An Independent Commission into the water sector and its regulation will be launched by the government tomorrow (Wednesday 23 October), in what is expected to form the largest review of the industry since privatisation.
The Commission forms the next stage in the Government's long-term approach to ensuring we have a sufficiently robust and stable regulatory framework to attract the investment needed to clean up our waterways, speed up infrastructure delivery and restore public confidence in the sector.
It follows the Government's inaugural International Investment Summit last week at which the Prime Minister spoke of the need for regulation and regulators to support growth and investment in the UK.
Launched by the UK and Welsh governments, the Commission will report back next year with recommendations to the Government on how to tackle inherited systemic issues in the water sector to restore our rivers, lakes and seas to good health, meet the challenges of the future and drive economic growth.
These recommendations will form the basis of further legislation to attract long-term investment and clean up our waters for good - injecting billions of pounds into the economy, speeding up delivery on infrastructure to support house building and addressing water scarcity, given the country needs to source an additional 5 billion litres of water a day by 2050.
Former Deputy Governor of the Bank of England, Jon Cunliffe, will chair the Commission. With several decades of economic and regulatory experience, his appointment demonstrates the Government's serious ambitions.
The Commission will draw upon a panel of experts from across the regulatory, environment, health, engineering, customer, investor and economic sectors. It forms part of the Government's reset of the water sector by establishing a new partnership between government, water companies, customers, investors, and all those who enjoy our waters and work to protect our environment.
Launching the review, Secretary of State Steve Reed said:
Our waterways are polluted and our water system urgently needs fixing.
That is why today we have launched a Water Commission to attract the investment we need to clean up our waterways and rebuild our broken water infrastructure.
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.
Water Commission Chair Sir Jon Cunliffe said:
I'm honoured to be appointed as chair of the government's new Water Commission. It is vital we deliver a better system to attract stable investment and speed up the building of water infrastructure.
Working over many years in the public sector, in environment, transport and the Treasury, and the Bank of England, I have seen how the regulation of private firms can be fundamental to incentivising performance and innovation, securing resilience and delivering public policy objectives.
I am looking forward to working with experts from across the water sector, from environment and customer groups and investors, to help deliver a water sector that works successfully for both customers, investors and our natural environment.
Huw Irranca Davies, Wales' Deputy First Minister with responsibility for Climate Change and Rural Affairs, added:
This vital review couldn't come at a more urgent time for our water environment and water industry.
This shows the fresh approach of our two governments working together on an issue which affects us all as consumers, investors and as stewards of the natural world.
Both the Welsh and UK Governments are determined to improve water quality and the resilience of the water sector for future generations. We have clear priorities for reform and a shared sense of the work needed across both countries' policy and regulatory regimes to make this change happen.
A set of recommendations will be delivered to the Defra Secretary of State, and Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs next year. The UK Government and Welsh Government will then respond with the proposals they intend to take forward.
The objectives of the Commission are to recommend measures to ensure the regulatory system delivers:
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Clear Vision: Establishing clear outcomes for the future and a long-term vision for delivering environmental, public health, customer, and economic outcomes.
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Strategic Planning: Adopting a collaborative, strategic, catchment approach to managing water, tackling pollution and restoring nature.
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Better Regulation: Rationalising and clarifying requirements for companies to secure better customer and environmental outcomes.
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Empowered Regulators: Ensuring regulators are effective in holding water companies accountable, for example for illegal pollution.
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Improved Delivery: Enhancing the sector's ability to meet obligations, including clean rivers, lakes, and seas, while driving innovation.
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Stable Framework: Ensuring a regulatory environment that attracts investment and supports financial resilience for water companies.
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Consumer Protection: Safeguarding consumer interests and affordability through transparent and fair governance.
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Resilient Infrastructure: Delivering and maintaining robust infrastructure on time, anticipating future needs and climate challenges.
The independent commission is the third stage of the government's water strategy. In his first week in office, the Secretary of State secured an agreement from water companies and Ofwat to ringfence money for vital infrastructure upgrades so it cannot be diverted to shareholder payouts and bonus payments.
In just 70 days, the Government also introduced the Water (Special Measures) Bill, which sets out tough new measures to crack down on water companies failing their customers. This includes:
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Bringing criminal charges against persistent lawbreakers, including imprisonment.
