Water firms sign up to reforms amid pressure over bills and sewage

Companies met new Environment Secretary Steve Reed on Thursday as Ofwat announced proposals for bill rises.

Water companies have agreed to ‘initial reforms’ to clean up water (Alamy/PA)

Water bosses have signed up to “initial” reforms set out by the Government to clean up England’s waters as pressure mounts over rising bills and the sewage scandal.

The companies, which are facing a public outcry over dividends and bonuses, rising bills, and sewage spills that are polluting rivers, lakes and seas, met new Environment Secretary Steve Reed in London on Thursday.

After the meeting, it was announced they had agreed to what Mr Reed described as an initial package of reforms, including ringfencing funding for infrastructure investment and prioritising customers and the environment.

Under the reforms, consumers will also gain new powers to hold water company bosses to account through new customer panels, while there will be more compensation when things go wrong, the Environment Department (Defra) said.

The meeting came as regulator Ofwat set out its draft proposals for how much water firms will be able to raise consumer bills over the next five years, and how much they can invest in upgrading infrastructure.

The proposed bill hikes provoked an angry reaction from campaigners, who attacked water companies for demanding more money from households during a cost-of-living crisis while failing to curb sewage pollution, and were labelled a “bitter pill” by Chancellor Rachel Reeves.

After his meeting with the bosses of the 16 water companies covering England and Wales, Mr Reed blamed the water bill rises on “years of failure”.

He said: “Firm action should have been taken much earlier to ensure money was spent on fixing the sewage system, not syphoned off for bonuses and dividends.

“The decisive steps set out today mean this will never be allowed to happen again.

“After meetings with water bosses this afternoon, they have now signed up to my initial package of reforms as we work towards cleaning up our water, prioritising the interests of water customers and the environment, and fixing our broken sewage system.”

I want to get to work quickly to clean up the unacceptable levels of pollution that are so outraging the public when they see it in their rivers, lakes and seas

Steve Reed

But Mr Reed appeared to rule out the prospect of nationalising Thames Water, which is among the worst performing firms on sewage spills and is also in £15 billion of debt. The business has said it only has enough cash to continue trading until the end of May next year.

Mr Reed said: “Nationalising any of the water companies would cost billions of pounds and take years, potentially.

“I want to get to work quickly to clean up the unacceptable levels of pollution that are so outraging the public when they see it in their rivers, lakes and seas.

“Nationalisation would slow that down and cost money we do not have. The best way to achieve our outcomes is to ensure there is tough regulation.”

Environment Secretary Steve Reed (Lucy North/PA) (PA Wire)

Mr Reed suggested investors should take comfort in his reforms, not be put off by them.

“Investors want to invest in a sector that is performing well for its customers, and 14 years of failure under the Conservatives meant that money was being misspent on bonuses and dividends instead of being spent on fixing the broken infrastructure, and that is why there is so much public anger, understandably, at the extent of the pollution in our waterways.

“Those investors want to know that a government is going to come in that will ensure fair and consistent regulation and are delivering services the public want to see.”

Under the reforms, funding for infrastructure investments is ringfenced and can only be spent on upgrades benefitting customers and the environment, with Ofwat ensuring that when investment money is not spent it will be refunded to customers, not diverted for bonuses, dividends or salaries.

(PA Graphics) (PA Graphics)

Companies have agreed to change their articles of association to make the interests of customers and the environment a primary objective, while new customer panels will enable billpayers to summon board members and hold executives to account, Defra said.

Subject to consultation, the amount of compensation customers are legally entitled to when key standards are not met will more than double, while the payments will be triggered by a wider set of circumstances including “boil water” notices issued when tap water is unsafe to drink.

On behalf of the English water companies, David Henderson, Water UK chief executive, said: “We welcome today’s swift action by the Secretary of State.

“Companies have agreed to his direction that, in addition to turbocharging investment, they put customers and the environment at the core of how they operate.

“We will work with Government to implement these reforms as quickly as possible and deliver our largest-ever investment plan to secure our water supplies, end sewage in rivers and enable economic growth.”