Andy Burnham has told officials to come back with more radical options for dealing with the crisis at Thames Water, including ways of increasing public control without simply handing billions of pounds to the company’s creditors.
The prime minister has repeatedly said he wants Thames Water brought into public ownership, but ministers have been wrestling with the cost and legal complexity of doing so. The company remains heavily indebted, under intense regulatory pressure and dependent on a proposed rescue package from creditors.
According to The Guardian, Burnham has now asked officials to examine more aggressive alternatives after becoming frustrated with the limited choices presented to him.
One option being explored would convert more than £100m in outstanding regulatory fines into an equity stake for the government. Another could involve future penalties being waived or restructured in exchange for the state gaining greater control over the company.
Officials are also looking again at whether Thames Water could be forced into the special administration regime, a process designed for failing water companies that could ultimately allow the government to take control.
The move suggests Burnham is unwilling to accept the idea that the only choices are either an expensive nationalisation settlement or allowing creditors to continue controlling the company through a private rescue deal.
Burnham wants a route that does not simply reward creditors
Thames Water has become the most politically toxic company in Britain’s privatised water industry.
It serves around 16 million customers across London and the south-east but is carrying an enormous debt burden while facing repeated criticism over sewage spills, infrastructure failures, executive pay and shareholder payouts.
Burnham has been much more explicit than his predecessor Keir Starmer about wanting greater public ownership in the water sector.
Before becoming prime minister, he said Thames Water should be nationalised. Since entering Downing Street, however, officials have warned that an immediate takeover could expose taxpayers to substantial costs and lengthy legal disputes with creditors.
That has forced ministers to look for other routes.
The government’s problem is that Thames Water’s financial structure is extraordinarily complicated. Creditors have been trying to agree a rescue plan worth around £10bn, but Burnham has made clear that he does not want the state simply stepping in with public money while existing investors retain control.
His latest instruction appears designed to test how much leverage the government already has.
If unpaid fines can be converted into a public stake, ministers could potentially increase state influence without paying the full market price for the company.
More than £100m in fines could become a government stake
The proposal to turn fines into equity is particularly striking because it would effectively use Thames Water’s own regulatory failures to increase public ownership.
The company has accumulated substantial penalties after missing environmental and performance targets.
Earlier this month, Ofwat proposed that Thames Water should return £45.8m to customers through lower bills because of missed targets. Across England and Wales, water companies could be required to hand back £107m in total. :chatgpt-content-reference{index=”0″}
The government is now examining whether other outstanding fines could be used differently.
Rather than simply taking the money, officials could potentially exchange some of those liabilities for an ownership stake.
Another option would be to waive future fines in return for stronger public control.
Neither proposal has yet been adopted, and both would need careful legal and regulatory work.
But they show that Burnham is looking for ways to shift ownership without paying creditors whatever price they demand.
Special administration is back on the table
The other major option remains special administration.
This is the emergency regime available when a water company is unable to continue operating normally.
Under the system, administrators would be appointed to keep water and sewage services running while the company was restructured or transferred to another owner.
Officials had previously raised concerns that forcing Thames Water into special administration could be extremely expensive for taxpayers.
That led to reports in August that Burnham had temporarily stepped back from using the mechanism because of the potential cost. :chatgpt-content-reference{index=”1″}
But the government has not abandoned it.
Environment Secretary Angela Eagle is now preparing legislation that would make it easier for ministers to take distressed water companies into public control and remove legal barriers that currently make intervention more cumbersome.
That could include changing the special administration regime itself.
Some inside government favour a negotiated settlement with Thames Water’s creditors. Others are pushing for the more direct route of allowing the company to collapse into special administration and then rebuilding it under public ownership.
Burnham has asked officials to examine both.
A test of Burnham’s promise to break with privatisation
The Thames Water crisis has become one of the clearest tests of Burnham’s claim that his government intends to break with what he has described as four decades of neoliberal economics.
Water was privatised in England and Wales in 1989.
Since then, companies have invested heavily in infrastructure, but the sector has also accumulated large debts while paying out billions in dividends.
Public anger has grown sharply over sewage discharges, rising bills, leaks and executive bonuses.
Thames Water sits at the centre of that argument because of the scale of its debt and the importance of the population it serves.
Burnham has repeatedly suggested that essential utilities cannot be treated like ordinary private businesses when the public has no realistic alternative supplier.
That is why his government is looking at a wider model of public control rather than treating Thames Water as an isolated financial problem.
Creditors are still trying to avoid nationalisation
Thames Water’s creditors have been working on their own rescue package designed to stabilise the company and keep it in private ownership.
Their proposal involves billions of pounds of new money and debt restructuring, alongside changes to the company’s board and governance.
Supporters of that approach argue it would avoid the government taking on the financial risks associated with nationalisation.
Critics say it would leave the same basic ownership model in place and allow creditors to retain control of an essential public service.
Campaigners have previously described parts of the creditor-led rescue effort as little more than “shuffling chairs on the Titanic”. :chatgpt-content-reference{index=”2″}
Burnham has not formally rejected the private rescue proposal, but his latest instruction to officials makes clear that Downing Street wants alternatives on the table before any final decision is taken.
Water bill could make future takeovers easier
The government’s forthcoming water bill may prove just as important as whatever happens to Thames Water itself.
Eagle is expected to remove historic restrictions that make public ownership of water companies more difficult and to give ministers greater powers when firms fall into severe financial distress.
That would represent a significant change in approach.
For decades, governments of both parties largely accepted that the privatised ownership model would remain in place even when individual companies ran into serious difficulty.
Burnham’s government appears willing to challenge that assumption.
The question now is how far it is prepared to go, and how much public money it is willing to risk to do so.
For Thames Water, the immediate battle is over whether creditors retain control, the state gradually acquires a stake, or ministers eventually force the company into special administration.
Burnham has now made clear that officials should not return with only the safest option.
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Joe Connor is a UK-based reporter specialising in politics, public policy, and national affairs. He has previously contributed to publications including The London Economic (JOE Media Group) and Spotted News.
At The Daily Britain, he covers Westminster politics, elections, and breaking political developments, alongside in-depth analysis of policy decisions and their real-world impact.