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Strengthening regulation to ensure water bosses face personal criminal liability for lawbreaking.
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Giving the water regulator new powers to ban the payment of bonuses if environmental standards are not met.
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Boost accountability for water executives through a new 'code of conduct' for water companies, so customers can summon board members and hold executives to account.
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Introduce new powers to bring automatic and severe fines.
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Require water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators.
In addition, the cost recovery powers of regulators will be expanded to ensure that water companies bear the cost of enforcement action taken in response to their failings. The Environment Agency will undertake a consultation on the implementation of these new powers.
Further quotes
Jon Phillips, Chief Executive of the Global Infrastructure Investor Association said:
The Secretary of State should be congratulated for acting swiftly to put in place this much needed review and reset of the water sector. No parties involved in the sector can be happy with the current arrangements, and that includes investors whose capital is vital to addressing current and future environmental challenges.
The government has heard loud and clear that the sector needs both a long-term plan and a regulatory framework that places greater emphasis on attracting investment. We look forward to the opportunity to support the Commission's work and hope that its findings can be put into practice at the earliest opportunity.
Gail Davies-Walsh, CEO of Afonydd Cymru, said:
This independent review of Welsh and English water companies is very welcome news and something that we hope will ultimately result in a much needed boost for river health.
We would like to understand how long-term water company investment can be secured to deliver the environmental performance that we need.
Afonydd Cymru welcome the collaboration of Welsh Government and the UK Government on this matter, particularly given the current cross-border management issues that hinder river restoration efforts.
Richard Benwell, CEO of Wildlife and Countryside Link, said:
The water sector is a perfect example of where stronger, better enforced regulation can drive up investment and drive down pollution.
We welcome this significant review as the next step in Defra's work to clean up our water environment. We'll be looking for strong new rules that tie the industry into environmental investment and improve the way that money is spent in every river catchment to deliver quick, clean results for nature and communities.
Jamie Cook, CEO of Angling Trust, said:
The Angling Community has been calling for a root and branch review of Britain's failing water sector, so we are pleased the Government has moved swiftly to set up an independent commission to deliver this.
However, there is inevitably going to be a difficult balancing act between economic, consumer and environmental priorities that this review will need to address. We are pleased the views of water users, like the two million anglers, are going to be a key part of this review.
The Angling Trust is committed to working with the commission to ensure the health of our rivers, lakes and seas remains front and centre of its work.
Mark Lloyd, CEO of Rivers Trust, said:
35 years after water privatisation, this review is long overdue, which makes it even more welcome. Our rivers have been flatlining for far too long, alongside the failure of our current systems to manage ageing infrastructure and population increase they face huge strategic challenges from climate change and biodiversity decline.
Incremental policy tweaks will not fix our water system, and the review must look beyond the water industry to include land and water management in both urban and rural areas. There needs to be much more focus on delivery of cost-effective solutions, through an integrated systems approach.
We will be keeping a close eye on the work of the commission to ensure it considers land use, nature, drought, flood and pollution in concert, because they are all intrinsically linked. We look forward to working closely with Sir Jon Cunliffe and his team on a new system.
Nicci Russell, CEO of Waterwise, said:
We welcome this review, its wide scope and the collaborative way the government is approaching it. We agree with the government that now is the time for a reset in the water sector - nothing happens without water, so access to water needs to be at the heart of everything the government does.
We will aim to put water efficiency at the heart of the Commission's work, and look forward to working with Sir Jon and his team of experts to do this. The first objective in our Water Efficiency Strategy to 2030 is that governments and regulators show clear, visible leadership for water efficiency and reflect this in their policy and regulatory frameworks.
We are also delighted to see that Ministers are placing environmental and social outcomes as equally important to economic ones - because nothing happens without water. This is a great opportunity for the water sector to play a part in the Government's mission of national renewal - not just in delivering a vital public service, but also in playing a proactive role to ensure a just society and a strong economy.
Joan Edwards, Director Policy and Public Affairs at The Wildlife Trusts, said:
This review comes not a moment too soon, given the precarious and polluted state of our waters, and the looming threat of future water shortages.
It's crucial that regulation drives companies to invest in the solutions that can best deliver improvements for nature at the same time as limiting bill increases.
We look forward to supporting the Commission's work by feeding in on the importance of a healthy environment and the changes needed to get us there.
