and Rural Affairs said: “We are unable to comment on an ongoing legal challenge.”
By Emma Dearnaley, River Action’s head of legal
Thames Water is on the brink of collapse.
For decades, it has failed to invest in critical infrastructure, repeatedly broken environmental law and its licence conditions, mismanaged its finances, and lost the confidence of both investors and the public. With £20 billion in debt, it is now widely seen as uninvestable in its privatised form – leaving customers and the environment to bear the cost, with rising bills and sewage continuing to flow into our rivers and seas.
But it doesn’t have to be this way.
To solve the Thames Water crisis, the Government can use its legal power to activate a process called special administration. This is a bespoke mechanism for the water industry, created in 1991 to ensure the continued provision of essential water and wastewater services in the event of company failure, prioritising service continuity and the public over financial interests.
This can be done when a company faces insolvency and also when a company breaches its duties. It is the most effective and immediate way of solving the fundamental failures in the water industry and Thames Water’s failures in particular.
Special administration gives the time and space for a water company to stabilise and reset, with the opportunity to take a much wider view on its future form and put water services rather than profit at the heart of the system. It can enable a company to restructure, refinance, and redirect funds from investor payouts to urgently needed infrastructure upgrades. Crucially, this can all be done without exposing customers and at little cost to the public purse.
This Government has promised to clean up our rivers, lakes and seas. It has the power to start the special administration process in cases like Thames Water. Yet special administration has never been used. Why not?
That’s why River Action is bringing a legal challenge against the Government to make it explain when it will use special administration for failing water companies. Our legal case is simple: the Environment Secretary Steve Reed is legally required to have and publish a clear policy on special administration. In a letter to us, he has said he doesn’t have one.
It’s time for the Government to come clean – and for it to put Thames Water into special administration and out of its misery.
