Government prepares for release of landmark review into ailing water sector
The review was commissioned by the UK and Welsh governments as part of their response to systemic industry failures, which include rising bills, record sewage spills and debt-ridden company finances, although ministers have ruled out nationalising companies.
The Government will respond to the recommendations in Parliament later on Monday.
The review reportedly includes proposals to establish a new system of regulation, which is currently split between Ofwat, the Environment Agency and the Drinking Water Inspectorate.
Sir Jon Cunliffe is leading the review (Leon Neal/PA)
Ministers will announce a consultation that could lead to axing Ofwat, which oversees how much water companies in England and Wales can charge for services, according to the Guardian.
Ofwat has faced intense criticism for overseeing water companies during the years that they paid shareholders and accrued large debts while ageing infrastructure crumbled and sewage spills skyrocketed.
In an interview with the Sunday Times, Environment Secretary Steve Reed suggested he was in favour of a new model where regional boards managed water in their areas, including representatives from water companies, local authorities and other organisations.
He said: 'I think the catchment-based model has a lot to commend it. Because if you can manage what's going into the water better, you can clean up the water faster.'
Asked on Friday if there were plans to scrap Ofwat as the regulator, Downing Street said the Government will wait for a final report.
A No 10 spokesman said: 'We are waiting for Sir Jon Cunliffe's final report next week, you can expect us to set out our response after that on what more we will do to turn the sector around.'
A Government spokesperson said: 'We are not going to comment on speculation.' Ofwat declined to comment.
Mr Reed is also expected to announce a new Government pledge to halve sewage pollution from water companies by the end of the decade, during broadcast interviews on Sunday.
He said: 'Families have watched their local rivers, coastlines and lakes suffer from record levels of pollution.
'My pledge to you: the Government will halve sewage pollution from water companies by the end of the decade.'
But in his Sunday Times interview, he acknowledged that bills were unlikely to fall from their current level, saying instead that an investment of £104 billion in the sector would 'avoid the need for any big bill hikes in the future'.
It comes after the Environment Agency on Friday said the number of serious pollution incidents caused by water companies across England rose by 60% in 2024 compared with the previous year.
The figures showed companies recorded a total of 2,801 pollution incidents, up from 2,174 in 2023.
Of these, 75 were categorised as posing 'serious or persistent' harm to wildlife and human health – up from 47 last year.
The Environment Agency said it is clear some companies are failing to meet the targets it has set on pollution, attributing failures to persistent underinvestment in new infrastructure, poor asset maintenance and reduced resilience because of the impacts of climate change.
Earlier on Friday, the Public Accounts Committee also released a report which called the level of pollution 'woeful' and recommended an overhaul of the regulation system.
Dovestone Reservoir on Saddleworth Moor as water companies have asked customers to conserve supplies (Peter Byrne/PA)
The cross-party group of MPs said the Government must act with urgency to strengthen oversight of the sector to rebuild trust and ensure its poor performance improves.
The Independent Water Commission published its interim report in June, which found the sector to be beset with 'deep-rooted, systemic' failures.
While the paper outlined the commission's direction of travel, it stopped short of providing detailed recommendations on policy, regulatory reform and corporate governance, which are now expected in the final report.
The interim review pointed to the need for better regulation of water companies but it did not recommend the wholesale scrapping of Ofwat, which some have urged.
Nationalisation, which some campaigners have also called for, was excluded from its terms of reference when commissioned by the Government.
Meanwhile, the Conservatives accused Labour of copying the previous government's policies and doing nothing to halt rises in water bills.
Shadow environment secretary Victoria Atkins said the Government should be 'transparent' about where the money to fix Britain's sewers was coming from, warning that consumers may have to stump up some of the cash.
