The FT notes this morning that:
The Treasury is seeking greater clarity on the cost of renationalising Thames Water ahead of a crucial court judgment this week that could decide the future of Britain's largest water supplier.
As is often the case, what is not said here is at least as interesting as the words published by the FT.
What this paragraph says is that, so far, the Treasury has not even considered the cost of nationalising Thames Water.
Presumably, as a result of the dogmatic objection of ministers, this issue has not been considered a strategic option, even though the need to consider this issue has very obviously existed for some time.
As a consequence, it is only now, in a situation of extreme stress, that the Treasury is turning its attention to something that was glaringly obviously always going to be essential.
As an indication of incompetence under the management of Rachael Reeves, this is quite striking.
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Surely there should be outline contingency plans for all sorts of scenarios especially when defence is climbing the political agenda
There is no way that the people they owe money to should have ever have been allowed to be involved.
The regulator has also failed.
Thee is a need to re-nationalise.
Reeves’ incompetence is staggering. You couldn’t make it up. It would be hard to believe. But here it is, nevertheless.
To be honest Larry, I am not staggered in the least. I refer you to lots of comments by Col Smithers on Mrs Reeves and her “capacities”.
The situation is quite normal, Reeves and the Treasury were hoping, hoping hoping that things would all turn out OK in the end (= no need to take over the slo-mo disaster – cos then they would – shock horror – have to do something). That is the problem you see, they would have to do something & Rachel-from-accounts is not good at that (neither come to that is the rest of the Starmer crew). They are all managers, good provided things (events) don’t happen & it is all “steady as she goes”. Wonder how many of the judges have had a shit experience with Thames Water?
Thank you for the shout-out, Mike.
The Thames Water catchment area is home, if not second home, to many politicians, wannabes, media types etc. It’s not likely that many won’t have had bad experiences.
Former British official Aurelien reckons that the default in Whitehall and elsewhere is to do nothing, except in cases that involve bleeding (if it bleeds, it leads), and let situations play out.
I reckon that it’s not just Reeves, but Starmer and the rest of the gang, too, are terrified of setting a precedent and upsetting the, especially US, donors they court. The officials are little better as they need a retirement nest egg.
Further to last week’s post about Reeves and her acquaintance with the truth, we forgot her claims to be a junior chess champion.
She wasn’t…..
I think I win a class chess championship at primary school. Not many played. She was, maybe, that good.
“if it bleeds, it leads”
adding to Col Smithers observation,
known-knowns – TW treatment works very poor. TW catchment – vast. Cloud-rivers happen regularly. Tic-toc.
Cloud-river coincides with high tide (they happen on a regular basis high tides – driven by the moon).
Westminster becomes: Wezzie-on-turd, undergound becomes an overflow/turd storage system.
I’m not wishing this on anybody but given the goings-on @ TW does anybody think their management have the eye on the ball (or in this case – the sewage?)
Tic-toc.
Surely the obvious answer is that renationalising water will cost a lot less than leaving it in the hands of private companies?
No, it is WE that would like to know from HMT what the “cost” of nationalisation is. The point here is that government, within reason, can dictate what that cost is!
As I said in a previous comment, my suggestion is – Shareholders get nothing (they are expecting that); senior bond holders/lenders get 2.5% 40 year government guaranteed “Water bonds” (gilts in all but name). TW is then owned by us with a sustainable interest cost.
Now, we will all have to pay more for clean water….. but at least those higher bills will not be siphoned off to pay sky-high debt servicing costs under the proposals from Hedge Funds.
I would also note that an FT editorial (yesterday??) called for SAR to end the current nonsense.
PS….. this underscores “the price of everything, the value of nothing” approach at HMT so clearly and shows why it is so destructive.
All noted.
But the FT was very specific about temporary nationalisation.
“Temporary”….. a lovely word that can mean anything. My bet is that once in SAR it never goes back to private ownership.
It has a court deal this morning
Yes – just seen it. So, the loan is “legal” – does not make it sensible. The government could, if they choose, to put it into SAR… but will they? Probably not.
What we need to do is take a VERY careful note of the small print on the new loan. It is highly likely that we will be back at this point in a year’s time (who is going to put in fresh equity?) and I would hate to see Elliott taking all the high interest rate and fees now and then getting a full payback under some “super senior loan” deal made now.
SAR is clearly the better choice
“The ruler is not truly wise who cannot discern evils before they develop themselves.”
