Illustration by Tracy Worrall

8 min read10 min

What, exactly, does the word ‘control’ mean when applied to those entities that supply vital public goods?

Does it mean full nationalisation, with every decision in the hands of ministers and officials in Whitehall? Or does it rather mean that customers exercise a measure of control over their operation through ownership of a portion of equity? Or some other variant in which locally elected representatives take a golden share in the companies that serve their region?

These are not theoretical questions but are coming sharply into focus as Andy Burnham wrestles with what to do about Thames Water.

As of today, Thames Water supplies 16 million customers, owes more than £20bn and has been in breach of its licence for two years.

A large portion of the Labour Party would like to see the company – which critics say has become emblematic of the failures of utility privatisation – back in public ownership.

Its creditors, however, want to take over the company and keep it afloat by releasing tranches of cash to help the beleaguered firm.

The financiers are quietly optimistic. Industry sources suggest Burnham and the officials supporting him are pragmatic on the issue, and hope that the focus on control could reheat plans for the minister to hold a “golden share” in Thames Water, offering the government a veto while retaining private ownership of the suffering water company.

A concerted effort is being made by some in the City to understand Burnham’s policy brain. Some of Thames Water’s creditors have commissioned research into Burnham’s work on taking buses into public ownership in Greater Manchester, extrapolating out what it would mean for their financial interests.

They take heart from public comments by John Healey, the Chancellor, who insisted that ‘control’ need not mean full nationalisation.

“Some might claim that public control is public ownership,” the Chancellor told his audience, “but it’s broader than that.” What it meant instead was “local leaders and a stronger centre”, accountability for “fair bills, better services, investment that gets delivered”, and “an active state driving better regulation, quicker decisions”.

Within the Labour movement, two rival plans are circling ahead of the party’s conference.

On one side is Mainstream, the group co-founded by Compass and Open Labour. It did more than any other to get Burnham back to Westminster by criticising Keir Starmer’s economic policies from the left and encouraging bolder decision making from the government.

With an ally in No 10, the group is still singing the same tune. Mainstream supports public ownership of water generally, and believes that Thames Water should be put immediately into special administration.

Initially, Burnham struck a similar tone on water. In June, campaigning in Makerfield, Burnham told the Guardian that public ownership was “absolutely an option” and that “for Thames Water, that is what should be done”. By the end of August, the plan to put the company into special administration had gone quiet, with a Whitehall source telling the Times there was “no quick or clean solution without an enormous price tag attached”.

While Mainstream’s motion has been left open-ended for the interpretation of the new government, its motive is clear: a source close to the group says that the system now is itself an attempt at public control without public ownership, and it is not working.

Mainstream is careful to say this is not a confrontation, that it wants the government to succeed, and that the motion is deliberately open. It also does not expect to win. Under Starmer, it tried something similar on the two-child benefit cap last year, had its initial motion blocked but counted the overall shift in tone around the debate as a success.

“Copying the failed model of non-profits like Welsh Water doesn’t get around the questions of compensation, debt or legal risk”

The parliamentary case is led by Clive Lewis, whose own water bill had its first reading a week before the Cunliffe review was commissioned, and who secured an urgent question on the sector in June. He told the Commons then that this “was never a market failure” but “the market working as designed”. Allies of Lewis say that like-minded MPs are prepared to rebel if government proposals do not go far enough.

Lena Swedlow, the deputy director of Compass, tells The House that the left-wing pressure group is now campaigning with Labour MPs to push the government to more wide-ranging action.

“I think we got here because Ofwat and the Starmer-led government believed the creditors and the Thames Water leadership could get themselves out of this mess, which was short-sighted.

“It’s part of the larger theme of Starmer’s No 10 that they didn’t adequately prepare for power, and figures like Morgan McSweeney are now on record saying so. Fast-forward two years later, the hesitance to put Thames Water in special administration is as short-sighted and dangerous.”

Those supportive of implementing the special administration regime are “incensed” by the clear change in government language from public ownership to control.

However, the government is clear that the special administration threshold hasn’t been cleared, as of now. The law only allows it if a company is insolvent or in serious breach of its licence, and while creditors keep lending, Thames is not insolvent. “You either are, or you aren’t,” Environment Secretary Angela Eagle said this month. “And whatever people think of Thames at the moment, it isn’t technically insolvent.”

