A report on the state of the water industry in England and the plans to reform it has been long-awaited, but exactly how it will affect water security, the accountability of companies and the cost of water for businesses is somewhat mixed.
The policy white paper, A New Vision For Water, notes the clear need for reform, after decades of neglect, money being taken out of the water sector, record fines and unprecedented levels of chaos.
Does the new vision signpost a genuine new start for the water sector, or is it a false dawn? To understand what comes next for the water sector, it is important to know the main proposals, the reaction from the industry and consumer advocacy groups, and what still needs to be addressed.
What Is The New Vision For The Water Sector?
The white paper ultimately splits itself into seven key areas, each addressing a fundamental need within the water sector and some proposed policy shifts:
- Changing the long-term direction for the water direction: This involved setting up a clear, rationalised and unified strategic plan to reform the sector and focus on long-term benefits rather than short-term gains for investors.
- Regulation resets: Alongside getting rid of Ofwat, a proposal that has been in the works for months, it also involves a new, proactive regulatory board focused on early intervention rather than fines. Some of the proposals have become controversial for reasons we will explore.
- Making water more appealing for investors: The dilemma with the water sector, and a major reason why nationalisation was ruled out from even being discussed, is that a core aim is to attract third-party financing and investment.
- Protecting and prioritising customers: Conversely, the reforms also aim to safeguard drinking water and waterways through the establishment of a water ombudsman that helps represent and advocate for water customers.
- Cleaning up waterways: Alongside stronger enforcement standards and investing in wastewater treatment to avoid the overflow of raw sewage that has become shockingly common, the monitoring system is set to change from self-reporting to a stronger oversight authority.
- Improving water security: This is the biggest priority for the reforms; the hope is that by improving water efficiency, reusing more water, having better regulatory oversight and improving infrastructure, there are fewer risks of floods and droughts.
- Establishing a clear plan for transitional reform: As with any other white paper, a major priority is setting up a roadmap, establishing the stakeholders and trying to provide clarity as to how the reforms will be delivered.
What Has Been The Reaction To The White Paper?
A white paper is only a set of proposals; there will be further consultations before a final Bill is even presented to be voted on in both the House of Parliament and the House of Lords.
However, it is interesting to see how mixed the reaction has been to the proposals, and how the response to the criticisms has been found wanting.
Many of the reforms have been welcomed, including the superauthority having powers to inspect water companies with no notice, dedicated supervisors for each company, blocking excessive bonuses for water company directors and holding them personally responsible and liable for criminal offences undertaken by water companies.
However, there are a few major sticking points, of which the biggest is the nature of the turnaround regime rules. These could potentially include measures that will allow the new superauthority to “manage” fines to allow them to defer or even void payments.
This has been seen as a “desperate” capitulation that allows water companies to end up off the hook for their crimes and infractions.
In fact, Sir Jon Cunliffe noted the contradiction that financial sanctions ultimately punish customers if there are no additional restrictions and punishments.
After all, if a water company ends up with the fines Thames Water has but cries poverty and that being punished for their crimes would put the company out of business, they could escape accountability and make the new authority as toothless as Ofwat proved to be.
What Was The Report Not Allowed To Explore?
The biggest controversy, one that has existed since the announcement of the Cunliffe Report, is that there is no mention of nationalisation. In fact, Sir Jon Cunliffe was not allowed to explore it at all, and the Guardian reports that he believes that it would not fix the issue regardless.
England and (to a certain extent) Wales are the only countries in the entire world with fully private for-profit water companies; other countries with private sector involvement use systems such as public-private partnerships instead.
However, the issues with Thames Water, in particular, as well as Southern Water and several other water companies facing financial issues, are a direct result of their profit motive; by being incentivised, if not legally required, to run water companies for the benefit of shareholders, standards slip and infrastructure is allowed to decay.
Fergal Sharkey noted in no uncertain terms that corporate greed is at the core of the problems with the water sector. As has been demonstrated for decades, a good heart is hard to find, and water companies have taken advantage of any leeway given to them to increase profits at the expense of customers.
Will the reforms change this? Perhaps a more radical approach is required, but this may not happen before the 2029 bill negotiations.
