Public asked for views on how to fix the water industry

The British government has established a dedicated body aimed at reforming the water industry. Currently, this body is soliciting opinions from the public, environmental groups, and investors to seek solutions for improving the water sector. These diverse perspectives are crucial for comprehensive reform.

The head of the newly established independent commission will invite suggestions from all parties on how to address the challenges facing the water industry in England and Wales. Sir Jon Cunliffe, former Deputy Governor of the Bank of England, will launch the call for opinions in Manchester on Thursday morning. The commission hopes to hear various perspectives on reform, given the public's growing dissatisfaction with the performance of water companies due to numerous sewage leaks and soaring water bills.

Environment Secretary Steve Reed stated that the water sector in England and Wales is in "urgent need of an overhaul." Reed ruled out the possibility of nationalizing water companies, saying it would cost up to £100 billion and that water pollution problems would persist during the unwinding of the privatization structure. Instead, the government hopes to upgrade sewage treatment systems and reservoirs through private investment. To attract investment, regulator Ofwat has allowed the water industry to raise water bills, with an average annual increase of £123 expected from April.

In 2023, water companies discharged sewage into England's lakes, rivers, and seas for 3.6 million hours, more than double the previous year. Sir Jon Cunliffe stated that there are "serious" and "interconnected problems" in the water industry that require "bold changes." He also acknowledged that "trust in the system has broken down on all sides." He noted that company missteps, poor performance, regulatory loopholes, policy instability, and a series of ad hoc adjustments have led to an increasingly complex system that no longer works effectively for anyone. However, he emphasized that these problems are not an inevitable consequence of privatization.

The government has established the independent water commission, promising the largest reforms to the industry since its privatization 35 years ago. Sir Jon Cunliffe is expected to acknowledge the widespread public dissatisfaction with the multiple failures of the water industry and seek input from regulators, investors, industry leaders, and the public on potential reform options. He will also acknowledge the tensions between different regulators, the increasing demands placed on the system by climate and population growth, and how to make the industry more attractive to private investors. Sir Jon Cunliffe told the BBC that the commission's report will be "as radical as it needs to be, based on what we need to do to reset the system."

The plight of Thames Water, which is burdened with approximately £19 billion in debt, is one of the most closely watched issues in the industry. The company recently won a crucial High Court case, securing a £3 billion emergency loan and averting government takeover. Sir Jon Cunliffe's review comes as six companies, including Thames Water, appeal Ofwat's decision to limit water bill increases over the next five years. The commission's report, expected in June, will not affect this process.

Sir Jon Cunliffe stated that the regulation of the water industry will be a "key area" of the commission's review. He added: "Regulation needs to strike a balance between the costs to bill payers and the need for investment, not just to ensure we have clean water supplies in the future, but also to invest in environmental protection. Government, both at the national and local level, may need to play a greater role in guiding how those priorities are managed." To increase company accountability, the government has enacted a law giving regulators the power to ban bonuses for water company executives. In addition, executives who are uncooperative or obstruct investigations may face up to two years in prison.