UNIONS, campaigners and MPs are demanding the government put an end to the uncertainty surrounding Thames Water and permanently nationalise the scandal-ridden utility.

They renewed their calls to nationalise the water firm today after Environment Secretary Emma Reynolds came out against a £10 billion rescue bid, saying it poses an “unfair cost to consumers.”

The minister’s warnings closely followed an open letter to Ofwat signed by 107 MPs demanding the government reject the deal put forward by Thames Water creditors to salvage the company.

Politicians expressed urgent concern over allowing the firm, which is responsible for almost a third of all the industry’s most harmful pollution incidents last year, to set its own rules through the proposed deal.

Ms Reynolds told the House of Commons today of her letter to water regulator Ofwat warning that the plan did not go far enough to protect the environment and water customers.

Thames Water hopes the deal will help stave off temporary nationalisation as it faces collapse due to being nearly £20bn in debt.

Although not an official government decision, the minister’s comments cast doubt on the viability of the plan which she said could mean Thames Water’s 16 million customers “bear an undue cost for investment in the company.”

Ms Reynolds added that the proposal likely means further delays to mandated environmental improvements of wastewater treatment facilities and other projects vital to drinking water safety.

On Tuesday, Ofwat was reportedly still close to accepting the offer from bidding consortium London & Valley Water, which proposed injecting £10bn into debt-ridden Thames Water.

In return, any new fines for sewage leaks would be waived for four years.

The GMB union said it was clear from the outset that the deal “would do nothing for consumers or the environment.”

Cliff Rooney, GMB activist and contributor to the Channel 4 documentary Dirty Business, said it was “a relief” that a government minister could see the deal’s shortcomings.

He said: “As the government forges ahead with bringing rail companies back under public control, we urgently need them to do the same for the water companies.

“Temporary nationalisation is not enough to end uncertainty for water workers, and it won’t fix the deep-seated problems with Thames Water.

“Renationalisation is the only way to end this farce and protect consumers, water workers, and our precious waterways.”

River Action chief executive James Wallace called the objection by the Environment Secretary a “clear recognition that Thames Water’s latest market-led rescue plan is not in the interest of the public or environment.

“After years of financial mismanagement, mounting debt and relentless sewage pollution, customers and rivers cannot be expected to pay the price for this failed business model.”

Mr Wallace said the government should use its powers to place the utility into Special Administration.

“It is time for the government to show that failure has consequences. Only decisive and immediate action will end the era of distressed asset investors and junk debt creditors, securing the lifeblood of 16 million customers by operating for public benefit.”

Public ownership campaigners We Own It, who co-ordinated the open letter from 107 MPs calling for the use of Special Administration powers, welcomed the Environment Secretary’s statements today.

Lead campaigner Sophie Conquest said the private firm should “not be rewarded for its abysmal failure with a regulatory holiday,” while taxpayers foot the bill.

She said: “The government is absolutely right to block this deal. Members of the public — who pay for, and depend upon, our water system — and the MPs who represent them are clearly opposed to a deal which puts the interests of US hedge funds ahead of billpayers and our environment.

“Special administration of Thames Water must be the beginning of the end of our water system being used as an ATM for faraway shareholders.”

Ms Conquest explained that using these powers will allow the government to “slash the debts and give billpayers and the environment a fair deal,” saying that after that ministers “must place Thames Water into permanent public ownership.”

We Own It also highlighted the average water bill in England, now £639, adding that “households have no choice but to pay more and more for a broken service and sewage-filled rivers.”

An Ofwat spokesperson said the regulator was reviewing the letter and considering Ms Reynolds’s views on the proposal and that its board had not yet made a decision on the proposal.