(Niccolo Machiavelli)
Thank you, Richard.
Not unrelated: https://www.nakedcapitalism.com/2025/02/who-is-driving-the-global-privatization-of-domestic-infrastructure.html?unapproved=4177230&moderation-hash=4ff75158ad42473def33651a73646787#comment-4177230.
Thanks
More not unrelated: https://www.nakedcapitalism.com/2025/02/we-must-fund-oppositions-properly-to-save-democracy.html?unapproved=4177306&moderation-hash=a0c3277928b0b012161178f141d6a546#comment-4177306.
Noted
I appreciated the co0mments by you and Aurelian – all being appropriate
I think that the cost to nationalise the railways in 1948 (when Britain was broke and recovering after World War II), was £0.
The government merely issued bonds that it repaid over the next 50 years.
The government can always repay its expenditure with future income, instead of any surplus being paid out as profits to shareholders.
I don’t understand why they don’t just let it go into administration.
That is what happens to ‘normal companies’, e.g. Carillion, Marconi (GE) etc.
The treasury, or someone else, can buy the business from the administrators, debt free at that point.
Or am I being seriously naive?
I doubt it would be debt free.
Read Clive Party’s comments.
Purchased out of bankruptcy, the normal situation is that the purchase price paid is distributed to creditors on an approximately pro-rata basis (yes, I’m simplifying), but at that point all existing debt is cancelled. Why would Thames Water be any different? Isn’t it just a question of beating all other bids the receivers procure?
There are special rules for water companies
And these creditors have taken security for their debts
I suspect that the price can be anything that the government chooses it to be. For the simple reason that the government can begin publicising what the cost of failure for TW’s past, existing and future failures will be. That will reduce the value that anyone else, except the government, would be prepared to pay.
It’s also time that the cost of TW’s true externalities and the need to pay for compensating for their failure to maintain their infrastructure is made clear to everyone. That would change the ‘value’ that people see in TW.
Time the government and the regulator did their job.
The SAR rules for the administration of water company have a big imapct on this.
I’ve just had a look at the SAR rules (or a precis of them)… SAR rules apply when the Administration is invoked.
My point is that the cost of utilities failing to provide adequate service has not been set at a level that encourages, motivates or demands good behaviour. That should be changed as a matter of urgency – and made public. So the ‘rules’ for the expected failure for non-compliance should be made public now – before the SAR needs to become involved.
This acceptable level of performance (including a limit on the incidence of sewage discharge/overspill) and the costs associated with non-compliance (for example, based on the ‘opportunity saved’ by the company failing to invest in adequate solutions) should be made clear. Otherwise, it appears that companies will invest the minimum without any concern for what they are supposed to be doing. We have a situation where the main role of the utility is to manage their regulatory positioning – not service delivery.
With the cost of non-compliance made as a suitable level (more than the cost of doing their job properly), any future bailout will be in a position to take that into account in their evaluation of assets. Provisions should be put in place in the event that utility companies are ‘unable’ to provide verifiable measurement data or their performance. We need to insist on this type of scrutiny now.
Setting the bar high will be expensive – but then everyone can be clear about what it is that is being demanded (and needs that level of funding).
The bar should be very high
Water is fundamental
I just hate the idea of solely nationalising failing companies. It’s privatising the profits and nationalising the losses. Should be across the board of all water companies.
Thank you for your patience and tolerance, Richard.
Again, not unrelated: https://www.gov.uk/government/speeches/defence-secretarys-speech-on-defence-reform–2. What is it about these politicians, many of whom have not “worked” outside politics, but think the government is a business? McFadden is another.
That’s a very weird speech.
It was all very basic management accounting, at best. The6 think that’s innovation?
Just noticed this via an X post from Prem Sikka.
“Treasury to hand Bank of England £130bn in next five years in stealth subsidy to bankers”
https://neweconomics.org/2025/02/treasury-to-hand-bank-of-england-130bn-in-next-five-years-in-stealth-subsidy-to-bankers#
That’s from quantitative tightening – on which Prem and I share a view. We are old friends for a reason.
I have also just noticed this from last week:
“Memorandum of Understanding Between HM Treasury and the Bank of England 2025”
“HM Treasury and the Bank of England have updated the 2018 Memorandum of Understanding on their financial relationship and published a Joint Statement. ”
https://www.gov.uk/government/publications/memorandum-of-understanding-between-hm-treasury-and-the-bank-of-england-2025
I did blog that…..