Thames Water’s leadership must “carry the can” for the company’s shortcomings and not pass higher bills onto consumers after successive management teams failed to invest enough, Michael Gove has said.
The Communities Secretary branded the water company’s leaders “a disgrace” and claimed the firm had acted in an “arrogant” way towards its customers.
Bosses at Thames Water have admitted the firm could face the risk of emergency nationalisation as its funding crisis deepened after shareholders refused to give the troubled utility extra cash.
The group – the UK’s biggest water supplier, with 16 million households across London and the South East – revealed that its investors had pulled a £500 million funding lifeline that was due to be paid at the end of this month.
Thames Water blamed Ofwat, claiming that the regulator had made its business plan “uninvestible”.
It is understood that investors pulled the deal after Ofwat refused to bow to the water giant’s demands for a 40% bill hike for customers, an easing of capital spending requirements, as well as leniency on penalties for failing to meet targets.
Asked about the water company by broadcasters, the Communities Secretary said: “I think the leadership of Thames Water has been a disgrace. I think for years now, we have seen customers of Thames Water taken advantage of by successive management teams that have been taking out profits and not investing as they should have been.”
Mr Gove, who served as environment secretary between 2017 and 2019, said he had called out the behaviour of the company while in post, but claimed they “haven’t changed their ways”.
The Conservative MP for Surrey Heath added: “I have zero sympathy for the leadership of Thames Water. In my own constituency, I have seen how they have behaved in a high-handed and arrogant way towards the consumers who pay their bills.
“So the answer is not to hit the consumers, the answer is for the management team to look to their own approach and ask themselves why they are in this difficult situation, and of course the answer is because of serial mismanagement for which they must carry the can.”
The Government would monitor Thames Water carefully in coming months, according to Chancellor Jeremy Hunt.
The firm has £2.4 billion of cash currently available to it, which should see it meet funding needs for the next 15 months.
But its chief executive Chris Weston admitted that if no alternative funding could be found by the end of next year, then it could face the prospect of a special administration – which would likely see the taxpayer pick up the bill.
Asked by broadcasters if the Government was ready to step in to support Thames Water customers if necessary, Mr Hunt said: “The Treasury will continue to monitor very carefully what is happening at Thames Water.
“Our understanding is that the company is still solvent and today’s news should not have an impact on the services received by customers.
“Obviously, there are parts of the country where the service has not been up to scratch, including in my own constituency, and local MPs will continue to hold Thames Water to account in those situations, but overall we will continue to watch the situation very carefully.”
Meanwhile, Liberal Democrat leader Sir Ed Davey called for a special administration regime for Thames Water after the investment plan was pulled.
He told BBC Radio 4’s World At One programme: “If you had the special administration regime, you get it away from these owners who’ve been completely incompetent, you’d stabilise the firm and you’d keep the bills down.
“And it’s alright Michael Gove being cross, well where are the Conservatives in this? The Conservatives have failed to tackle this over all their time, and we really need now to get a grip of this.
“People are fed up of this sewage problem across our country – Thames Water is one of the worst examples of it – and they’re looking to the Government to take some action.”