Another plan is that of the Co-operative Party, which Burnham recently became the first Prime Minister to represent.

A recent report by the Good Growth Foundation think tank, with a foreword by Labour MP Helena Dollimore, proposes a bill that would create a path to mutualisation by encouraging water companies to sell up to customers via a share exchange scheme. If they refused to comply, the bar for an enhanced special administration regime would be lowered.

As with nationalisation, the government is thought to have cooled on the co-operative idea, with industry sources expecting the plans to go nowhere.

Officials recognise that any attempt to mutualise would likely lead to the largest rise in customer bills, as investors would be unwilling to stomach any short-term losses without an equity stake. Investors agree, highlighting the mutualised Welsh Water as having the highest bills in Britain.

The left of the party is sceptical too, for the opposite reason. 

Mainstream says mutuals work well in many settings but that water needs something stronger, and that it is not clear mutualisation changes who owns anything.

Swedlow says: “Of course devolved and regional leaders should have a say in the future of water. But copying the failed model of non-profits like Welsh Water doesn’t get around the questions of compensation, debt or legal risk.”

One policy wonk highlights that, currently, the Co-operative Party, the Liberal Democrats and Reform all have policies to mutualise water, all with little clarity about what would actually happen next.

What seems sure either way is a significant downgrade in the powers of Ofwat, with responsibility set to be transferred to ministers. The regulator has not had a permanent chief executive since August 2025, and cannot have a successor until the government’s clean water bill is introduced.

The research of the financiers into Burnham’s bus plan seems to be beneficial – earlier this month, The Telegraph reported that regional bodies would be set up to oversee water companies, with a responsibility to hold company bosses accountable for bills and sewage.

As Burnham battles for control, water waits. For the moment, the sector once in the eye of the storm waits to find out the government’s decision and MPs wait to hear the direction of travel. 

Within a month of Labour’s conference in Liverpool, Andy Burnham’s government will have delivered its first Budget and Thames Water’s lenders will have decided whether to extend its emergency funding without a signed rescue deal. Labour’s new 10-year plan promising “stronger public control” of water is set to be delivered by the end of the year too. Here are the three leading plans circulating around Westminster.

Public ownership.

Mainstream, the Andy Burnham-affiliated campaign group co-founded by Compass and Open Labour, has drafted a conference motion calling on the Prime Minister to “urgently return water in England into public ownership”. Its paper, The Productive State, sets out the details: put Thames Water into special administration, restructure its debts and have it function as a national public water corporation, run at arm’s length from ministers and paying for investment by borrowing against customers’ bills.

A private solution.

London & Valley Water, a consortium of 100 investors holding £17bn of Thames’ £21bn debt, wants to take over the beleaguered firm. Its £10bn plan would write off billions of debt, add new capital and pay no dividends until 2035. In return, it wants leniency on penalties worth up to £1bn. In June, the then environment secretary Emma Reynolds said the deal did not go far enough – a month later, the creditors offered the government a “golden share”, offering a veto over important decisions and hostile takeovers. 

Mutualisation.

A proposal by the Good Growth Foundation, backed by the Co-operative Party and three Labour metro mayors, suggests a law giving water companies a choice: sell up to customers through a share exchange, or face a lower bar for special administration and leave it as a customer-owned co-operative. While it would keep the debt off the government’s books, investors say that borrowing costs and bills would rise without shareholders to absorb any losses.  

 

Andy Burnham is rumoured to make an announcement on Thames Water in his speech to Labour’s party conference (Alamy)

4 min read8 min

Speaking to PoliticsHome podcast The Rundown at Labour Party conference in Liverpool on Sunday, Eagle said the privatised system currently in place is not “working” and that she is “examining a whole range of potential options”.

Andy Burnham is facing calls to bring Thames Water into public ownership amid MP and public anger with the water company over its significant debts, rising customer bills and sewage leaks. The firm supplies 16m customers across southern England.

The Prime Minister is set to address the issue of private water companies in his first conference speech as PM on Tuesday afternoon, with a preview making the case for “more control of the basics so that we can make it more functional again”.

Eagle told the podcast that “legal certain obligations” meant there were limits on what she could say about Thames Water, but stressed that something has to change.

Asked whether the Thames Water situation would be allowed to stretch out into next year or beyond, Eagle said: “The Thames issue will be dealt with when it’s dealt with.

