Scrapping Ofwat could be considered by new water sector commission

Scrapping watchdog Ofwat could be considered by a new independent commission on the water sector as ministers aim to attract investment into the industry.

Ministers have launched the largest review of the sector since it was privatised, with the commission set to be chaired by former deputy Bank of England Governor Sir Jon Cunliffe. 

It comes after environment minister Steve Reed unveiled the Water (Special Measures) Bill which ramps up watchdogs’ powers to issue fines, conduct oversight and recoup costs.

Reed said the “water system urgently needs fixing”, with the probe intended to “attract the investment we need to clean up our waterways and rebuild our broken water infrastructure”.

He added: “The commission’s findings will help shape new legislation to reform the water sector so it properly serves the interests of customers and the environment.”

The sweeping new probe is intended to also strengthen regulation, boost investment and inform further future reform of the sector, including how to secure and fund infrastructure. 

It will have no limits in the scope of its potential recommendations – including to abolish or wholly reform Ofwat or other water regulators – and will draw on experts from across sectors including health, regulation, environment, engineering, customers, investors and economics.

It follows the government’s recent international Investment Summit, which saw Prime Minister Keir Starmer vow to scrap red tape restricting financing and to rewrite the UK’s rulebook to make it “fit for the modern age.”

Ministers will decide whether to accept the review’s proposals, which they say they are set to receive in spring 2025, and will outline future legislation on attracting water investment.

Commission chairman Sir Jon added: “It is vital we deliver a better system to attract stable investment and speed up the building of water infrastructure.

“I have seen how the regulation of private firms can be fundamental to incentivising performance and innovation, securing resilience and delivering public policy objectives.”

Recommendations from the review – which aim to ensure strategic planning, stable regulation, lower pollution, financial resilience, consumer protection, and resilient infrastructure – will be presented to Reed and the Welsh climate change minister.

David Black, chief executive at Ofwat, said: “We welcome the water commission’s review and look forward to being able to work with the government on the change that is needed to drive better outcomes for customers and the environment.

“We are ready to back record investment. The challenge for water companies is to match that investment with the changes in company culture and performance that are essential to rebuilding the trust of customers and the public.”