In the same week, Susan Davy, chief executive of South West Water owner Pennon, declared that she was stepping down<\/a> \u2014 a day after her company was hit with a \u00a324 million fine for failing to run its wastewater plants properly.<\/p>\n And on Friday, fresh data showed river pollution incidents in England were up 60 per cent last year.<\/p>\n Amid the heat generated by developments like these, public outrage at Britain\u2019s water companies is at boiling point. For years, the industry has been accused of fouling our rivers while paying out huge dividends to investors. The industry regulator Ofwat, in turn, had been blamed for keeping household water bills low at the expense of the utilities being able to fund critical maintenance. Last year, it sanctioned a large rise in bills to underpin a belated \u00a3104 billion investment in water over the next five years.<\/p>\n The Labour government wants to go further. It has convened an independent commission to make recommendations on reform of the sector \u2014 the biggest shake-up in more than 30 years.<\/p>\n Led by former Bank of England deputy governor Sir Jon Cunliffe, the commission will report back tomorrow with a blueprint<\/a> for how to fix the water industry once and for all.<\/p>\n Steve Reed, the environment secretary<\/p>\n JACK TAYLOR FOR THE SUNDAY TIMES<\/p>\n The man given the task of turning that plan into reality is Steve Reed, the secretary of state for environment, food and rural affairs. He insists Labour has already jumped in, toolbox in hand, to tackle Britain\u2019s dodgy plumbing.<\/p>\n \u201cWe\u2019ve had a big step up in bills this year because maintenance wasn\u2019t done and wasn\u2019t funded,\u201d he said last week in an interview with The Sunday Times.<\/p>\n \u201cThe previous government could have intervened at any point and fixed that problem. They didn\u2019t. I\u2019ve intervened now and I\u2019ve fixed it. So in the future, we won\u2019t see big bill hikes again.\u201d<\/p>\n Reed is adopting a three-pronged approach to the water industry. The first part is a \u201creset\u201d of the industry via the Water (Special Measures) Act, which received royal assent in February and introduced potential criminal punishments for directors of failing water companies and bans on bonuses for the most senior executives. <\/p>\n This is populist stuff; Labour believes it plays well with the public because internal polling reveals that sewage in rivers is one of the most pressing issues on voters\u2019 minds.<\/p>\n But Reed knows that frightening water companies into compliance or financial health isn\u2019t a viable strategy on its own, so investment comes next, with the \u201crebuild\u201d phase of his plan. This is where the \u00a3104 billion comes in.<\/p>\n \u201cThe projections were that by the mid-2030s, demand for drinking water would outstrip supply and that would lead to rationing,\u201d he said. \u201cBecause we\u2019ve secured this \u00a3104 billion worth of investment, we will be able to ensure that the infrastructure is in place \u2026 to guarantee water supplies for the future.\u201d<\/p>\n But Reed is most keen to talk about phase three: \u201crevolution\u201d, an overhaul of the entire industry, which will be shaped by the Cunliffe report.<\/p>\n Legacy of Thatcher Margaret Thatcher championed privatisation as prime minister<\/p>\n GRAHAM WOOD\/TIMES NEWSPAPERS<\/p>\n It is worth remembering how we got here. England\u2019s regional water boards were privatised in 1989 under then prime minister Margaret Thatcher as ten, debt-free, listed companies. Many were later taken private; three are still listed on the stock exchange.<\/p>\n Over time, the owners of the water companies loaded them up with debt while extracting dividends. Ofwat kept a lid on bill increases and, after an initial spurt of investment in the 1990s, spending was broadly flat until the turn of this decade \u2014 when fraying infrastructure and the increasing challenge of climate change made the problems more apparent.<\/p>\n Anger over river health<\/a> grew as campaigners such as the singer Feargal Sharkey drew attention to the issue. And better monitoring of sewage spills also played a part. During storms, which may be becoming more frequent, sewage works spill into rivers by design.<\/p>\n It would take decades and vast amounts of money to re-engineer this system.<\/p>\n Privatisation has had some clear successes: the quality of our drinking water has improved over the past 30 years, according to Environment Agency data. However, Reed said, a failure to plan for the future, a changing population and new demands for water from sites such as data centres have left the UK exposed: \u201cIf you see a crack in the wall of your house and you leave it for ten years, it gets worse and worse and it costs much more to fix it.