“We have to be absolutely certain that we do these things properly because there’s potential litigiousness if not done properly.”

The Environment Secretary held her first meeting with the leaders of the company earlier this month, insisting she was “polite”, but asked if she was angry about its conduct, she said: “My predecessor Emma Reynolds wrote to the regulator after Thames made its final offer on restructuring, saying that the offer as it was did not meet the environmental interests, or the interests of the customers.

“That’s where we are. There’s been a lot of stuff in the newspapers about how Thames are going to make a different offer that hasn’t materialised in fact yet.

“So I will wait and see what they come up with. But what’s absolutely certain is the status quo is not an option.”

The Labour MP for Wallasey continued: “We have had 40 years of a privatised water system that has not delivered the benefits that those that privatised it said it would.

“It was privatised without debt, so debt-free. It’s now £85bn in debt, and we have collapsing infrastructure in many places, high levels of water bills and sewage in our rivers and sea.

“That is not a system that’s working. And the Prime Minister has asked me to look to see what we can do to improve that, and that is what I’m doing.”

Elsewhere in the interview, Eagle, who is one of the longest-serving MPs in the House of Commons, said it feels easier to get things done in the Burnham government than it did in the Keir Starmer administration, explaining that, in her view, the civil service had become “very encrusted in process” in recent years.

She said there’s a “more coherent direction” at the centre of government thanks to Burnham’s vision: “We know what his basic parameters are and what he wants to achieve.”

Eagle, who revealed this was her 46th Labour conference, said Whitehall was much less “process” focused when Labour was last in power than it is now.

Reflecting on her time as an environment minister in the Tony Blair government, she told the podcast: “It was very, very different the second time around than the first. The first time was much faster decisions, much less process to get through.”

The cabinet minister told PoliticsHome there are too many consultations in the civil service, “consultations just coming out of every pore for no obvious reason,” joking: “You have to have a government write-round about whether you can breathe in.”

Eagle said much of it is because departments are worried about leaving themselves open to judicial review, where their decisions are taken to court and potentially overturned.

But she added: “We just have to get the boat out of the harbour, turn it over, get all the barnacles off it, and see if we can actually get faster processes.”

The Rundown is presented by Alain Tolhurst, and is produced and edited by Lulu Goad and Ewan Cameron for Podot

• Click here to listen to the full conversation with Angela Eagle on the latest episode of The Rundown, or search for ‘PoliticsHome’ wherever you get your podcasts.

Healey hinted at welfare reform in Liverpool on Monday (Alamy)

2 min read2 hr

Speaking from Liverpool on the second day of Labour Party conference, Healey said that the “core” of the budget he will deliver next month will be “fiscal discipline”.

It comes after Healey inherited a difficult economic landscape from his predecessor, with growing concerns around the costs of government borrowing and an enduring war in Iran. 

Healey told conference that the “hope” that Labour wants to bring to the country would be “earned through fiscal discipline, through good work, and through strong industries,” and he said he and the Prime Minister are “in lockstep that we will meet the fiscal rules, that we will maintain control of Britain’s finances.”

Elsewhere in the speech, Healey said: “I will bring fresh hope to build from the rock of fiscal discipline, built on a growing economy with good work and jobs in more places, built on a new age of industrialisation.”

While Healey was positive about the country’s outlook and the return to a Labour government, he said that “the money New Labour had in the 90s is simply not there now.”

Pointing to the Tories’ years in power, Healey said: “We had 14 years of flatlining Tory growth and living standards when Cameron’s austerity gutted our public services, when Johnson’s Brexit hammered our exports and Truss’s mini budget crashed the economy and collapsed confidence in Britain’s fiscal strength.”

Healey also used his speech on Monday to argue for the need for welfare reform, arguing that while the social security system “must always be there for those who can never work”, it is “not progressive to allow bigger and bigger benefits bill, and a system which offers an income but doesn’t offer a future.”

Pointing to the one million young people who are not in education, employment or training, Healey said that tackling this is “more than just an economic must. This is a moral duty.”

“I refuse to write off a million young people like the Tories have done.”

During his speech on Monday, Healey paid tribute to the former chancellor Rachel Reeves, pointing to her work on “financial discipline” and lifting the two-child benefit cap.

Healey also announced a new “local apprenticeship service” to help connect companies with young people, and said that the Government would commit to £6bn of contracts for British shipyards.