New ‘integrated regulator' should replace Ofwat and drive ‘fundamental reform' of the water sector, review finds

The Guardian

21-07-2025

Update:
Date: 2025-07-21T05:56:48.000Z
Title: Commission recommends new integrated water regulators to replace Ofwat
Content: One of the Independent Water Commission's most important recommendations is the creation of a new integrated water regulator for the sector in England, and a single water regulator in Wales.
These new body would replace Ofwat, the criticised regulator which the Guardian reported on Friday was to be abolished.
The new integrated regulator in England would combine the functions of Ofwat, the Drinking Water Inspectorate, as well as taking on the water functions from the Environment Agency and Natural England.
The commission says this could 'significantly strenthen' oversight of water companies, arguing:
A single regulator would be able to oversee all operations of a water company from all angles and come to a 'whole firm view' of performance issues and compliance failures – some of which may interrelate and may not have been adequately understood in the current model, where cooperation between regulators is limited. This could deliver greater accountability in the regulatory framework with one organisation and one board responsible and accountable for the outcomes of the sector.
It could also mean 'more joined-up approach to regulation overall', allowing issues to be tackled faster and more effectively.
There would also be increased accountability for delivery, as well as reduced regulatory burden by simplifying water company and stakeholder interactions with regulatory bodies, the Commission suggests.
A more joined-up, coherent and streamlined approach to regulation could also benefit investor confidence, the Commission suggests, adding:
Although a merger inevitably presents uncertainty in the short-term, in the long-term it should create greater stability overall for the regulatory system – establishing the clear and objective conditions necessary to attract investment.
Update:
Date: 2025-07-21T05:55:52.000Z
Title: Introduction: Independent Water Commission pushes for 'fundamental reform'
Content: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
England and Wales's water industry requires 'fundamental reform' to address the problems that have dogged the sector, a new review has found.
A new official report into the water sector, just released, is recommending a swathe of new meaasures, including new regional water authorities with responsibility for 'integrated and holistic water system planning'.
The Independent Water Commission has found that a fundamental 'reset' of the water sector is needed, to raise standards across the industry, in a 465-page report which just landed.
Sir Jon Cunliffe, the former civil servant and central banker who led the Commission, is warning this morning that 'no single, simple change' will fix the water industry, which has been beset by under-investment, rising pollution incidents, soaring customers billd and meaty shareholder payouts.
Cunliffe says:
This sector requires fundamental reform on all sides – how we manage the demands on water, how the system is regulated, how companies are governed and how we manage the critical infrastructure on which we all rely.
He also calls for 'a long-term, cross-sector strategy for water', explaining:
It may sound academic, but it is profoundly important. A clear set of national priorities for water – covering the water industry, agriculture, land-use, energy, transport, housing development – is essential. Without it, we will continue to be dogged by inconsistency, short termism, unintended consequences and risk willing the ends without ever fully understanding the means required.
Cunliffe's report has 88 recommendations in total, which include:
a long-term, cross-sector strategy for water.
the modernisation of the legal framework for water
regulatory changes, including a new integrated regulator for water
greater transparency in areas such as operator self-monitoring and scrutiny of water company reporting
the introduction of a single social tariff, to improve affordability and customer service
Changes to the economic regulation of water companies, including 'a company-specific supervisory function' that would feed into the current price review structure
New national resilience standards for infrastructure, to help guarantee the maintainance of underground pipes and other water and wastewater assets