Overhaul water regulators into one single body, landmark review recommends

Powys County Times

18 hours ago

The system for regulating water companies should be overhauled and replaced with one body for England and one body for Wales, a landmark review of the sector has advised.
The much-anticipated final report from the Independent Water Commission, led by former Bank of England deputy governor Sir Jon Cunliffe, outlined 88 recommendations to the UK and Welsh governments to turn around the ailing industry.
The Government-commissioned team was tasked to carry out the largest review of the sector since privatisation in the face of widespread public anger over pollution, bills and bosses' bonuses, although ministers ruled out nationalising water companies.
The report, published on Monday morning, recommended far-reaching changes to the way the water system is regulated as it called the current landscape 'fragmented and overlapping'.
For England, proposals include abolishing Ofwat, which oversees how much water companies in England and Wales can charge for services, and the Drinking Water Inspectorate (DWI), which ensures that public water supplies are safe.
The report also advises removing the regulatory roles of the Environment Agency and Natural England, which monitor the sector's impact on nature, such as companies illegally dumping sewage into waterways.
Instead, a 'joined-up' and 'powerful' single integrated water regulator should be established, according to the recommendations.
In Wales, Ofwat's economic responsibilities would be integrated into Natural Resources Wales, the review said.
The current system has faced intense criticism for overseeing water companies during the years they paid out shareholders and accrued large debts while ageing infrastructure crumbled and sewage spills skyrocketed.
Other recommendations from the commission include stronger consumer advocacy, nine new regional water authorities to deliver on local priorities, significant improvements to environmental regulation and tighter oversight of company ownership and governance.
The regional authorities – eight in England and one national authority in Wales – would see current planning responsibilities devolved and resources from regulators transferred to ensure investments reflect local priorities and voices.
Author Sir Jon said the review has 'tried to attack the problem from all sides' but warned that bills are going to rise by 30% over the next five years.
'There are some inescapable facts here,' he said.
'The cost of producing water and dealing with our wastewater is going up.'
He later told Times Radio that regulators have failed to work together to make the sector deliver and blamed the Government for not giving clear direction.
'It's the failure of Government to balance out all the different pressures on water,' he said, adding that firms 'need to perform better' and 'be funded to invest'.
The Government backed the commission's findings, with water minister Emma Hardy saying consumers have been 'failed time and time again'.
Speaking on Times Radio, she said 'root-and-branch reform' is needed to fix the crisis and told listeners the Government is considering a piece of primary legislation to deliver many of the proposed changes.
Ms Hardy also described trust in the water industry as at 'the lowest ever level' and criticised executives for handing out pay rises and bonuses.
'Everyone knows the system is broken,' she said.
'And they give themselves huge pay rises.'
However, the minister also ruled out supporting Government intervention to cap pay in the private sector.
Ms Hardy said: 'I don't think as Government we should say what private companies should pay.
'But I will say – read the room. Look how angry and furious people are.'
Other key recommendations in the review include:
– Expanding the role of the voluntary Consumer Council for Water (CCW) into an ombudsman to give stronger protection to customers and a clearer route to resolving complaints.
– Significant improvements to environmental regulation, including the process where companies collect and analyse wastewater discharges they make into waterways, by introducing more digitalisation, automation, third-party assurance and inspections.
– Tightening oversight of water company ownership and governance through measures such as new regulatory powers to block changes to water company ownership and 'minimum capital' requirements so that companies are less reliant on debt.
– Introducing legislative reforms to better manage public health risks in water, recognising the many people who swim, surf and enjoy other water-based activities.
– Fundamentally resetting economic regulation, including a new 'supervisory' approach that supports tailored decisions and earlier interventions in water company oversight.
Elsewhere, the report shared proposals on implementation, including which reforms can be delivered in the short term and which require new primary legislation.
In a speech responding to Sir Jon's report later on Monday, Environment Secretary Steve Reed will welcome the commission's recommendations to ensure 'the failures of the past can never happen again'.
Mr Reed is also widely reported to be preparing to abolish Ofwat and is set to commit to the creation of a new, legally binding water ombudsman through the role of the CCW.
Both the Conservatives and the Liberal Democrats have said that water regulation needs to change.
Lib Dem leader Sir Ed Davey called for the creation of a Clean Water Authority that could 'hold these water companies to account' and 'fine them when they fail'.