Andy Burnham Under Pressure to Nationalise Thames Water as Options Widen
Prime Minister asked to rip up Thames Water plans; experts urge emergency legislation, a new state-owned company or a court fight
By AXY Politics Desk ·
Key points
- Prime Minister Andy Burnham has told officials to rip up their plans for Thames Water and present more radical options.
- Richard Murphy wants emergency legislation and a new state-owned company set up within days, taking over the company's assets but not its debts.
- Ewen McGaughey says the government should be prepared to go to court to take Thames Water back into public control.
- Murphy says Thames Water is financially insolvent and may not survive into 2027, and that it is failing its regulatory duties on clean water and rivers.
- McGaughey estimates privatisation could cost bill payers up to £22bn extra from 2025 to 2030, or £176 a household a year.
Prime Minister Andy Burnham has told officials to rip up their plans for how to fix Thames Water and present him with more radical options for what to do with the stricken company. The instruction was reported on 21 October, and it came as commentators began setting out what those options could look like.
The pressure is coming from people who want the government to take the company out of private hands. Two experts have put forward detailed proposals. Richard Murphy, a tax accountant who is known as one of the architects of Corbynomics, the economic programme associated with former Labour leader Jeremy Corbyn, wants emergency legislation introduced immediately. Ewen McGaughey, professor of law at University College London, says the government should be ready to go to court to bring the company back under public control.
For the millions of households that rely on the company, the debate is not abstract. Thames Water supplies drinking water and takes away sewage across London and the Thames Valley. Any change in ownership would affect the bills people pay, the quality of the water coming out of their taps and the state of rivers and beaches near their homes.
What Burnham has asked for
The prime minister's request is unusual in its scale. Officials were not simply asked to tidy up an existing plan. They were told to drop it and come back with stronger choices. That signals that ministers are no longer willing to wait for the company's owners and creditors to find a solution on their own.
It is not yet clear from the source material which options Burnham will prefer, or when he will decide. What is clear is that the ideas now on the table go well beyond the usual tools used to manage struggling utilities, such as tighter regulation or a rise in the amount customers pay.
Why the company is in trouble
Thames Water was sold into private ownership in 1989, when the water industry in England and Wales was privatised. Since then it has been run by a series of owners and has carried a large amount of debt. The company is regulated by Ofwat, the economic regulator for water companies in England, which sets the limits on what firms can charge customers.
Murphy's central claim is that the company is financially insolvent. In plain terms, insolvent means a business cannot pay its debts as they fall due. He said there is real doubt about whether Thames Water can survive into 2027. He also argued that the company is failing in its regulatory obligations, including its duty to keep water supplies clean and to keep rivers and beaches clean.
Those failures matter because they are not only financial. A water company that cannot invest enough to fix leaking pipes, treat sewage properly or keep supplies safe is a problem for public health and the environment, whoever owns it. Murphy's argument is that the state cannot wait for a financial collapse to force its hand.
Option one: emergency state ownership
Murphy's plan has three main parts. First, emergency legislation would be passed immediately to protect the public's water supply. Second, a new state-owned company would be created, with a management team ready to go and all the necessary steps prepared to take over the existing company's systems. Third, that new company would need to be set up within days.
"There is no time to wait," Murphy said.
Murphy also set out a precise limit on what the state would take on. Under his proposal, the emergency law would nationalise the assets and undertakings of Thames Water, meaning the pipes, treatment works, networks and running operations, rather than the company itself. All of the company's financial liabilities, including its debts, would be left with the old company to settle. The government would not acquire them.
That distinction is important. Taking on the debts would mean taxpayers absorbing large sums owed to banks and bondholders. Leaving them with the old company would, in Murphy's view, keep the public cost down while still putting the water service under public control.
He pointed to a historical precedent. In 1971, the government nationalised the Rolls-Royce aeronautical engineering company to protect the national interest after it collapsed into receivership. Murphy said a similar national emergency exists now to protect the supply of water, and that the 1971 move could be used as a blueprint.
He also made a stark political argument. "A prime minister who cannot deliver water to maybe a quarter of the UK's population would not be someone to be trusted with anything else. Andy Burnham has no choice but to address this matter, now," Murphy said.
Option two: a court fight
McGaughey's proposal is different. Rather than passing new legislation to take the company over, he argues the government should be prepared to go to court to take Thames Water back into public control. He is a professor of law, so his focus is on the legal route and on how far the state could go in challenging the company's current position.
A court route would be slower and riskier than emergency legislation, and the source material does not set out how such a case would be argued or how long it would take. What McGaughey's view adds is the idea that the state's powers and legal options should be tested rather than assumed to be out of reach.
What privatisation has cost, according to critics
McGaughey put a figure on the cost of the current arrangement. He noted that Moody's, the credit rating agency, estimated a one-off cost of £14.5bn in 2019 to bring water into public ownership. He argued that privatisation, by contrast, would cost bill payers up to £22bn extra from 2025 to 2030. He said that works out at £176 a household a year, in returns on capital paid to shareholders and banks, as set by Ofwat's price review.
Those figures are the heart of the public ownership argument. The claim is that a one-off cost to buy the company back could be less than the extra money drawn from bills over several years. The figures come from McGaughey's reading of the situation and the source material does not show how they were calculated in full, so they should be read as his estimates rather than settled facts.
It is also worth noting that the two cost figures refer to different things. The Moody's estimate was a one-off cost in 2019. The £22bn figure refers to a period from 2025 to 2030 and is described as extra cost to bill payers. Comparing them directly requires care.
What happens next
The source material does not say which option the government is leaning towards, or whether ministers have ruled any of them out. Analysts following the issue are likely to watch three things closely: whether officials produce new options in the coming weeks, whether any emergency legislation is drafted, and whether the company's finances deteriorate further.
Any move towards state ownership would raise hard questions about the price, the legal basis and the timing. It would also test how the government plans to keep water flowing and bills under control during the transition. Any move that goes through the courts would face its own delays and legal risks.
For customers, the immediate question is whether the service they rely on stays safe and reliable while the debate plays out. For the government, the question is whether it acts now, while the company's options are still wide, or waits until the choices are narrower and more expensive.
Questions and answers
Why is Andy Burnham being urged to act on Thames Water?
Burnham has told officials to rip up their plans and present more radical options for the company. Commentators argue the company is financially insolvent, may not survive into 2027, and is failing its duties to keep water clean and rivers and beaches clean.
What does nationalising Thames Water mean in this proposal?
Richard Murphy proposes that emergency legislation nationalise the assets and undertakings of Thames Water, such as its pipes and systems, rather than the company itself. All of its financial liabilities would be left with the old company to settle.
How much would privatisation cost bill payers, according to critics?
Ewen McGaughey says privatisation would cost bill payers up to £22bn extra from 2025 to 2030, or £176 a household a year, in returns on capital to shareholders and banks. He cites a one-off cost of £14.5bn in 2019 to bring water into public ownership, estimated by Moody's.
What could happen next with Thames Water?
The source material does not say which option the government will choose. Options under discussion include emergency legislation to create a state-owned company and a legal challenge to take the company back into public control.
Topics: Andy Burnham, Thames Water, Water nationalisation, Ofwat, UK water supply, Richard Murphy, Ewen McGaughey, UK politics
Sources: The Guardian Politics