Water bill rises needed after years of low investment, says report

Water bills have to rise steeply to make up for years of underinvestment, a major review into the state of the water industry in England and Wales has found.

The long-awaited Independent Water Commission report found there had been pressure to keep household prices low for years which has led to bills being expected to jump by 30% between now and 2030.

The report led by Sir Jon Cunliffe, a former Bank of England deputy governor, also suggested compulsory smart meters in homes to help people manage costs as well as scrapping the regulator Ofwat.

It comes amid widespread criticism of water companies over leaking pipes and sewage spills, with pollution incidents in England hitting a new record.

Campaigner Feargal Sharkey said “corporate greed”, “exploitation of bill-payers and the environment” were at the heart of the industry’s problems.

He also criticised the government for limiting the scope of the report to exclude renationalising the water industry in England and Wales.

Environment Secretary Steve Reed claimed that nationalisation would cost £100bn.

“That’s money we don’t have,” he said.

However, pollution incidents by water companies in England have reached record levels according to data from the Environment Agency.

The most serious cases, which cause significant harm to aquatic life and potentially human health, rose by 60% last year.

Companies have long claimed that they have been held back from investing in the country’s pipes and sewage treatment facilities because Ofwat limited price increases for customers.

The report said customers’ water bills have declined by 15% over the last decade when taking inflation into account.

It added that there was “pressure from government and the regulator to keep bills low… between 2009 and 2024” and that this “played an important role in what can now be seen as underinvestment over this period”.

Last year, Ofwat announced that water bills in England and Wales would increase sharply over five years to raise £104bn to invest in infrastructure.

However, since being privatised in 1989, water companies have paid out at least £54bn to shareholders, including to overseas investment funds.

“There are legitimate questions about whether companies have, in some cases, issued dividends at the expense of their own financial resilience,” the report said.

Sir Jon told the BBC there had been a “really huge rise in bills” over the past year.

He added: “The inescapable fact is it costs more to produce drinking water and it costs more to deal with our waste water as we go forward – climate change, ageing infrastructure, population growth, development – these put pressure on the system.”

He has suggested establishing a single regulator in England to replace Ofwat, the Drinking Water Inspectorate, and the Environment Agency’s water responsibilities with a similar body for Wales.

An Ofwat spokesperson said it would “work with the government and the other regulators to form this new regulatory body”.

Reed claimed that having a single regulator would mean it could better oversee maintenance and investment in water infrastructure so that “hard working British families are never again hit by the shocking bill hikes we saw last year”.

He added: “The reforms that we’re bringing in are intended to prevent the circumstances that led to those bill hikes.”

However, other campaigners said that the review did not go far enough to fix the system.

“The report diagnoses symptoms but avoids the cure,” said James Wallace, chief executive of River Action.

Surfers Against Sewage (SAS) said the recommendations were simply “putting lipstick on a pig”.

Its chief executive Giles Bristow said the report “utterly fails to prioritise public benefit over private profit”.

In his 88 recommendations to reform the water industry, Sir Jon said installing smart water meters in homes would mean people will be charged for what they use rather than paying a flat fee.

The report also recommended:

• Turning the Consumer Council for Water into a consumer ombudsman
• Creating nine regional water system boards to give local consumers and businesses a voice
• Introducing a single social tariff to help struggling households
• Bringing in a formal turnaround regime which could waive fines against poorly performing water companies
• Give regulator greater power to restrict dividends to ensure money is used for investment and financial stability instead