Coffey: Government has full confidence in water industry’s financial resilience
The Environment Secretary’s remarks came as Labour accused the Government of ‘sinking’ the industry.
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Your support makes all the difference.Therese Coffey says she has “full confidence in the financial resilience” of the water industry, amid warnings that Thames Water’s struggles are “not an isolated case”.
The Environment Secretary said a “measured approach” is needed to “get through this difficulty” as she appealed for those who “do not know a lot about the water industry” and are “out of their depth on making some comments and speculation” to not get involved.
Labour accused the Government of “sinking the water industry” and urged Ms Coffey to rule out customers having to “pay twice for boardroom failures”.
Industry regulator Ofwat this week said water companies are planning to increase prices further for households in a bid to fund infrastructure investment.
The sector has come under increased scrutiny over financial uncertainty, dividend payouts and environmental failures.
The UK’s largest supplier, Thames Water, is continuing talks on fresh funding to secure its long-term future as it faces pressure over its roughly £14 billion debt.
Speaking at environment questions, Ms Coffey told the House of Commons: “I think it’s important to put on the record that the Government has confidence in the financial resilience of the water sector industry and we will continue to have those discussions that are important.”
But shadow environment secretary Jim McMahon said: “The Tories are sinking the water industry.
“Since Tory privatisation water companies have racked up debts of over £60 billion and every day we see 800 sewage dumps and lose over three billion litres of water in leaks. And the biggest leak of all? £72 billion paid out to shareholders.
“And now Thames Water is on the edge as the money dries up.
“So can the Secretary of State tell the House if she believes if this is an isolated case – yes or no?”
Ms Coffey replied: “I’ve already said to the House that the Government has full confidence in the financial resilience of the water sector.”
In December, Ofwat flagged five firms which it said it was most worried about.
They were Thames Water, Portsmouth, Yorkshire, Southern and SES Water.
These companies all have higher-than-average gearing levels – which mean they have a higher proportion of debt compared to their equity.
People know that Thames Water is not an isolated case - five companies are rated 'of concern' by the Government's own financial regulator
Ms Coffey said gearing for Thames Water “shot up when Labour was in government in 2007”, adding: “Now, it’s fair to say when the previous secretary of state issued a strategic policy statement to Ofwat one of the key focuses was about reducing gearing, that has not happened with Thames Water and Ofwat is still responsible and I’m still holding (them) to account on how that goes forward.”
Ms Coffey repeated she did not want to hear “speculation” or “misinformed” comments, adding: “It’s critical that we get the water company through certain stages and I’m confident the Government will do that.”
Mr McMahon countered: “Like the industry itself that response does not hold water.
“People know that Thames Water is not an isolated case – five companies are rated ‘of concern’ by the Government’s own financial regulator.”
Mr McMahon said he had written to Ms Coffey outlining six tests to protect billpayers, workers and taxpayers from “paying the price of a failing water industry”.
He said: “Will she finally act to protect the national interest and commit to those six tests and will she rule out customers having to pay twice for boardroom failures – yes or no?”
Ms Coffey said she had yet to see the letter before defending privatisation of the water industry, adding: “It’s critical that we continue to have a measured approach in how we get through this difficulty.
“He mentions other water companies, that’s why Ofwat has acted, it’s why new equity has come into a lot of the water companies and it’s critical that we continue to have that confidence.”