We’re prepared to change the law to reform the water industry, says Angela Eagle

Angela Eagle says Britain may need to change the law before it can properly deal with the companies controlling Thames Water, a warning that the government’s route to public ownership could be more complicated than expected.

The environment secretary told the Guardian that ministers were prepared to take Thames Water into public ownership. But she said existing insolvency rules could not handle what she described as aggressive behaviour by the US hedge funds that own much of the company while seeking to renegotiate its debts.

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A lot of people think you can just choose [special administration] … [but] you either are, or you aren’t, insolvent. And whatever people think of Thames at the moment, it isn’t technically insolvent.

Special administration is widely seen as a possible first step toward deprivatisation. Eagle cautioned against treating it as a simple option. “A lot of people think you can just choose [special administration] … [but] you either are, or you aren’t, insolvent. And whatever people think of Thames at the moment, it isn’t technically insolvent,” she said.

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The Water Act didn’t really envisage this kind of behaviour and this kind of corporate presence behaving in particular ways.

She argued that the Water Act had not anticipated this type of corporate behaviour. A new water bill will provide the legislative vehicle for whatever decision ministers make, she said, adding: “nothing is off the table.”

Thames Water is expected to become an early test of Prime Minister Andy Burnham’s pledge to bring utilities into public control, despite corporate lobbying and possible legal action. Eagle was told by Burnham to make water reform her top priority. Her responsibilities also include cleaning up illegal dumping sites and coordinating the response to the country’s fifth drought in three years.

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nothing is off the table

Speaking from Havant Thicket in Hampshire, the site of what is due to become Britain’s first new reservoir since 1992, Eagle said the country had lost resilience under previous governments. She wants to accelerate infrastructure construction, arguing that completing projects has become slower and more difficult. Thames Water, meanwhile, is struggling under £20 billion in debt and has received a record fine of £122.7 million for sewage spills and unlawful payments to shareholders.

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The system has got more clagged up.