A major review into the state of the water industry in England and Wales has concluded that water bills must increase significantly to compensate for years of underinvestment.
The long-awaited report from the Independent Water Commission determined that sustained pressure to maintain low household prices has resulted in an anticipated 30% surge in bills between now and 2030.
The report, led by Sir Jon Cunliffe, former Deputy Governor of the Bank of England, also proposes the implementation of compulsory smart meters in homes to aid cost management, as well as the abolishment of the regulator, Ofwat.
This comes amid widespread criticism of water companies regarding leaking pipes and sewage spills, with pollution incidents in England reaching a record high.
Campaigner Feargal Sharkey asserted that “corporate greed” and the “exploitation of bill-payers and the environment” are central to the industry’s issues.
He also criticized the government for limiting the scope of the report, excluding the possibility of renationalizing the water industry in England and Wales.
Environment Secretary Steve Reed stated that nationalization would incur a cost of £100 billion.
“That’s money we don’t have,” he affirmed.
However, data from the Environment Agency indicates that pollution incidents by water companies in England have reached unprecedented levels.
The most serious cases, those causing significant harm to aquatic life and potentially human health, increased by 60% in the past year.
Water companies have long maintained that investment in the country’s pipes and sewage treatment facilities has been constrained by Ofwat’s limitations on price increases for customers.
The report notes that customers’ water bills have decreased by 15% over the last decade when adjusted for inflation.
It further states that “pressure from government and the regulator to keep bills low… between 2009 and 2024” “played an important role in what can now be seen as underinvestment over this period.”
Last year, Ofwat announced that water bills in England and Wales would rise sharply over five years to generate £104 billion for infrastructure investment.
However, since privatization in 1989, water companies have distributed at least £54 billion to shareholders, including overseas investment funds.
“There are legitimate questions about whether companies have, in some cases, issued dividends at the expense of their own financial resilience,” the report states.
Sir Jon told the BBC that there had been a “really huge rise in bills” over the past year.
He added: “The inescapable fact is it costs more to produce drinking water and it costs more to deal with our waste water as we go forward – climate change, ageing infrastructure, population growth, development – these put pressure on the system.”
He has proposed the establishment of a unified regulator in England, consolidating Ofwat, the Drinking Water Inspectorate, and the Environment Agency’s water responsibilities, with a similar body for Wales.
An Ofwat spokesperson stated that it would “work with the government and the other regulators to form this new regulatory body.”
Reed asserted that a single regulator would improve oversight of maintenance and investment in water infrastructure, ensuring that “hard working British families are never again hit by the shocking bill hikes we saw last year.”
He added: “The reforms that we’re bringing in are intended to prevent the circumstances that led to those bill hikes.”
However, other campaigners argue that the review does not go far enough to rectify the system.
“The report diagnoses symptoms but avoids the cure,” said James Wallace, chief executive of River Action.
Surfers Against Sewage (SAS) described the recommendations as merely “putting lipstick on a pig.”
Its chief executive, Giles Bristow, stated that the report “utterly fails to prioritize public benefit over private profit.”
In his 88 recommendations to reform the water industry, Sir Jon suggested installing smart water meters in homes, allowing people to be charged based on consumption rather than a flat fee.
The report also recommended:
The Welsh government is to take on Ofwat’s job amid major changes to how water is regulated.
Campaigners respond to the government’s decision to scrap the water regulator Ofwat.
The wide-ranging review was launched amid growing public concern about sewage spills and rising bills.
The Cunliffe report has proposed reforms that are deep and wide, but they will take time to take effect.
The new consumer champion is being launched as part of wider plans to overhaul the water industry.