Thames Water is £18.3 billion underwater in debts, cannot find new equity investors and its current shareholders are turning off the tap. If the company cannot pay those debts, under the current system, Ofwat’s ‘special administration regime’ will kick in – a.k.a. forced nationalisation. That would be somewhat awkward for the government, which has staunchly defended water privatisation. A summer collapse of Thames Water would be a major headache for Sunak…

A row is raging inside Labour about how they would deal with the situation. Labour’s left has long called for water nationalisation, a key plank of Corbyn era policy, which is now being pushed in a new campaign by Clive Lewis and John McDonnell. But Starmer’s team is privately briefing the water industry that any form of even part nationalisation will not be anywhere near the manifesto despite current events – last year Rachel Reeves publicly ditched their policy on water renationalisation. According to industry insiders, Labour is instead soft testing the idea of a community interest company to replace the failing utility provider. Starmer told reporters earlier this year that it’s ‘time for a rethink’ on water privatisation, but then ruled out nationalisation. Clear as mud…

There is scant evidence that any form of nationalisation or ‘community ownership’ would help Thames. Nationalised water companies are even less efficient, as the experience in Ireland and Northern Ireland shows. In Scotland, the then Labour government changed the company’s reporting regime so that its performance was artificially enhanced. The UK’s water bills are among the lowest in developed economies. Would they be under Labour…