Thames Water Crisis Exposes ‘Broken Britain’ Danger for Sunak

(Bloomberg) -- Rishi Sunak tried to bat away his latest crises in Parliament on Wednesday as he often does, declaring how his Conservative Party is “delivering” for Britain. But the man favored by voters to take his job wondered aloud whether even the UK premier himself was convinced.

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“You can tell from his answer, his body language, he has actually given up,” Labour Party leader Keir Starmer said. “He has given up.”

While such jibes are common in Parliament’s raucous weekly question sessions, the blow from Starmer — during an exchange about missed homebuilding targets — captured the mood of even some Sunak supporters looking on. One cabinet minister who requested anonymity to speak privately said afterward that the hoarse-sounding prime minister seemed beaten down.

The hard-to-resolve problems facing Sunak involve some of people’s most basic needs, including soaring food prices and housing costs. Trouble struck another fundamental service this week, when it emerged that ministers were working on plans to rescue Britain’s biggest water supplier.

Read More: UK Considers Nationalization of Thames Water as Bonds Tumble

The uncertainty surrounding Thames Water, which serves some 15 million people in London and southeast England and is more than £13 billion ($16.5 billion) in debt, is especially damaging for Sunak. It plays directly into Labour’s narrative that the Conservative Party has let services crumble.

“The big problem with it for the government is people aren’t going to get into the details. It’s just another thing that has gone wrong,” said Luke Tryl, a former Conservative government adviser who is now director of the More In Common think tank. “Most damningly, people aren’t going to be surprised because they’ve come to expect big parts of service provision will go wrong.”

Some 66% of respondents to a YouGov tracking poll released Monday disapproved of the government’s record, compared with just 14% who approved. The decline in public services has led some to question whether Britain is “broken,” a critique used by David Cameron while leading the Conservatives back to power in 2010.

Thames Water sits at the center of decades of struggles over the size of the British state. The water industry was privatized in the late 1980s under then-Prime Minister Margaret Thatcher, who remains idolized by the Tory right-wing for her efforts to shrink the public sector.

Yet taking utilities out of state hands remains controversial, especially now that people can see the leaking pipes and sewage flows themselves. Seven in 10 Britons think water companies should be nationalized and run in the public sector, according to a YouGov poll published Thursday. Complaints have been fanned by dividends paid by service providers — even as they ran up huge debts, and as the ramifications of decaying infrastructure was laid bare.

Voters are “fed up to the back teeth with this company that not only pumps sewage into our precious River Thames, but also we’ve seen sewage flooding our streets in recent times of heavy rainfall,” Munira Wilson, the Liberal Democrat MP for Twickenham in southwest London, told Parliament. “This is indicative of underinvestment by the company in fixing leaks, and being stripped to the bare bones while lining the pockets of executives.”

Thames Water Is Drowning in Debt. What Went Wrong?: QuickTake

The situation facing Thames Water is complex. Some water companies’ debt is linked to inflation, while the price they can charge customers is decided in five-year periods and may not keep up with the increased cost of borrowing. At the same time, higher interest rates are making it even more difficult to fund investments for infrastructure.

While the water crisis was decades in the making, the risk to Sunak is immediate. A taxpayer-funded bailout for Thames Water would be a political disaster, one government adviser said on condition of anonymity to discuss their private views. There’s a major risk of a voter backlash, given the dividends and profits made by water companies over so many years.

Read More: Britain Comes to Terms With Its New Water Poor Reality

With the tax burden at a 70-year high after 13 years of Conservative rule, it’s harder for the party to make its usual claim to be the party of sound economic management. One Tory lawmaker said the government risked being seen as lurching from crisis to crisis without having convincing solutions.

The narrative of a state that is in need of a fundamental change is a key Labour message ahead of a general election expected in 2024. Aside from the political chaos and personal scandals that have forced the Tories to cycle through five prime ministers since Cameron in 2010, it is their competence that Labour wants to target.

Sunak’s allies insist he is taking the right action in dealing with problems they say stem from the Covid-19 pandemic and Russia’s war in Ukraine, illustrated by his overarching aim to halve inflation this year. On Wednesday, Chancellor of the Exchequer Jeremy Hunt called in key regulators to discuss how to protect consumers from corporate profiteering, though the meeting yielded no new measures to directly cut prices.

During his exchange with Starmer, Sunak listed government efforts to help people, before concluding with what the prime minister sees as his own best political argument against the Labour leader: “That is the difference between us. I deliver what I promise. He just breaks his.”

Yet Sunak is running out of time to convince voters that he’s the right person to fix them, while the setbacks keep coming. On Thursday, judges ruled that the government’s policy to deport asylum seekers to Rwanda is unlawful.

The prime minister relies on portraying himself as a fresh start after the chaos of his immediate predecessors, Boris Johnson and Liz Truss. But his stint as chancellor under Johnson complicates that pitch.

“He is literally the worst person to be leading the country through a cost-of-living crisis,” Labour MP Chris Bryant said in Parliament on Wednesday, “because he created it.”

--With assistance from Emily Ashton, Kitty Donaldson, Eamon Akil Farhat and Alex Morales.

(Updates with YouGov survey in ninth paragraph, Rwanda court ruling three paragraphs from bottom)

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