Tom Espiner
Business reporter, BBC News
The public, environment groups and investors are being asked for their views about how the water sector can be changed by a body set up by the UK government.
The head of a new independent commission will invite ideas on how to fix England and Wales’ troubled water industry.
Sir Jon Cunliffe, a former deputy governor of the Bank of England, will launch his call for evidence in Manchester on Thursday morning.
There has been growing public anger about water company performance amid massive sewage leaks and soaring bills, and the commission is looking for views on reform.
Environment Secretary Steve Reed has said the water sector in England and Wales “urgently needs fixing”.
Reed has ruled out nationalisation, saying it would cost up to £100bn, and that waterways would continue to be polluted while private ownership structures were unpicked.
Instead, the government wants private investment to upgrade the sewerage system and reservoirs.
To get that, regulator Ofwat has allowed the water industry to raise bills, which will go up by an average of £123 a year from April.
There were 3.6 million hours of sewage spills into England’s lakes, rivers and seas by water companies in 2023, which is more than double the amount of the previous year.
Sir Jon said there were “serious” and “interlocking concerns” with the sector which need “ambitious changes”, and acknowledged that “trust in the system” had “broken down on all sides”.
He said there had been “poor decisions and poor performance by companies, regulatory gaps, policy instability and a history of ad-hoc changes that have left an increasingly complex system that is no longer working well for anyone”.
But he said these problems were not the “inevitable” consequence of privatisation.
The government established the independent water commission promising the biggest shake up of the sector since privatisation 35 years ago.
Sir Jon is expected to recognise the widespread dissatisfaction at multiple failings and will seek submissions from regulators, investors, industry leaders and the public on potential reforms.
He will acknowledge the tensions between different regulators, the increasing demands place on the system by climate and population growth, and making the sector attractive to private investors.
Sir Jon told the BBC the commission’s report would be “as radical as we need to be to reset the system”.
The plight of Thames Water has been one of the most high-profile issues in the sector, with the company struggling with about £19bn of debt.
It recently won a crucial High Court battle to secure a £3bn rescue loan, staving off the prospect of the company coming under government control.
Sir Jon’s review comes as six companies – including Thames – are appealing against decisions by Ofwat to limit bill increases over the next five years.
The commission’s report, expected in June, will not affect that process.
Sir Jon said regulation of the water sector would be a “key area” that the commission will examine.
“Regulation needs to balance the cost to the bill payers with the needs of investment, not just to ensure that we’ve got supply of clean water for the future, but also investment to protect the environment.
“There is probably a bigger role for government, both at the national and at the local level, for giving guidelines for how those priorities should be managed,” he added.
To try to make companies more accountable, the government has brought in a law which gives regulators the power to ban bonuses for water company bosses.
In addition, executives who fail to co-operate or obstruct investigators could face prison sentences of up to two years.
