Paul Johnson, director of the Institute for Fiscal Studies and a known advisor to Andy Burnham, has reportedly been advising a group of Thames Water's creditors, including U.S. hedge funds Elliott Management and Silverpoint Capital. This counsel is in connection with a proposed rescue package for the debt-laden utility, which involves a $12.7 billion injection of new equity and debt. The creditors are demanding concessions such as a four-year waiver on new fines for sewage leaks and a reduction in environmental investments until 2030, in exchange for their funding.
This revelation about Johnson's role introduces a potential conflict of interest for Andy Burnham, who is currently seen as a potential successor to Keir Starmer as Labour leader. Burnham has been a vocal proponent of renationalizing the water industry, aiming to bring companies like Thames Water under public control. The fact that a close advisor to Burnham is also involved in private sector negotiations for Thames Water’s rescue raises questions about how a nationalization plan might be implemented if Burnham were to become prime minister.
The proposed rescue deal is already facing significant scrutiny. Environment Secretary Emma Reynolds has warned that the plan poses "unfair costs to consumers" and could delay crucial infrastructure and environmental improvements. The deal, which could see Thames Water paying nearly $1 billion in fees and accrued interest to creditors, has government insiders worried about its impact on customers and the environment. Ofwat, the water regulator, is currently reviewing the proposal carefully to assess its benefits for customers and the environment.
Concerns are also growing that the overall deal could be jeopardized by the political uncertainty surrounding the next General Election and the Labour Party's leadership. Andy Burnham’s stated desire to bring water companies into public ownership, particularly if he were to become prime minister, could complicate the current creditor-led rescue efforts. The creditors' consortium, London & Valley Water, argues their plan is the fastest route to resolving Thames Water's issues without taxpayer money, warning that further delays or special administration would only prolong uncertainty and hinder the company's turnaround.
