ENVIRONMENTAL charity River Action filed a legal challenge today against the government’s lack of preparation for temporary nationalisation of floundering water companies.

The group argues that Environment Secretary Steve Reed has acted unlawfully by failing to develop or publish policy on when he would put failing firms into special administration.

Campaigners pointed to Thames Water as a clear candidate for special administration, citing repeated breaches of its statutory and licence obligations.

Thames was revealed earlier this month to be the worst polluter of all the water firms in Britain, accounting for 44 per cent of incidents classified as “serious.”

Bosses, who are sitting on £20 billion of debt, had to go to the High Court to secure a bailout in February but it since been struggling to strike a deal with creditors.

The Environment Secretary has the power under section 24 of the 1991 Water Industry Act to ask the High Court to place a water company in special administration on either financial or performance grounds.

Triggering it would put a firm under temporary government control to keep services running, redirecting funds away from investor profits.

River Action head of legal Emma Dearnaley said: “The government has the power but won’t use it, or even explain when it might trigger this process.

“Apparently, the government has no policy at all. That’s a fundamental failure of transparency and accountability — and it’s unlawful.”

She added: “We need water companies that serve customers and protect our rivers, not prioritise financial returns to investors.

“Special administration creates the space for a fundamental redesign of the water industry with public benefit and environmental protection put at its heart.”

The water commission, which had been blocked by the government from considering nationalisation, presented its recommendations for overhauling the sector last week.

It said that the policy around Special Administration Regime assessment “should be set out more clearly” and underlined that it “should be a practical option for the regulator and government.”

The Department for Environment, Food & Rural Affairs said: “We are unable to comment on an ongoing legal challenge.”