New ‘super watchdog’ could aid Labour’s plans to fix sewage crisis
Commission urged to consider combining Ofwat with parts of Environment Agency to forge a new, all-powerful regulator
Surfers Against Sewage called on the commission to give regulators the power to turn water firms into ‘public benefit companies’ so that they can make profit ‘but with a clear duty driving environment improvement’
A new Independent Commission has been urged to consider whether combining Ofwat with parts of the Environment Agency (EA) in an all-powerful regulator might force water companies to clean up their act.
The campaign manifesto, launched before the general election, called for an overhaul in the oversight of water firms, with existing regulators blamed for failing to prevent companies from pumping huge volumes of sewage into the nation’s waterways.
i understands that Labour ministers are placing no limits on the Independent Commission when it comes to the fate of the current regulators – meaning they could be scrapped, overhauled or combined. i earlier reported that Ofwat, which has been criticised as “dithering” and “toothless”, could being scrapped entirely.
Led by the Bank of England’s former deputy governor Sir Jon Cunliffe, the commission will report its findings in 2025,
A government source said it would be up to the commission to recommend a particular shake-up. Nothing has been ruled out except the re-nationalisation of water companies.
The economic regulator Ofwat, which is in charge of ensuring the financial health of water firms so that they operate in the interest of consumers, has been accused of allowing companies to underinvest in much-needed infrastructure upgrades. It has also been accused of sanctioning large chief executive’s bonuses and dividends to shareholders.
The EA has been criticised for failing to investigate or take enforcement actions when it comes to pollution and allowing water firms to “mark their own homework” on ongoing sewage releases.
The possible benefit of a “super watchdog” would be a more joined-up approach to the enforcement of pollution laws and economic investment, according to some campaigners.
Environment Secretary Steve Reed said the water system “urgently needs fixing”, adding: “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.”
“Regulation is too complicated at the moment, so it may be a good idea to combine them into a single, super water regulator.
“When we’re stuck with a system as broken as this, we need new thinking.”
James Wallace, chief executive of River Action UK, said replacing the “toothless” Ofwat organisation with a much stronger body – taking in some of the EA’s functions to regulate pollution – was worth considering.
“Water companies need stronger environmental and financial regulation – whether it’s done by one body or two, I don’t mind. One water regulator is an option to consider.”
i has been calling for a new “green duty” to be placed on Ofwat, so that it puts much greater emphasis on the environment when considering the level of upgrades to the sewer system required of water firms.
Surfers Against Sewage called on the commission to give regulators the power to turn water firms into “public benefit companies” so that they can make profit “but with a clear duty driving environment improvement”.
Mark Lloyd, chief executive of The Rivers Trust, said there would be “some logic” in having a single water regulator, since it would combine environmental and economic expertise. “It’s worth considering,” he told i.
However, he warned the scale of such a restructure could prove too time-consuming. “My hesitation with that reorganisation is that it could set us back for a number of years.
“Working out what everyone does and who reports to whom can create delays in action, when we don’t have a lot of time with a nature emergency upon us.”
Mr Lloyd said there was an argument for removing “distracting” responsibilities from the EA such as planning, so it can focus on far more rigorous enforcement of pollution laws.
Mr Reed ruled out re-nationalising water companies, and said its focus remained on attracting more private investment into the sector.
But he suggested the Government was open to a fundamental shake-up in regulation.
Asked if was willing to see Ofwat replaced, Mr Reed told BBC Radio 4’s Today programme: “There are certainly very severe failures of regulation and governance that underpin the problems that we’re seeing in the water sector.
“What I’ve asked Sir Jon to do is look from the bottom up at the whole sector,” he added. “But I’m not going to predict what he might come up with, because that is for him.”
i’s Save Britain’s Rivers campaign
Leading environmental groups praised i’s Save Britain’s Rivers campaign for forcing action on regulatory change.
Mr Wallace of River Action UK said: “It’s through the efforts of public pressure and campaigns like i’s Save Britain’s Rivers that is making the Government listen.”
Mr Lloyd of Rivers Trust added: “It’s fantastic that i has picked up this issue and pushing for change on front pages. i has an important role to play in finding solutions that work.”
Doug Parr, policy director for Greenpeace UK, said i had been a “leading voice” in “holding the decisions of water companies and politicians up to the light”.
Earlier, Mr Reed paid “tribute to i’s tireless campaigning for clean rivers” and said the Independent Commission “is a huge win for the paper”.
The water minister, Emma Hardy, added that “i has been at the forefront of exposing why we need to fix our water system”.
David Black, the chief executive of Ofwat, said it welcomed the new review and looked forward “to being able to work with the Government on the change that is needed to drive better outcomes for customers and the environment”.
The Environment Agency has been approached for comment.
How Labour’s policies compare with i’s manifesto
1. RIVER HEALTH: 77 per cent of rivers in good health by 2027
What i says: Within its first six months in power, the Government must publish a roadmap on how the UK is going to achieve its legal target of 77 per cent of rivers being in good ecological health by 2027. This must include increased funding for the Environment Agency.
What Labour says: Under the new legislation, water companies will have to cover the costs for any investigation into them, which will significantly improve resourcing for the Environment Agency. Officials have refused to put a timeline on bringing the waterways back into good health, but have said it will take years to improve.
2. SEWAGE: Sewage spills will not damage high-priority areas – including bathing spots and nature sites – by 2030
What i says: Untreated sewage should not be causing damage to high-priority sites (bathing spots, protected nature sites, National Parks and chalk streams) by 2030. Water companies who fail to meet this target will be prosecuted.
What Labour says: While there is no specific target relating to high-priority sites, the Government has announced plans to imprison water executives if they persistently obstruct investigations into sewage spills, which is a dramatic strengthening of regulators’ powers.
3. WATCHDOG: Regulators will stop water companies destroying the environment in pursuit of profit
What i says: The Government must publish a plan to reform the regulation of water companies, including tougher powers for Ofwat to restrict dividends and bonuses for underperforming water companies. A “green duty” will be placed on Ofwat, which will force the regulator to place greater emphasis on the environment when making decisions over companies’ business plans.
What Labour says: The Government has launched an independent review of the water sector that will report back its findings next year. It has also introduced a Water Bill to Parliament that will give Ofwat the power to restrict bonuses. Labour has not yet committed to a “green duty” for Ofwat.
4. BATHING: Create 100 clean bathing spots in rivers by 2030
What i says: 100 clean bathing spots must be created in England by the end of the parliament, and the Environment Agency must start monitoring water quality throughout the year at these sites.
What Labour says: The Government has not mentioned bathing spots specifically, but there are further plans to look at water regulation at a more localised level.
5. FARMING: Farmers must be funded to improve water quality and face enforcement action if they damage the environment
What i says: Within its first year in power, the Government should strengthen its Environmental Land Management scheme so farmers are given more grants, support and advice to undertake activities that will improve water quality.
What Labour says: It says it will ensure “environment land management schemes work for farmers and nature”, but is yet to provide more detail on what that will entail. Environment Secretary Steve Reed will set out plans to further legislation that will seek to deal with agricultural run off into the waterways.
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