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The former Business Secretary has said taxpayers should not have to “pay a penny” to Thames Water.

Sir Jacob Rees-Mogg said Thames Water and its owners made “dud investments” and it was shareholder greed which has left the company in its current position.

Speaking on GB News, Sir Jacob Rees-Mogg said:

“Thames Water, the United Kingdom’s largest water supply, must be allowed to fail. Thames Water has used complex financial engineering to pay very large dividends to its shareholders.

“It borrowed heavily, and it borrowed using interest rates linked to inflation and inflation then took off. It was rip roaring inflation, so they faced very high costs.

Basically, Thames Water’s owners made dud investments.

“Now, this is not inherently immoral. But when a complex financing scheme fails, it’s the shareholders and the bondholders who should take the hit, not the consumer.

“The shares are now probably worthless and, according to a report I read in The Times last week, the bonds are trading at 15% of face value.

“That means that if you invested a pound, you’ve only got 15p left and 85% lost.

“Insolvency simply allows the normal process of the free market to take place.

“The assets are still there: the sewage plants, the water pipes, they’re all there and they have value. They could be bought by other investors and the bondholders would get some of their money back, the other creditors would get some of their money back, but the shareholders will be wiped out altogether.

“And this could, in fact, reduce the price of water in London because the capital in the company would decline as some of the excess debt was straightforwardly written off. This would allow the new owners to make a reasonable regulated return on a monopoly business, which is why the regulation is fair, on this lower level of capital.

“On this new basis, funds can be raised for further investment to stop leaks and to stop the sewage problems. There would be no interruption to supply, no risk to consumers, and probably a better more strongly capitalized company.

“So there is no need for a bailout. It would also not be a disincentive to further overseas investment. In my business career I’ve dealt with overseas investors and they know that sometimes their investments go wrong. That’s part of investment.

“They wouldn’t have been cheated in any way, they wouldn’t have been done down by regulation. They’d have just made a mistake.

“Foreign and domestic investors know that some investments go bad, some are mistakes. Thames Water became a bad investment, not because of the regulatory environment, not because the customers went away, but because of the greed of the shareholders and their own bad decisions.

“So they deserve no quarter and the consequences of insolvency will be perfectly routine. You should not have to pay a penny.”