Thames Water creditors offer £75m social tariff boost to win over Burnham

Thames Water creditors will establish a £75m fund for vulnerable customers as part of a package designed to win Andy Burnham’s support for a private sector rescue of the company and avert its nationalisation.

Sky News has learnt that the London & Valley Water consortium (L&VW), which comprises funds accounting for the majority of Thames Water's £20bn debt mountain, will promise to establish the ring-fenced pot of money as part of a submission to Ofwat in the coming weeks.

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Sources said the £75m social tariff funding would be in addition to a Community Benefit Foundation initially worth £25m and which featured in the consortium's two earlier recapitalisation plans.

Thames Water, which supplies about 16m premises, already supports roughly 600,000 customers who cannot afford to pay their water bills through a scheme called WaterHelp.

L&VW's plan would see those households receiving a further bill discount in addition to the average 50% reduction they receive through the initiative.

The £75m would be funded by creditors and not recouped, according to a source.

The creditors hope that the proposal will help persuade the prime minister and Angela Eagle, the environment secretary, that their plan to rescue Britain's biggest water utility should trump alternatives including placing the company into a form of temporary public ownership called a Special Administration Regime (SAR).

They have also floated the idea of a golden share for the government, and have promised not to extract any dividends from the company until at least 2030.

Thames Water Utilities' board, which would be chaired under the L&VW plan by former Labour minister Lord Hutton, has said it wants to float the company on the London Stock Exchange in the medium term.

Opponents of L&VW's efforts to gain control of Thames Water, who include water industry campaigners aghast at its record on sewage spills and leaks from its ageing infrastructure, have urged Mr Burnham to ditch the consortium's proposals and nationalise the company instead.

Sky News revealed during the summer that London & Valley Water had hired litigation specialists to prepare for a legal battle with the government if it forces the company into a SAR.

The tussle over Thames Water's future has been in progress for over three years, but appeared to be reaching a conclusion when Mr Burnham said earlier this autumn that he wanted to see "greater public control" of Britain's privatised water industry.

While he has yet to reach a definitive conclusion on Thames Water's future - which would cost billions of pounds to absorb into state ownership - the PM backed a plan this month to create eight new regional water councils across England to facilitate local decision-making.

"For the first time, local people will have a real say over what they need from their water company, whether that is cleaning up polluted rivers, building new reservoirs or protecting homes from floods," he said.

"That is what moving power closer to communities looks like: making sure local voices are heard and local priorities come first."

Critics of the plan argue that there is little clarity over how the new bodies will interact with water industry regulators and that it will simply pave the way for chaotic corporate governance in a sector where sharper decision-making over spending priorities is viewed as essential.

The London & Valley Water consortium is in the process of finalising its third - and supposedly final - proposal to Ofwat, with a formal submission expected around the end of the month.

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It will include a £3.5bn equity injection from the creditor group, up from the £3.35bn envisaged in March, and an increased debt write-off worth billions of pounds.

Thames recently secured lenders' backing for an extension of its debt maturities, while this week L&VW launched a process to fund £600m of the company's latest £2.4bn tranche of financing.

To facilitate a private sector deal, Ofwat is required to hold a three-month public consultation, although the timetable for launching one remains unclear.

More broadly, the financing of England's water companies has become increasingly fraught amid uncertainty among investors about the future regulatory regime.

South East Water recently abandoned a £200m bond issue but was able to secure a £50m equity injection from its shareholders.

L&VW declined to comment this weekend on the proposed social tariff funding.

The Department for Environment, Food and Rural Affairs has been contacted for comment, having previously said that the government was "holding water companies to account".

"Our generational reforms will create a water system that works for customers, the environment and investors for decades to come, with tougher regulation, stronger enforcement and greater accountability," it said several weeks ago.

(c) Sky News 2026: Thames Water creditors offer £75m social tariff boost to win over Burnham