Thames Tideway Tunnel a ‘one-off’, says Treasury boss

The government would never back a project in the same way as the Thames Tideway Tunnel again, the Treasury’s chief executive of UK infrastructure Geoffrey Spence said today.

Speaking to delegates at KPMG’s annual summit, Spence said Thames Water had a legal obligation to develop the sewer. But he said it was happening in a “slightly complicated way” that “was not to be repeated”.

The government has said it is willing in principle to provide contingent financial support for the scheme. Thames Water is setting up a separate company to finance and deliver the £5 billion Thames Tideway Tunnel, subject to bondholders’ approval on June 3.

“We do recognise that there is a degree of support which, under the circumstances it is appropriate for the government to give,” said Spence.

“There are certain times in the private sector for major projects where the government provides some backstopping and that is really what we are doing.

“That makes it very unusual and not to be repeated if at all possible because normally we want a privatised industry to continue to perform their obligation to their consumers, including investment.

“I’m afraid it is a one-off experience because this is not something we ever want to do again if we can possibly afford to.”

Earlier this month, ratings agency Moody’s said the joint venture would protect Thames Water from the main construction risk but said that even with the limited risk the company “may not be able to exhibit sufficient headroom”.

In addition, Moody’s Stefanie Veolz warned that if the company’s bondholders don’t vote in favour of the formation of the IP company, there could be delays to the project.

Spence added that the government was “very supportive” of the project and a successful outcome.