Diving into the Deep End: Five Key Reform Proposals from the Water Sector Review
The long-awaited review of the troubled water sector in England and Wales, led by former Bank of England deputy governor Sir Jon Cunliffe, has revealed significant insights and proposed a transformative approach. This extensive 465-page report is a direct response to public outcry over sewage spills and escalating water bills. Sir Jon underscores that no party emerges blameless in the current crisis, stating, “We have not managed this well, and no one comes out of this with very much glory.”
Key Takeaways:
Regulatory Overhaul: The review heavily criticizes the existing regulatory framework, which is fragmented among various agencies. It suggests a bold move towards a single water regulator for England and a separate one for Wales, aiming to eliminate the dual focus on economic and environmental goals. This could mean the abolition of Ofwat, signaling a significant shift in how water companies are monitored and held accountable.
2. Self-Monitoring Reforms: Current practices of operator self-monitoring—where water companies report their own pollution incidents—are called into question. The review highlights the need for a stronger monitoring system involving automation and third-party checks to rebuild trust. While it rejects fully transferring monitoring responsibilities to regulators due to costs, it advocates for a balance of advanced technology in monitoring sewage spills.
3. Ownership and Accountability: The report proposes that the regulator should exert greater control over who owns water companies and hold senior executives accountable for performance. This also entails attracting long-term investors and ensuring better oversight of financial practices within the sector.
4. Acknowledging Underinvestment: Acknowledging the underinvestment due to governmental pressure to keep consumer bills low, the review anticipates significant hikes in water bills moving forward to address the backlog in necessary improvements. A 26% rise in bills has already been approved for 2024/25 through 2025/26, which the report suggests could affect vulnerable households disproportionately.
5. Lack of Immediate Solutions: Despite the promising recommendations, Sir Jon cautions that no single reform will immediately rectify the sector’s issues. Change will require substantial time and investment in infrastructure. He emphasizes that real improvement in river conditions and billing will unfold gradually—”Change will take time; it takes years to build new infrastructure.”
The report concludes with the acknowledgment that the recommendations are not legally binding and will require governmental action to be implemented, as the government has only partially committed to some of the proposals thus far.