Farming budget faces ‘death knell' if Thames Water is rescued

Sir Keir Starmer has been warned that buying out Thames Water could signal a 'death knell for farming as we know it'.
The Government could be forced to step in to rescue the ailing water company, which is teetering on the edge of bankruptcy despite a £3 billion bailout in February.
Independent estimates suggest that public ownership of the firm, which supplies 16 million customers, could cost the taxpayer up to £2.75 billion a year.
Whitehall officials are discussing which Government department would pay for the Special Administration Regime (SAR) if ministers are forced to step in.
It has been suggested that Defra, which is responsible for water policy, should pay for any public ownership out of its own budget.
But a £2.75 billion cost would amount to 37 per cent of the department's budget, as allocated in last week's spending review, and would be likely to lead to cuts to farming support.
The Government would also have to bear the cost of hundreds of millions of pounds in fines with which Thames Water has been hit for breaching rules on waste water management and dividend payments.
The cost of nationalising the company would be equivalent to the entire farming support budget, of £2.7 billion a year, and almost double the annual flood defences budget of £1.4 billion.]
'It's taxpayers who will pay the price'
A City source close to the process told The Telegraph: 'With no money set aside, Defra would be forced to raid its own budgets to bail out London's ailing water company and divert funds away from farmers.
'It is no exaggeration to say that special administration for Thames Water could signal the death knell for farming as we know it in this country. Meanwhile, the Government would have to pay itself nearly a billion pounds in fines for breaking its own rules. Ultimately, it's taxpayers who will pay the price.'
It comes after the Government was accused of betraying farmers by making family farms subject to inheritance tax in last year's Budget. The move sparked mass protests by farmers on tractors outside the Treasury.
If the cost of bringing Thames Water into public ownership was borne by the Treasury, it would create an additional black hole for Rachel Reeves ahead of this year's Budget, at which she is expected to raise taxes.
Economists estimate that there is a shortfall of around £20 billion in the public finances, which must be filled by spending cuts or tax rises because of the Government's rules, which restrict borrowing.
Steve Reed, the Environment Secretary, told MPs on Thursday that Thames Water remained 'financially stable' and suggested that a public bailout was not imminent.
But he added: 'We have stepped up our preparations and stand ready for all eventualities... including a special administration regime, if that were to become necessary.'
If Thames Water were to go bust without a public bailout, it would be likely to cause disruption to customers across London. Ministers are understood to have drawn up contingency plans on an SAR and are ready to intervene if the company looks on the brink of failure.
The last significant public bailout came in November 2021, when the Government was forced to temporarily nationalise Bulb Energy. Taxpayers ultimately made a profit on selling the company to Octopus Energy, a rival firm, the following year.
A Government spokesman said: 'The company remains stable and the government is closely monitoring the situation. It would be inappropriate to comment in detail on the financial matters of a private company.'

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