She added: 'Labour's water plans must also include credible proposals to improve the water system's resilience to droughts, without placing an additional burden on bill payers and taxpayers.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
43 minutes ago
- Telegraph
Two-tier policing is the nail in the coffin for Britain's social contract
Has a British Government ever appeared so terrified of its own people? More to the point, can you think of one that deserved it more? The social contract has been shredded. You go to work and pay your taxes for a state that seems to be crumbling into disrepair. In exchange, the Government takes your money, and uses it to fund an alleged secret scheme to fly in Taliban fighters to live on your street. But don't worry – we've got a new 'elite police squad' to prevent trouble. That police unit won't be patrolling your neighbourhood to keep you safe from harm. Rather, it will be tasked with scouring social media for protest pre-crime, monitoring your opinions for anti-migrant sentiment. The police might not have enough resources to deal with shoplifting. They might not have solved a single theft or burglary, or recover a stolen bike, across a third of England. But we are to believe they have resources for what really counts: scrutinising your views for wrongthink. The current state of affairs is so absurd that simply writing it down feels almost subversive. But each element is true: we do appear to have flown unvetted Taliban members into Britain. The Government really will be watching your posts for signs of dissent. This isn't some accident, some Civil Service blunder. It's by design. It truly appears that Labour's strategy is to impose ever more restrictions on the freedoms of the law-abiding, in the hope that eventually people will acquiesce with a resigned shrug. The problem is that it isn't working. The population is fed up with being punished for doing the right thing. The hectoring about slavery, imperialism, war and all the other iniquities of history used to justify sacrificing our comforts and liberties on the altar of mass migration is no longer having the desired effect. British citizens living today did not build the empire. They didn't enslave anyone. Why should they foot the bill for housing illegal migrants up in four star hotels in central London? Why should they put up with them working in the shadow economy? Unfortunately for the Government, the previously silent majority is beginning to vocally express its frustration. MPs and ministers are fearful that the country is becoming a 'tinderbox'. But even this isn't enough to convince them that we must change course. Why? Perhaps because doing so would be an admission of past failures. For decades we were told that mass migration was an unalloyed good while critics were denounced as bigots. To concede, after all this time, that it has not come without costs – at times intolerable costs – would be catastrophically damaging to the political class. The pro-migration fanatics, who promised to control numbers while throwing open our borders, who overrode objections to impose their policies despite what they were repeatedly being told at the ballot box, would be discredited. So instead, the state appears to be passing through the stages of grief. At first there was denial that people were worried about migration at all; Brexit had allowed us to be liberals. Then there was anger after Southport, with Starmer's denunciation of the 'thugs' taking to the streets. Now we seem to have reached bargaining: if we can stop people talking about it, perhaps they'll stop caring? It was a strategy that might have worked prior to the social media era, and in particular prior to Elon Musk's buyout of Twitter. Now, even the censorship of protest videos, arrest of people for incendiary content, and threat of mass scanning of output isn't sufficient to quell dissent. And though many of the protests now cropping up across Britain are peaceful, shows of police force are not enough to deter outside agitators from hijacking them. Tiff Lynch, the head of the Police Federation, which represents rank-and-file officers, last week warned that officers were being 'pulled in every direction' and commanders were 'forced to choose between keeping the peace at home or plugging national gaps'. Where do we go from here? As the costs of legal migration become apparent, with talk of labour market infusions and attracting the 'best and brightest' seeming increasingly hollow, overall numbers must be reduced. As the impact of illegal migration becomes clearer, the establishment must stop trying to guilt us into acceptance, and finally stop the influx. It's highly doubtful Yvette Cooper has the will or the way. The Home Secretary would prefer to silence opponents, by censoring and arresting those who speak out.
Telegraph
4 hours ago
- Telegraph
Thames Water faces rocketing demand for supplies
Thames Water has warned that plans to build 100 new data centres across London and the South East will pile more pressure on its creaking infrastructure. The utility giant said it had identified 108 'hyper or large' data centres that will drive up demand in its region, with bosses suggesting it will have to manage water supplies carefully to ensure there is no impact on households. Each data centre is equivalent to thousands of homes being added to a water network, meaning the pipeline of new data centres is on par with a new small city being built. In its annual report, Thames Water said that building data centres 'needs to be carefully managed from a demand and UK growth perspective'. The company, which is battling to avoid nationalisation amid pressure from a £17bn debt pile, has previously raised the prospect of rationing water use for data centres or charging more at peak times. Data centres contain giant racks of computer servers that need to be cooled to avoid overheating, often with water piped in. The facilities are crucial to the rise of artificial intelligence and are a key priority for Sir Keir Starmer's growth push. However, the vast number being built has sparked concern among water companies such as Thames Water, which is now engaging with the Government to prevent potential shortages in future. 'The south-east of England is a water-stressed region and data centres can use a vast amount of water, equivalent to the usage of thousands of homes at peak draw,' a Thames Water spokesman said. 'With a large proportion of the proposed data centres earmarked to be built in the Thames Water region, it brings a challenge between safeguarding our finite resources while supporting the UK's growth strategy. 'It is important that we work collaboratively to meet this challenge and to avoid exacerbating water stress and impacting service for customers and the environment.' 'We are engaging with the Government regarding the challenge of water demand related to cooling data centres and how this can be mitigated. We are also working with a number of data centre providers about opportunities to reduce demand through innovation.' A corridor of land between London and Slough, much of which is served by Thames Water, contains Britain's densest collection of data centres. An independent review of the water sector last week cited data centres as one of the factors that are likely to mean water bills rising by 30pc over the next five years. The report, by Sir Jon Cunliffe, a former deputy governor of the Bank of England, said that national infrastructure bodies should be consulted when deciding where to build them. The Government has welcomed investment in new data centres, including designating them as critical national infrastructure. Thames Water last week started a hosepipe ban for more than 1 million people in Gloucestershire, Oxfordshire, Berkshire and Wiltshire. The company is also seeking to agree a rescue deal with creditors, but has warned it may fall into special administration if talks between the lenders and regulator Ofwat fail.
