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The water industry faces a complete overhaul following the publication of a landmark review on Monday. Environment Secretary Steve Reed is expected to promise "root and branch reform" of the sector to clean up England's rivers and limit water bill rises.
The commitment follows the final report of the Independent Water Commission led by former Bank of England deputy governor Sir Jon Cunliffe. In his response to the report, Reed is set to describe the water industry as "broken" and welcome recommendations to ensure "the failures of the past can never happen again".
Ofwat faces potential abolition
Reed is widely reported to be preparing to abolish the industry's beleaguered regulator Ofwat. The regulator has faced criticism for overseeing a sharp rise in sewage pollution while failing to crack down on executive pay and large dividends at debt-ridden water companies.
Sir Jon criticised the way the sector was regulated in his interim report, with duties split between Ofwat, the Environment Agency and the Drinking Water Inspectorate. On Sunday, Reed would not confirm that Ofwat was in line to be scrapped, but declined to express confidence in the regulator, saying it was "clearly failing".
Cross-party support for reform
Both the Conservatives and Liberal Democrats have agreed that water regulation needs to change. Tory shadow environment secretary Victoria Atkins urged the Government to be "transparent" about what would replace Ofwat and how it would work.
"No one disputes that the water sector is under pressure, and we all want to see meaningful improvements," Atkins said. "Reforming regulation must be focused on improving performance and guaranteeing water security."
Bill rises remain likely
Liberal Democrat leader Sir Ed Davey has called for the creation of a Clean Water Authority that could "hold these water companies to account" and "fine them when they fail". While Reed has pledged to avoid "huge shock hikes" in water bills, such as the 26 per cent increase seen this year, reform is unlikely to lead to falling costs for consumers.
The Government hopes that investment in long-neglected infrastructure will make large bill increases unnecessary. However, Reed acknowledged on Sunday that there needed to be "appropriate bill rises" to secure "appropriate levels of investment".
Previous commitments outlined
He is also unlikely to commit to expanding social tariffs that could help households struggling with bills at the cost of higher charges for wealthier families. Reed said he was yet to be convinced that this was needed.
Prior to Monday's announcement, Reed had already committed to halving sewage pollution in England's rivers by 2030 thanks to a £104 billion investment from the sector in upgrading infrastructure. He has also announced the creation of a new, legally binding water ombudsman, expanding the role of the voluntary Consumer Council for Water and bringing the sector into line with other utilities.
Conservative criticism emerges
The Conservatives have accused Labour of copying the policies of the previous government. Atkins said: "Labour have already wasted a year since the general election as they came into office with no plans for water, instead claiming that the work we started in office is their own."
(PA) Note: This article has been edited with the help of Artificial Intelligence.
