Ofwat to be scrapped in sweeping water reforms

Ofwat is set to be abolished and replaced by a “single, powerful regulator” aimed at cutting water pollution and protecting families from higher bills, the government has revealed.

The Department for Environment, Food and Rural Affairs (Defra) has said operations conducted in England by Ofwat will be merged with the Environment Agency, Natural England and the Drinking Water Inspectorate, tying up water regulation into one body.

Labour officials will also work with the Welsh government to devolve regulation of water.

Environment secretary Steve Reed said reforms were urgent as he described the water industry as “broken”.

“In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one,” Reed said.  

“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.”  

“It will provide the clarity and direction required for a strong partnership between the government, the sector and investors to attract billions of pounds of new investment.”  

The government said putting £104bn into upgrading pipes and building sewage treatment while customer bills have been ring-fenced for investment in projects.

Other measures, such as the banning of wet wipes containing plastic and threatening law-breaking executives with prison sentences, have been flagged as measured aimed at cleaning up rivers and lakes in England.

Earlier on Monday, a review into the UK’s troubled water industry recommended Ofwat be scrapped as part of a huge regulatory overhaul.

Sir Jon Cunliffe, the former Bank of England deputy governor, called for a single integrated regulator in both England and Wales to ensure private companies act in the “public as well as private interest.”

Cunliffe’s report outlines 88 recommendations aimed at restoring public trust in water companies amid sky-high bills and excessive sewage leaks. The changes are set to mark the biggest set of reforms since privatisation in 1989.

“Restoring trust has been central to our work,” Sir Jon said on Monday. “Trust that bills are fair, that regulation is effective, that water companies will act in the public interest and that investors can get a fair return.

“Our recommendations to achieve this are significant. They include the management of the whole water system, regulation of the water industry, the governance and financial resilience of water companies and a stronger voice for local communities and water customers.”

The Cunliffe review also recommends greater protection for billpayers, including upgrading the Consumer Council for Water into an Ombudsman for Water and transferring consumer advocacy to Citizens Advice.

This would be coupled with a national social tariff to help address “widely different levels of support” across the country.

Cunliffe calls for Ofwat reset

UK water companies are under immense scrutiny after years of underinvestment in infrastructure, excessive dividend payouts and soaring pollution incidents.

Thames Water, the UK’s biggest water supplier, is facing temporary nationalisation amid a debt pile of more than £16bn.

Ofwat has previously approved significant bill hikes to support infrastructure and operational improvements, with firms set to spend around £104bn over the next five years.

Among Cunliffe’s other recommendations are mandatory water metering and the creation of eight new water sector planning authorities in England to fast-track the

The report suggests a new single integrated regulator to replace existing water watchdogs, mandatory water metering, and a social tariff for vulnerable customers.

Cunliffe argued for the creation of eight new regional water system planning authorities in England and one in Wales, to streamline the planning process.

His review also argued for “tighter oversight” of water company ownership, including new powers for the regulator that would block changes in cases where investors are not seen to have prioritised the “long-term interests” of customers.

“Resetting this sector and restoring pride in the future of our waterways matters to us all,” Sir Jon said.

“In countless conversations in the last nine months I have been struck by the urgent need and passion for change. Doing this will require hard work, strong leadership and sustained commitment. But it can and must be done.”