An independent government commission has published a landmark report after delving into the issues at the heart of England and Wales’ troubled water sector.
It has today (21 July) unveiled 88 recommendations, including replacing the current regulator, making water meters compulsory and strengthening environmental regulation.
The water sector has faced a series of public controversies in recent years, including financial mismanagement, steep bill hikes, and sewage being published into waterways. In May this year, Thames Water was slapped with a record £123 million fine after breaching rules on the management of waste water and the payment of dividends.
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Water bills rose by an average £123 per year this spring – the largest hike since the water industry was privatised in 1989. Jon Cunliffe who led the independent review warned bills could rise by another 30% in real terms over the next five years.
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Cunliffe told the BBC there are some “inescapable facts”, including climate change, higher environmental standards, and the need to replace ageing infrastructure. A long period of underinvestment has created problems. The catch-up effort now is causing bills to rise.
“Restoring trust has been central to our work. 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,” Cunliffe said. He added that resetting the sector “can and must be done”.
Water report: what are the key recommendations?
1. Overhaul the regulator
Cunliffe’s report recommends overhauling the current regulatory system, replacing it with a single integrated watchdog in England and Wales.
Currently, the system is more complex. Four separate bodies have areas of oversight in England: Ofwat, the Drinking Water Inspectorate, and parts of the Environment Agency and Natural England.
2. Compulsory water metering
After one of the driest springs on record, the report recommends making water meters compulsory. Sixty-three percent of households in England and Wales had water meters in 2023/24.
Customers with a water meter are charged for what they use rather than through an estimate. Meters incentivise customers to use less water.
3. Greater customer protection
The report sets out proposals to improve affordability and customer service. This includes upgrading the Consumer Council for Water, a consumer body, to an ombudsman. This should create a clearer route for resolving complaints.
The report also recommends introducing a national social tariff so low-income customers get more consistent support. Currently, caps on bills vary by hundreds of pounds in different parts of the country.
4. Tighter oversight of water companies
The report says the regulator should have more power to block decisions made by water companies. These could be used if the management team acts against customers’ best interests.
The report also sets out minimum capital requirements so that water companies are less reliant on debt.
5. Environmental and infrastructure reforms
The report sets out a string of recommendations to reduce public health risks, ensure infrastructure is better managed, and boost water reuse through initiatives like rainwater harvesting schemes.
6. A longer-term view
The independent commission also wants the government to adopt a new long-term water strategy with a minimum horizon of 25 years.
“A clear long-term strategy will help drive the right outcomes for consumers, growth and the environment and support long-term investment planning,” it said.
Will water bills rise further?
The average water bill rose by £123 per year in April, equivalent to around £10 per month. It takes the typical annual bill to £603 – but there is significant variation between regions.
Southern Water customers saw their bill soar by 47%, equivalent to £224 per year, taking the typical bill to £703. Thames Water customers are paying 31% more than a year ago, equivalent to £151, taking the typical bill to £639.
Cunliffe warned that bills could rise by a further 30% in real terms over the next five years as companies invest in rebuilding a water system that has been neglected and mismanaged for too long.
Some critics believe the latest reforms don’t go far enough. Unison, the trade union, thinks renationalisation is the answer – something the Cunliffe review has not looked at.
“Only wholesale changes will fix the system. Tinkering around the edges and failing to consider all options won’t deliver the change that is desperately needed,” said the union’s general secretary Christina McAnea.
Mike Keil, chief executive at the Consumer Council for Water, said a lot would depend on the water companies themselves: “The commission has set out significant changes to the regulatory system, but water companies have always had the freedom to do what’s right by their customers and many have made bad choices.
“Restoring public confidence in the sector hinges on whether water companies are committed to improving their culture, conduct and performance.”
Customers cannot shop around for water, unlike energy, which means they have to use the provider that supplies their area. This makes it particularly frustrating when bills go up as a result of mismanagement.
Despite this, there are some steps you can take to reduce your water bill. Depending on your usage, a meter could be cheaper than being charged based on an estimate.
Not all properties are suitable for a water meter, but if you can’t get one, you can ask your provider for an assessed charge bill. This is a bill which is customised to your situation based on factors like the size of the property and how many people live there.
Low-income customers can request a social tariff. Each company has its own scheme and eligibility criteria, so contact your provider to find out what options are available if you are concerned about higher bills.
