Thames Water: Will government save water company from collapse?

inundated pipelines bursting sewers overrun now debt threatening to sweep Britain's biggest water company away hello I'm Sarah Bentley Thames Waters CEO not anymore we've stepped up our leakage activity to help us get back on track this year but it is going to be a challenge it's turned out to be a bigger challenge than Bentley thought last night the chief executive suddenly resigned leaving the government looking at the prospect of an emergency rescue the business is currently racing to find a cash injection as it struggles to manage the potential whole in its finances where is the Secretary of State literally one of the largest water companies in Britain potentially is going to go to the wall amid the cost of living squeeze signs of another consumer crisis keeps more pressure on the government leaks are leading to water shortages sewage dumping pollutes our Rivers our Lakes our seas and the only thing on the up there's debt at 60 billion pound I am the water Minister and uh secretary of state has full confidence in her minister in sending them to the dispatch course for information um debt to equity fell last year by four percent in the water industry actually making it more resilient Mr Speaker but higher up the packing order there was more anxiety though the details were a tad patchy and unclear uh well I'm very concerned obviously this is a commercially sensitive situation and I know that my colleagues across government are looking at what we can what we can do I don't know too much about what the plans are going to be I was concerned to hear that the CEO had resigned abruptly well I think what we've got here is the most extreme example of regulatory failure of the water industry you've got a company that has mounted uh up debt when it was privatized the industry was was almost debt free they paid out huge amounts in dividends to shareholders and yet we've been seeing sewage pumped into our Rivers Bill payers hit with higher prices but this is symptomatic of The Wider sector the company is owned through a complex series of structures by some of the world's most powerful pension and Sovereign wealth funds including the Canadian Pension funds BT's pension fund and the Chinese and Abu Dhabi Sovereign wealth fund since privatization it has accumulated 14 billion pounds of debt in total the water industry has borrowed 60 billion pounds while paying out a larger 66 billion pounds in dividends Regulators are there in Industries like that in natural monopolies to protect the public interest and I think it's very hard today to say that the public interest has been protected the chancellor summoned Regulators across five key Industries into Downing Street warning them companies need to treat their customers fairly and support them as Financial pressures prior lot there was talk of securing agreements reviews and reports into better competition but much of the detail wasn't new and Thames water's ability to stay afloat will be critical in keeping the reputation of Britain's Regulators on course well earlier I spoke to the Secretary of State for work and pensions Mel stride who was out encouraging parents on Universal Credit to take up new enhanced Child Care payments which starting today go up by almost 50 for those eligible so we started on that and I began by asking how many people he thinks will benefit from it well we know we've got 119 000 households who are already in receipts of of that kind of arrangement so of course potentially that can make a big difference to them we would hope that there will be tens of thousands more who will get involved in this offer because it's now much more generous so we are increasing the maximum amount available for support for child care if you're receiving Universal Credit by 47 so it's a huge increase and we're also tackling one other thing which is one of the barriers to getting involved in the child care support has been having to pay The Upfront payment in the first month and we're providing financial assistance to basically take that problem away everyone is deeply worried about paying for everything um right now and and obviously the phrase that has upset a lot of people is which is soon act telling people to hold their nerve do you think that was tone deaf I think what the Prime Minister was very clearly saying is to underscore the importance of getting inflation down and that it's not easy to do so there are difficult choices that have to be taken in order for that to happen but we are absolutely determined to halve inflation by the end of this year how and that well firstly by having uh the bank of England using monetary policy and supporting them in that instance so the government firstly has got to have an accommodative uh fiscal policy that doesn't cut across or pull in the wrong direction against that the government's also going to have to make sure the public sector salary wage increases are at a sensible level so the honest answer is that you want people to feel the pinch even more you know you are saying people are going to have real terms pay cuts again because you're not going to be able to meet inflation and in order to bring inflation down and all you need you need money out of people's pockets what what we're doing at actually supporting those who are most vulnerable and those who are feeling the squeeze the most so my department has sent out about 8 million payments over this year will be 900 pounds to 8 million low income households 150 pounds to 6 million disabled people 300 pounds in December to pensioners we put I put up the benefits generally by 10.1 percent in April pensions went up by 10.1 percent so you've got a benefit system that helps people at the bottom but for most people they're going to be worse off it's going to be more Falls in living standards so that's how you deliver us so how we deliver falling falling in inflation which by the way you're not really delivering at the moment so so falling inflation is key to delivering for everybody because it affects all of us so if we can get and I'm confident that we can inflation to halve over the year that will be the single most important uh act that we can achieve as a government the other big economic problem today is the utilities Thames water might be going bust privatization has been a disaster hasn't it these things no no I don't think it has been an absolute disaster and well in fact if you look at uh the security of Supply it's much more secure uh than it was if you go back to the days when it was nationalized now that's not the same thing as saying there aren't significant challenges going forward and that's why AI we have given off what powers to make sure that if Dividends are being paid they're not being paid on the back of environmental damage that they are bonuses well paid in dividends and billions have been taken on that none of which exist well the second one that I was going to make was that there is a very clear plan as you will know 56 billion pounds worth of investment over the coming coming period to make sure that we get on top of across the sector the issues of sewage discharges but this had to pay is going to take a massive hit if Thames water goes under it's billions in debt and and a small number of people have become very wealthy because of it well I I don't think it would be right for me to be drawn into commenting on an individual private company as Richard said that's biggest cheerleader do you really think it's working I think he inherited an extraordinarily different difficult and tough Challenge and in those circumstances I think what you need to look to in a leader is who is the best person that has the best chance of bringing us through this in the most um favorable way and I still remain to this day very clearly the opinion that that is him and