Thames Water should be fined for failing to patch up the capital's leaking pipes, a London assembly committee has said.

Members of the health and public services committee heard that the company is wasting the equivalent of close to 10 million baths of water in London every day.

Of the four water companies supplying the city, Thames Water is the only one to miss local leakage targets set by regulator Ofwat.

Rainfall in South East England has been below average since November 2004, leading the region to face its worst drought in 30 years.

In a report published on Monday, committee members said even if Thames Water met Ofwat's long-term targets it could still "waste 28 per cent of the water in London's pipes".

Committee chairman Joanne McCartney said: "Thames Water's leakage is unacceptable and the targets set by the water regulator are laughable, especially when compared to Tokyo's leakage rate of just four percent.

"Last year Thames Water reduced leakage by a measly two per cent, while its profits rose by almost a third and customers’ bills increased by 20 per cent.

"The capital's water supply is under threat and more must be done.

"Ofwat must flex its muscles, set stricter targets for reducing leakage and hit Thames Water where it hurts – their bank balance – if they do not meet them."

Last month it was announced that Thames Water had missed its target for cutting leaks for the third year in a row.

The company also announced a 31 per cent rise in pre-tax profits, to £346.5m.

Ofwat has said it views Thames Water's failure as "very serious", but has yet to announce if it will take action.

The regulator has the power to impose fines of up to 10 per cent of the company's turnover, but AMs said they were "disappointed" to learn any money raised would be paid to the government's consolidated fund rather than being given to customers.

A Thames Water spokesman said reducing leaks was the company's top priority.

"We're spending half a million pounds every day to bring leakages down.

"Through our Victorian mains replacement scheme we've already replaced 300 miles of cast iron pipes since 2002 and we hope to see it fall still further.

"We're already finding and fixing 240 leaks on our pipe network every single day, we're doing everything we can to bring leakage down."

Thames Water has already imposed a hose pipe ban, and has requested a drought order.

The assembly report said if below average rainfall continues for the rest of the summer the use of rationing measures likes standpipes were a "real possibility".

It concluded such measures "could have major impacts on Londoners' public health, and on the safety of vulnerable Londoners."

It also said the water companies should work harder to help customers understand what restrictions are in place, and that the use of water meters in the capital should be "dramatically increased".