There’s a popular joke that the UK has to be the only country with a failing water company despite it raining all the time. That’s not quite true — it doesn’t actually rain as much in southeast England as most people think. But the fate of Thames Water, the biggest of the British privatised water firms, is a political hot potato that has been passed from prime minister to prime minister. Andy Burnham now might get caught out by it, and discover the vicious power of fiscal constraints.

The problem of Thames Water is basically the huge amount of debt that the firm is in. Earlier this year, the company declared a net debt of £18.5 billion, against a regulatory capital value of £22.7 billion. It is currently running on a £3 billion loan that will soon run out, and could have to arrange another £2 billion loan to stay afloat.

That enormous debt load has placed the British government in a game of chicken with Thames Waters’s creditors. Both sides would probably prefer to avoid a special administration regime, which would really be a last resort if Thames Water became insolvent. But both sides, in effect, want the other to bear the cost of avoiding it — whether that is creditors accepting a write-down, or the government providing a financial safety net. The government looks likely to put off a decision until late October, roughly when the next Budget would be presented.

Burnham’s problem more specifically is that delaying tactics over Thames Water are both highly visible and highly inconsistent with what he has previously said. He has clearly stated that Thames Water should be nationalised. The government stepping in to rescue it, nationalising the company in the process, would certainly be one solution. But this solution seems to stop when the time comes to pay for it. That is especially if it’s an ongoing process that involves seemingly endless injections of money to keep Thames Water going.

Behind all this drama lies the UK’s deteriorating fiscal situation. The country’s so-called fiscal headroom, or the amount of spending allowable in order to be on track for a current-budget surplus in 2029-30, has already shrunk since March. Both falling immigration and inflationary pressure have hit the government’s room for manoeuvre. The fall in immigration alone could cost £4 billion, while the headroom projection in March was already a relatively tight £24 billion. Chipping away at this headroom will not leave Burnham with many options come October.