Letwin appears to back government funding option for Thames Tideway project
A government spokesman this week has repeated that the proposed £4.2bn Thames Tideway Tunnel should be privately funded despite reports that one of its ministers favours a publicly funded option.
The assertion came after reports that government policy coordination minister Oliver Letwin has suggested the government could pay for the project.
But the Treasury has not ruled out providing financial support for the project, which it considers to be of national significance as it is in the government’s National Infrastructure Plan.
“The Thames Tideway Tunnel is a private sector project and should be built and financed by the private sector,” said a spokesman.
“In a project of this scale and complexity there may need to be financial support from government and we have made it clear that we are willing to provide this where it is value for money for customers and taxpayers,” said the spokesman.
The 32km tunnel is part of Thames Water’s plan to stop untreated sewage discharging into the river Thames.
It would follow the route of the river at a depth of around 75m, picking up 34 combined sewer outfalls that currently discharge into the river during heavy rainfall. It will transfer the discharge to Beckton sewage treatment works in east London.
Around 39M.t of sewage is currently discharged into the river every year, and Thames Water estimates this will rise to 70M.t over the next 10 years without the Tideway Tunnel project and associated improvements.
The company is spending £1.4bn on enabling works for the scheme, as well as another £1.3bn upgrading five sewage treatment works and building the 6.4km Lee Tunnel from Abbey Mills to Beckton.
But it is unwilling to take on the financial risk of constructing the tunnel, as this would significantly change the company’s risk profile, and make it more expensive for it to borrow money.
Until Letwin raised the possibility of full government funding, the most likely option for getting the tunnel built was for Thames Water to set up an arms-length independent company, with its own shareholders and funding mechanisms.
But, even in this scenario, government support would probably be needed to underwrite some of the finance or to use the government’s credit rating to borrow funds under the £40bn guarantee scheme announced in last year’s Infrastructure (Financial Assistance) Act.