Treasury threatens Defra with £4bn bill if Thames Water nationalised

Exclusive: Treasury threat an example of scare tactics' to help force through private sector deal, sources suggest

Whitehall officials have been at loggerheads over the fate of Thames Water since the Treasury told the environment department that it would have to meet the cost of a multibillion pound temporary nationalisation.

Britain's biggest water company recently came within days of running out of money. Thames is in a desperate race to find a buyer willing to inject cash, with the US private equity firm KKR in pole position.