we will do our absolute best to deliver on his priorities getting the inflation town getting growth going getting the debt down getting the NHS waiting list down and stopping those boats on the immigration front and that's what we're focusing on delivering I think because he said the list I have to point out that that list is not going well you haven't stopped the boats you're not getting inflation down okay let's down NHS waiting lists it's all going well you mentioned well no you mentioned the boats not all going wrong actually because we've seen a 20 reduction in the numbers uh coming across the short David Straits whereas across Europe we're seeing a 30 increase we've seen where we we've done the deal for returning people to Albania we've seen a 90 plus drop in the number of albanians coming across and making that very dangerous Journey very sadly uh people are dying in the process and I I want see an end to that and we are making progress and there's a court judgment as you know around the Rwanda policy let's see where we are at the end of the year but my view is we are making progress nostril thank you very much thank you well joining me now is labor and Pete Darren Jones which has the business and trade select committee let's come to Thames water what what should the government do well if Thames water goes bust the government's going to have to take it over but that's an outrageous outcome because Thames water should never have been in this position in the first place had there been adequate regulation of their conducts right I mean Labor's policy used to be to nationalize water then it's not anymore because you said it's not a good use of taxpayers money if the business is bust you may as well nationalize it well we'll have no choice but to bring a business back into public we have no intention of it going private again well it depends entirely on the nature of the business and whether it's a viable commercial concern but you're right to highlight that where companies are too important to fail and taxpayers are asked to underwrite them with a blank check there should be much stronger regulation about the way in which uh senior Executives and shareholders run those businesses which has clearly not happened here but the government taking it over will cost a fortune for taxpayers won't it I mean it's got massive liabilities yeah this is why it's sickening because this has already happened in the energy market last year it now seems to be happening in the water uh sector ministers have either been asleep at the wheel or they didn't care about the risk in these important sectors and now taxpayers are bearing the brunt is is Thames water an isolated case or are there others like it coming down the tracks do you think I don't know is the answer but I would expect the government now to do a full risk assessment of the sector and other companies that are too important to fail to be able to be honest with Parliament about the what the risks are and therefore what their actions should be I mean as your committee looks at this you know so we looked at the end energy market last year and the failings of the energy regulator that led to billions of pounds of exposure to taxpayers and we highlighted a number of issues about the role of regulators in supervising the conduct of the people running these businesses that walk away with millions of pounds personally and have no consequences for their behavior whatsoever it seems to me that there are very similar issues now in the water sector do you think this changes the arguments around nationalization I mean labor has kind of walked away from it because I mean the argument was this is not a good way to spend money but if the taxpayer is on the hook anyway it's effectively subsidizing a lot of these businesses and they're making you know lots of people Rich doesn't it change the the Dynamics of that whole argument make nationalization slightly more appealing is an argument it depends what the argument is if you said to me is it proportionate now for the government to borrow hundreds of billions of pounds to nationalize the entire water sector I would say no because I think that there are measures that could be taken now to improve the quality of the regulation to ensure that this can't happen in other businesses and I just say that for people that think that nationalization is a silver bullet I have oversight of government that owns other organizations the post office is one example and the government owning things doesn't mean those businesses are going to be run well what what's about sourcing out the regulation which you identify clearly as at fault I mean should that be brought into government departments maybe make politicians accountable because at the moment you know you can blame regulators and we can't do anything about them so ministers absolve themselves of responsibility they say The Regulators are independent nothing to do with them that is an unacceptable answer when taxpayers are exposed to so much risk so absolutely the government should be updating the requirements of regulators improving legislation if they need to give them stronger powers around conduct and supervision but ministers have to take some responsibility for this but should the cabinet minister be responsible for the regulation of water you know and how can they be when they're supposed to be an independent regulator I'm happy maybe that whole system doesn't work well I'm happy for an independent regulator to do the job ministers may not be qualified to do that but we have to have a much tougher ask of regulators and ministers have to be accountable for the performance of those Regulators that's the issue ministers have said now for many years they're independent it's not our problem that's unacceptable I mean do you think you know anyone has been able to sort of actually take a sort of a more strategic view of these utilities that you know are effectively privately owned monopolies in more cases well The Regulators were set up originally when the utilities are privatized to you know have the consumer's interest at heart because there's not competition uh The Regulators economic hardship has exposed the extent to which they just don't work for consumers exactly but I do believe we can fix it so when we looked at the energy sector last year there were clear things the energy regulator could do to run the sector better and we've made a lot of progress at doing that but it shouldn't be coming from parliamentary committees like mine it should be coming from ministers ministers have been meeting today with Regulators but where's the action plan this this cumulative risk has built up in key utilities over many many years and they have to step in and and deal with it I mean we saw Jim McMahon for Labor asking a lot of questions today all their labor answers well the labor answer is that you must do that regulatory work first before you even think about exposing yourself to hundreds of billion pounds of additional debt for the government but this looks like a sort of a sudden problem I mean if if he was the cabinet minister well you want to kind of know what would he do to sort of sure but it shouldn't have been a sudden problem Minister should have known this as a problem Thames water for example has been in very high levels of debt for many many years has taken out enormous dividends for many many years has rewarded their Executives very handsomely for many many years this should not have been a surprise either to The Regulators or to ministers it's because they weren't paying attention Darren Jones thank you very much

Channel: Channel 4 News

Views: 101,490

Keywords: c4news, channel 4 news, thames water, uk gov, chancellor, jeremy hunt, water supplier, water, debt

Id: YyUdTyljMQI

Length: 14min 37sec (877 seconds)

Published: Wed Jun 28 2023