Thames Water: Ofwat must correct the government’s legal errors

After the environment secretary, Angela Eagle, claimed that Thames Water isn’t “technically insolvent”, Good Law Project have called on Ofwat to make sure ministers stop misleading the public.

Eagle’s claims are just the latest in a barrage of excuses from a government that refuses to put the failing water company into special administration.

Officials have been briefing that they’re unable to take action because the negotiations between Ofwat and a group of creditors who want to take the firm over mean that the firm is neither insolvent, nor “unable to provide a basic level of service”.

But Thames Water has been operating in fundamental breach of its licence for more than two years. It can only carry on because the regulator accepted the plan it came up with in 2024 to restore its finances and improve its performance. And there’s no reason for Ofwat to keep waiting. The regulator has full authority, and a clear legal duty, to call time on this failing plan. This would make the company insolvent at the stroke of a pen.

Officials have also claimed that the government would have to pay a “significant price” to take Thames Water into special administration, because of a so-called “legal duty to maximise returns to the creditors”.

But the Water Industry Act 1991 is clear. When a company goes into special administration, the overriding duty is to make sure that water and sewage services are properly delivered. Any bid – like the current proposal from Thames Water’s creditors – which can’t deliver services that are up to scratch is legally irrelevant, regardless of whether it is the best result for creditors.

Ministers and officials have been polluting the debate around Thames Water with legal errors, so Good Law Project have written to Ofwat, demanding the regulator tackles this misinformation.

For James Douglas, head of legal at Good Law Project, Ofwat and the government have been letting Thames Water off the hook for far too long.

“The law gives ministers and regulators the tools they need to act today,” Douglas said. “So why aren’t they doing something? There may be other reasons why the Government is not ready to see Thames enter special administration, but if so it should come clean about them, rather than shelter behind alleged legal roadblocks that don’t stand up to scrutiny .”