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| Ofwat to be abolished in ‘reset’ of water industry regulation | |
| (about 3 hours later) | |
| Environment secretary backs plan to end sewage spills and financial mismanagement in England and Wales | |
| Business live – updates | Business live – updates |
| A new water regulator will replace the powers of Ofwat, the Drinking Water Inspectorate and the Environment Agency to “reset” a sector tarnished by scandals over sewage spills and financial mismanagement, a after a major review into the sector. | |
| The government will adopt the recommendation for England and Wales made in the review it commissioned from Sir Jon Cunliffe, a former deputy governor of the Bank of England, which was released on Monday. In England, the powers of Natural England will also be subsumed. | |
| The environment secretary, Steve Reed, said: “The government will abolish Ofwat. In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one. | |
| “A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.” | |
| Critics have said Ofwat has presided over a culture of underinvestment in infrastructure and financial mismanagement by water companies since its creation in 1989, when the industry was privatised. | Critics have said Ofwat has presided over a culture of underinvestment in infrastructure and financial mismanagement by water companies since its creation in 1989, when the industry was privatised. |
| Thames Water, the most troubling case for the government and the UK’s largest water company, is loaded with £20bn in debt and struggling to stave off financial collapse into a special administration, a form of temporary nationalisation. | Thames Water, the most troubling case for the government and the UK’s largest water company, is loaded with £20bn in debt and struggling to stave off financial collapse into a special administration, a form of temporary nationalisation. |
| Cunliffe’s review suggested a new regulator, with powers to “direct”, or take control of, failing water firms. | Cunliffe’s review suggested a new regulator, with powers to “direct”, or take control of, failing water firms. |
| Speaking in front of a display of sewage pumps at the London Water and Steam Museum in west London,Cunliffe said England and Wales was facing a new “Great Stink moment”, referencing the hot summer of 1858 which created such terrible conditions that Sir Joseph Bazalgette was tasked with creating the capital’s sewer system. | |
| In front of an audience which included the Ofwat chair, Iain Coucher, he said that the regulatory system had become “too adversarial on both sides” and that Ofwat had made overuse of its “econometric tools and industry wide benchmarks”. Regulation needs a “less desk-based approach”, he said. | |
| Emma Hardy, the minister for water and flooding, said the government would spend the summer examining how many of the report’s 88 recommendations to adopt. “We are going to introduce a water bill next year that will change the law and put many of them into law,” she said. Five of the recommendations will be “fast tracked” and announced in parliament later on Monday. | |
| Reed also announced on Monday he would be taking up the recommendation in the report to create an ombudsman with legal powers to compensate consumers who are failed by the water industry, for example with taps running dry due to burst pipes and sewage leaks in gardens. | |
| The report found that there were only 58 members of staff charged with protecting the safety of the country’s drinking water, because of civil service rules on headcount and pay. | |
| This means, the commission said, the Drinking Water Inspectorate in its current form may not be able to meet the “challenges of the future”. The report also says the country is not protected from pollutants in water such as Pfas, or “forever chemicals” and microplastic, and recommends legislative changes to address these and remove them from the water supply. | This means, the commission said, the Drinking Water Inspectorate in its current form may not be able to meet the “challenges of the future”. The report also says the country is not protected from pollutants in water such as Pfas, or “forever chemicals” and microplastic, and recommends legislative changes to address these and remove them from the water supply. |
| It also recommends that bills are not raised dramatically, as they were in April and will be until the end of the decade, with the new regulator prioritising consistent investment in infrastructure so companies do not have to “play catch up” and have to increase bills to urgently build or repair sewers and reservoirs. | It also recommends that bills are not raised dramatically, as they were in April and will be until the end of the decade, with the new regulator prioritising consistent investment in infrastructure so companies do not have to “play catch up” and have to increase bills to urgently build or repair sewers and reservoirs. |
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| Compulsory smart metering should also be rolled out in homes across England and Wales, the commission recommends, meaning households who use greater volumes of water will be charged more. The report also suggests more businesses are given smart meters to drive down water use and a nationwide social tariff to help consumers who cannot afford their bills. | |
| The commission was banned by Reed from considering the nationalisation of water. It did, however, consider the possibility of water companies transferring to a not-for-profit model, as is employed at Welsh Water. | The commission was banned by Reed from considering the nationalisation of water. It did, however, consider the possibility of water companies transferring to a not-for-profit model, as is employed at Welsh Water. |
| Cunliffe said the regulation of water companies and how they were managed was a bigger factor in whether they performed well or badly, rather than their ownership structure. | Cunliffe said the regulation of water companies and how they were managed was a bigger factor in whether they performed well or badly, rather than their ownership structure. |
| James Wallace, the chief executive of River Action, said: “This was a once-in-a-generation opportunity to reset a broken and corrupted system. Instead, the commission blinked. After three decades of privatisation, there is no evidence it can work.” | James Wallace, the chief executive of River Action, said: “This was a once-in-a-generation opportunity to reset a broken and corrupted system. Instead, the commission blinked. After three decades of privatisation, there is no evidence it can work.” |
| Gary Carter, national officer at the GMB union, said: “Water privatisation has been a disastrous failure. Our rivers and waterways have been fouled, while bills rocket and fat cat bosses get rich. | Gary Carter, national officer at the GMB union, said: “Water privatisation has been a disastrous failure. Our rivers and waterways have been fouled, while bills rocket and fat cat bosses get rich. |
| “Meanwhile, the water infrastructure crumbles through lack of investment. It’s a disgrace – and one Ofwat has overseen.” | “Meanwhile, the water infrastructure crumbles through lack of investment. It’s a disgrace – and one Ofwat has overseen.” |
| The former Undertones frontman and water campaigner Feargal Sharkey said Reed should resign over a failure to grip the issue of sewage pollution. |