Ofwat to be abolished as ministers look to create new water regulator | Water business

[ad_1] England and Wales’ embattled water regulator can be abolished beneath suggestions from a government-commissioned assessment due out on Monday, the Guardian understands.

Ministers will announce subsequent week a session into creating a brand new regulator, to coincide with the outcomes of a assessment into the water business directed by former Financial institution of England deputy governor Sir Jon Cunliffe.

This session is prone to conclude with the abolition of Ofwat, the embattled watchdog that polices how a lot water firms can cost for providers in England and Wales, sources mentioned.

Ofwat has confronted intense criticism over its failure to stop sewage spills, hefty funds of dividends, and ballooning money owed throughout England and Wales’s water firms. The assessment will suggest a brand new regulatory system.

Cunliffe’s assessment was arrange by the federal government amid rising public anger about file sewage spills and rising payments, in addition to the fraying funds of among the greatest utilities.

It is going to be the biggest assessment of the sector since its privatisation beneath Margaret Thatcher. On the launch of the assessment final 12 months, the surroundings secretary, Steve Reed, mentioned it might “form new laws to reform the water sector so it correctly serves the pursuits of consumers and the surroundings.”

Critics have mentioned Ofwat presided over a tradition of underinvestment in water infrastructure and monetary mismanagement by water firms since its creation in 1989. Probably the most troubling case for the federal government is the UK’s largest water firm, Thames Water, which is loaded with £20bn in debt and struggling to stave off monetary collapse.

Thames Water is in talks with Ofwat over a takeover by collectors who maintain a lot of its debt, and is making an attempt to safe leniency from fines and penalties. Ought to these negotiations fail, it's prone to fall into short-term state possession by way of the particular administration regime.

Cunliffe warned in his interim assessment that the present regulatory system, together with Ofwat, had “largely misplaced public belief”.

Prospects, MPs and campaigners protest exterior a Thames Water bailout listening to in London earlier this 12 months. {Photograph}: Victoria Jones/REX/Shutterstock Trade leaders have additionally lengthy bemoaned an absence of coherence in water regulation, with completely different regulators and businesses doubling up on areas of investigation. This has made it laborious to have well timed selections, permitting investigations to tug on slightly than forestall or deal with environmental hurt and air pollution.

Cunliffe had additionally urged “basic, structural choices for integrating regulatory remits and capabilities”. There at the moment are three regulators for water – Ofwat, the Surroundings Company and the Consuming Water Inspectorate.

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Water campaigner and former Undertones frontman Feargal Sharkey mentioned: “The bonfire of the quangos within the business must go additional, we want remedial and radical motion and we demand it now.

“A regulator that has by no means been ready to acknowledge its function on the epicentre of greed, corruption and incompetence is simply as responsible as any water firm of polluting rivers and exploiting prospects.”

A authorities spokesperson mentioned: “We don't touch upon hypothesis”.

Insiders at Ofwat have expressed concern that scrapping the regulator with out a clear plan for the long run may add to uncertainty at a delicate time for funding. Nonetheless, sources mentioned they supported combining some completely different investigatory and punishment powers inside one regulator – even when it price them their jobs.

One insider mentioned “merely scrapping Ofwat wouldn't be a fast repair”.

“If this had been a straightforward method to keep away from placing Thames Water into particular administration, I believe the federal government would have carried out it already,” they added.

A senior Whitehall supply mentioned they feared the politicisation of regulatory modifications may make it more durable to draw funding for the water business within the brief and medium time period.

“Buyers have to know what they're shopping for,” the supply mentioned. “That features regulation.”

On Friday, it was revealed severe air pollution incidents by water firms had been up by 60% final 12 months in contrast with the 12 months earlier than. The entire variety of severe air pollution incidents in 2024 was 75, up from 47 in 2023, Surroundings Company figures confirmed. Of those, 81% (61) had been attributable to three firms: Thames Water (33), Southern Water (15) and Yorkshire Water (13). Thames Water’s severe incidents greater than doubled from 14 to 33.