Telegraph
5 hours ago
- Telegraph
Britain risks following France into a terrifying debt crisis
Last week brought more bad news about the UK's public finances. June's figures for public sector borrowing came in at £20.7bn, well above the OBR's forecast and City expectations. What's more, £16.4bn of this was accounted for by debt interest payments. Yes, that's right: £16.4bn in one month. We are borrowing enormous sums to pay the interest on past borrowings of enormous sums. We are getting dangerously close to what economists call 'the debt trap'. This is when, under the pressure of rising debt interest payments, the debt ratio starts to explode. It goes without saying that it is good to avoid this, if you can. But can we? Be warned, you may need a ready supply of hot towels for this next bit. The key players in the debt drama are: the budget deficit, the debt ratio, the growth rate of the economy in money terms (which is equal to the real growth rate plus the rate of inflation) and the rate at which the Government can borrow. If the rate at which the Government borrows exceeds the growth of the economy (in nominal terms), then debt interest payments and the overall debt will rise as a share of GDP. In order to stop this process from leading to an ever-higher debt ratio, the Government must run a primary budget surplus (meaning a surplus on its budget without interest payments), requiring higher taxes and/or cuts in government spending. And the higher the initial debt ratio, the larger the surplus needs to be to stabilise the debt ratio. The debt dynamics are merciless. When emerging market countries become stuck in the debt trap, the result is usually default or much higher inflation, or both. Remarkably, given our pitifully low to non-existent real growth rate, the nominal growth of GDP (i.e. expressed in money terms), exceeds the average rate at which the Government borrows by a small margin. Phew! But this is somewhat misleading because the average cost of government debt is heavily influenced by past borrowing, some of which was at lower interest rates. When this debt matures, there is a risk that it will be refinanced at higher interest rates. So we are currently just avoiding the debt trap, but with the deficit so large, the debt ratio is still rising. In these circumstances, it is hardly surprising that the gloom is still gathering about the fiscal prospects that the Chancellor faces in the Budget this autumn. It hardly makes our position any better, but we are not alone. Amid all this domestic pessimism, few people have noticed what is happening to our close neighbour across the channel. France is facing a fiscal predicament every bit as serious as ours. For a start, France's ratio of government debt to GDP is higher than ours – 113pc of GDP compared with our 100pc. And its deficit is higher too – 5.8pc last year compared to our 5.1pc. And ours is set to be just under 4pc this year. In both countries, GDP growth has been weak, and prospects are clouded with uncertainty. The one area where France is better positioned is the cost of borrowing, and this really does show the weakness of the UK's position. Whereas 10-year bond yields here are 4.6pc, in France they stand at about 3.5pc, similar to other euro-zone members. In this regard, however, something extraordinary has been happening. French yields have been converging on Italy's. The gap between them is now only 0.18pc, the lowest for almost 20 years. It doesn't seem too fanciful to imagine that French yields will soon surpass Italy's. Admittedly, after a recent period of comparatively strong growth, it looks as though Italian economic growth is set to be slower than growth in France, returning to the long-established norm. That certainly does not make the job of stabilising the public finances any easier. And, at 135pc of GDP, Italy's debt ratio is a good deal higher than in France. But Italy possesses two striking advantages. First, its fiscal deficit is only 3.4pc of GDP, compared to France's 5.8pc. And excluding interest payments (the so-called primary budget), it is in a surplus of 0.5pc, compared to France's deficit of 3.7pc. The result is that to stabilise the debt ratio, Italy needs to tighten the budget deficit (through a mixture of higher taxes and expenditure cuts) by only 0.5pc of GDP. By contrast, to stabilise her debt ratio, France needs to tighten fiscal policy by over 3pc of GDP by 2027. Italy's second advantage is surprising to anyone who has followed Italian politics over the past 80 years. She seems to be more politically stable than France. Giorgia Meloni looks likely to be Italy's first post-war prime minister to complete their term. In France, there have been six prime ministers since 2020, and the current incumbent, Francois Bayrou, who heads a minority government, could be ousted any time soon. He recently announced a plan to tighten French fiscal policy by 1.5pc of GDP. By comparison, Rachel Reeves' Budget last October increased taxes by 1.2pc of GDP, but this was more than offset by increases in public expenditure. There is little chance of the proposed French tightening getting through parliament unscathed. The failure to pass a budget for next year, leading to the fall of the present government, could cause French bond yields to flare up. And then there is the presidential election in 2027. On voting intentions in the first round, Jordan Bardella, the likely candidate of Marine Le Pen's National Rally, is well ahead of the other candidates. Obviously, there's many a slip twixt the cup and the lip. But if the markets were to view a victory for the National Rally as likely, then they would surely send French bond yields much higher, thereby putting France in a dangerous fiscal position. We cannot gloat. There but for the grace of God go all of us.
