An Independent Commission into the water sector and its regulation has been launched by the government in what is expected to form the largest review of the industry since privatisation.
The Commission forms the next stage in the Government’s long-term approach to ensuring there is a sufficiently robust and stable regulatory framework to attract the investment needed to clean up the UK’s waterways, speed up infrastructure delivery and restore public confidence in the sector.
It follows the Government’s inaugural International Investment Summit last week at which the Prime Minister spoke of the need for regulation and regulators to support growth and investment in the UK.
Launched by the UK and Welsh governments, the Commission will report back next year with recommendations to the Government on how to tackle inherited systemic issues in the water sector to restore rivers, lakes and seas to good health, meet the challenges of the future and drive economic growth.
These recommendations will form the basis of further legislation to attract long-term investment and clean up waters for good – injecting billions of pounds into the economy, speeding up delivery on infrastructure to support house building and addressing water scarcity, given the country needs to source an additional 5 billion litres of water a day by 2050.
Former Deputy Governor of the Bank of England, Jon Cunliffe, will chair the Commission. With several decades of economic and regulatory experience, the Government says his appointment demonstrates their serious ambitions.
The Commission will draw upon a panel of experts from across the regulatory, environment, health, engineering, customer, investor and economic sectors. It forms part of the Government’s reset of the water sector by establishing a new partnership between government, water companies, customers, investors, and all those who enjoy our waters and work to protect our environment.
Launching the review, Secretary of State Steve Reed said:
“Our waterways are polluted and our water system urgently needs fixing.
“That is why today we have launched a Water Commission to attract the investment we need to clean up our waterways and rebuild our broken water infrastructure.
“The Commission’s findings will help shape new legislation to reform the water sector so it properly serves the interests of customers and the environment.”
Water Commission Chair Sir Jon Cunliffe said:
“I’m honoured to be appointed as chair of the government’s new Water Commission. It is vital we deliver a better system to attract stable investment and speed up the building of water infrastructure.
“Working over many years in the public sector, in environment, transport and the Treasury, and the Bank of England, I have seen how the regulation of private firms can be fundamental to incentivising performance and innovation, securing resilience and delivering public policy objectives.
“I am looking forward to working with experts from across the water sector, from environment and customer groups and investors, to help deliver a water sector that works successfully for both customers, investors and our natural environment.”
Huw Irranca Davies, Wales’ Deputy First Minister with responsibility for Climate Change and Rural Affairs, added:
“This vital review couldn’t come at a more urgent time for our water environment and water industry.
“This shows the fresh approach of our two governments working together on an issue which affects us all as consumers, investors and as stewards of the natural world.
“Both the Welsh and UK Governments are determined to improve water quality and the resilience of the water sector for future generations. We have clear priorities for reform and a shared sense of the work needed across both countries’ policy and regulatory regimes to make this change happen.”
A set of recommendations will be delivered to the Defra Secretary of State, and Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs next year. The UK Government and Welsh Government will then respond with the proposals they intend to take forward.
The objectives of the Commission are to recommend measures to ensure the regulatory system delivers:
- Clear Vision: Establishing clear outcomes for the future and a long-term vision for delivering environmental, public health, customer, and economic outcomes.
- Strategic Planning: Adopting a collaborative, strategic, catchment approach to managing water, tackling pollution and restoring nature.
- Better Regulation: Rationalising and clarifying requirements for companies to secure better customer and environmental outcomes.
- Empowered Regulators: Ensuring regulators are effective in holding water companies accountable, for example for illegal pollution.
- Improved Delivery: Enhancing the sector’s ability to meet obligations, including clean rivers, lakes, and seas, while driving innovation.
- Stable Framework: Ensuring a regulatory environment that attracts investment and supports financial resilience for water companies.
- Consumer Protection: Safeguarding consumer interests and affordability through transparent and fair governance.
- Resilient Infrastructure: Delivering and maintaining robust infrastructure on time, anticipating future needs and climate challenges.
The independent commission is the third stage of the government’s water strategy. In his first week in office, the Secretary of State secured an agreement from water companies and Ofwat to ringfence money for vital infrastructure upgrades so it cannot be diverted to shareholder payouts and bonus payments.
In just 70 days, the Government also introduced the Water (Special Measures) Bill, which sets out tough new measures to crack down on water companies failing their customers. This includes:
- Bringing criminal charges against persistent lawbreakers, including imprisonment.
- Strengthening regulation to ensure water bosses face personal criminal liability for lawbreaking.
- Giving the water regulator new powers to ban the payment of bonuses if environmental standards are not met.
- Boost accountability for water executives through a new ‘code of conduct’ for water companies, so customers can summon board members and hold executives to account.
- Introduce new powers to bring automatic and severe fines.
- Require water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators.
In addition, the cost recovery powers of regulators will be expanded to ensure that water companies bear the cost of enforcement action taken in response to their failings. The Environment Agency will undertake a consultation on the implementation of these new powers.