\u201d<\/p>\n Mogden sewage treatment works, operated by Thames Water, in west London<\/p>\n TOBY MELVILLE\/REUTERS<\/p>\n A new beginning? <\/p>\n According to Reed, \u201cregulation is completely broken\u201d. Cunliffe is expected to address this head-on. In his interim report, released in June, he talked of streamlining regulation. Alongside Ofwat, the industry is governed by the Environment Agency and the Drinking Water Inspectorate, all with overlapping responsibilities.<\/p>\n Reports this weekend suggested he will recommend the abolition of Ofwat. Reed declined to comment on the future of the regulator, but acknowledged: \u201cI\u2019m very aware that Ofwat\u2019s reputation is poor with the public and with investors.\u201d<\/p>\n Cunliffe\u2019s vision<\/a> is likely to be of a new \u201csupervisory\u201d regime for water firms, with the regulator employing engineers who can quickly raise red flags over crumbling infrastructure. This will demand \u201csignificant change in the culture, capacity and capability of the economic regulator\u201d, he said this year. There will be less emphasis on a \u201cone size fits all\u201d approach; currently, the utilities are judged against a \u201cnotional\u201d water company, which they say does not take into account the circumstances of each firm.<\/p>\n Longer term, Cunliffe has recommended building more resilience into the system by setting up regional bodies to co-ordinate water planning by \u201ccatchment\u201d \u2014 the geographic basins that capture water. Reed said this model \u201chas a lot to commend it, because if you can manage what\u2019s going into the water better, you can clean up the water faster\u201d.<\/p>\n These regional bodies could be made up of local authorities, water companies, farmers, housebuilders and even local campaigners.<\/p>\n Sir Jon Cunliffe<\/p>\n JOSHUA BRATT FOR THE TIMES<\/p>\n Cunliffe\u2019s initial findings have been broadly welcomed by the sector. \u201cThe commission identified many of the issues that have chipped away at people\u2019s trust, including the affordability of bills and poor environmental performance,\u201d said Mike Keil, chief executive of the Consumer Council for Water.<\/p>\n Outside Cunliffe\u2019s remit is any consideration of nationalisation. Officially, Labour\u2019s policy is that it still needs the private sector to own water companies, and lend to them. In theory, utilities should be low risk and low return. Andrew Moulder, an analyst at research firm CreditSights, explained: \u201cIf you\u2019ve got a good-performing company in the water sector, then you are earning a relatively stable return.\u201d<\/p>\n Keeping investors happy<\/p>\n Investor faith in Ofwat has been shaken, amid fears that the regulatory regime promotes too much risk and too little reward.<\/p>\n The argument goes like this: the watchdog, critics say, has kept bills low (in real terms, they have dropped in the past 15 years) and prevented companies from investing enough in infrastructure. That infrastructure then degrades, causing sewage spills or leaks, in turn earning the companies fines for missing targets. They then have even less money to turn themselves around. This is called the \u201cdoom loop\u201d.<\/p>\n \u201cFining a company into oblivion is counterproductive in the end,\u201d said one credit investor who is a lender to Thames Water. Constant punishment of struggling firms would put off potential new investors in the sector, they added: \u201cWhat provider of fresh capital is going to invest under this regime?\u201d Some cite the example of US private equity giant KKR, which walked away from a bid<\/a> for Thames in June in part because the risks seemed too great.<\/p>\n Reed is aware of the dilemma. \u201cTransformation will take time,\u201d he said. \u201cThat\u2019s why we will work in partnership with investors, water companies and communities to create a water system that is stable, resilient and investable.\u201d<\/p>\n Protests over Thames Water\u2019s debt restructuring plan at the High Court in February<\/p>\n TOBY MELVILLE\/REUTERS<\/p>\n Sinking Thames<\/p>\n Reed is trying to re-engineer the sector at a time when the Thames Water drama<\/a> shows little sign of abating. The utility said on Friday that it would seek more time from the regulator to reach a deal to avoid temporary nationalisation in the form of a special administration. Depending on how it manages its spending, it may have enough cash to last until May. But while it struggles to stay afloat, crucial upgrades to its pipes and facilities risk falling badly behind schedule.<\/p>\n![\"Steve](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/07\/\/4d4fd586-c37a-4906-987f-80339e33ed3d.jpg\")
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