Andy Burnham ‘right’ to look at changing insolvency laws to bring Thames Water into public control, campaigners say

Campaign group We Own It has said it is “brilliant news” that Andy Burnham is looking at ways to make it easier to bring Thames Water and other failed private companies into public control.

Reporting by The Times yesterday indicated that Burnham had shelved plans to bring Thames Water into public control.

While a Whitehall source told The Times that it would be difficult to put Thames Water into special administration (SAR) due to financial and legal challenges, the source added that SAR “is not off the table”. 

This morning, the Guardian said ministers had denied reports that Burnham had scrapped his nationalisation plans.

The Guardian reported that Burnham is looking at reforming the UK’s insolvency laws to make it easier to put utilities like Thames Water into special administration.

At the moment, companies can only be taken into administration if they are insolvent or unable to provide a basic level of service.

With US hedge fund creditors, Elliott Investment Management, BlackRock and others trying to take over Thames Water, the water company isn’t insolvent or unable to provide a service. 

Another issue is that once a company goes into administration, the administrator is under a legal duty to maximise returns to the creditors. 

This makes it difficult for the government to take ownership without paying a significant price.

A possible solution to the financial and legal challenges would be to use the upcoming Clean Water bill to change the terms of the special administration regime altogether.

Changes being considered include introducing new triggers for special administration, including lower financial thresholds and new environmental metrics.

We Own It, a campaign group that fights for public ownership, has welcomed the news that Burnham is reportedly looking at reforming the special administration regime.

Cat Hobbs, Director of We Own It, said: “The recent noise around the Thames Water scandal has been conflicted and confusing. Its US hedge fund creditors have, through the media, been piling the pressure on Ofwat and the government in an attempt to wrangle a deal that would allow them to pollute our waterways  illegally until the end of the decade. The public has been urging Andy Burnham to hold his nerve, and it seems that he’s listening.

Hobbs added: “It’s brilliant news that the Prime Minister is looking at insolvency laws to make it easier for failed private companies providing public services to go bust in the public interest. 

“For too long, faraway shareholders and creditors have racked up massive debt at our expense, failed the people who depend on those services, and played fast and loose with regulation. It’s crucial that the law enables the government to take back public services and assets when these companies fail.

“Changes to the special administration regime aren’t just about Thames Water, or even the water sector as a whole. Burnham has a huge opportunity to take back energy networks and cut bills, take back Royal Mail (saddled with £3bn of debt by its owner Czech billionaire Daniel Křetínsky) and hold private equity companies to account in social care. There should be no such thing as ‘too big to fail’. If private companies are failing, we need fit for purpose legislation to take them back at minimum cost.”

Hobbs also pointed out that when he was Mayor of Greater Manchester, Burnham took the city region’s buses under control. As part of this, he won a court battle with Manchester’s private bus companies.

“This shows the profiteers can be beaten, and he must stand up for the public again,” she said. 

Olivia Barber is a reporter at Left Foot Forward