Politicians and campaigners have condemned proposed water bill rises for England and Wales, accusing the industry regulator of showing “contempt” to customers who have endured poor service, sewage dumping and leaks.
Ofwat’s recommendation on Thursday that households pay on average £94 more over five years to fund improvements in environmental standards was described as a “bitter pill” by the chancellor, Rachel Reeves.
The regulator also put struggling Thames Water into unprecedented special measures, allowing extra scrutiny of Britain’s biggest supplier, as fears grow over whether it may have to go through a painful restructuring or be temporarily nationalised.
The UK’s private water companies have faced a barrage of public anger, after years of taking out millions in bonuses and dividends while underinvesting in an ageing network led to high levels of leaks and sewage overflows. In March, data revealed that untreated human waste was discharged for more than 3.6m hours into rivers and seas last year, up 105% on the previous 12 months.
Ofwat’s plans to pay for the necessary repairs by raising household bills were met with anger by activists and politicians. The former Undertones singer turned water campaigner Feargal Sharkey accused the watchdog of charging customers twice by “allowing water companies to put up bills by a large amount to pay for infrastructure they should have already paid for”.
Keir Starmer said the Conservatives had let the water industry “get completely out of hand”, and Labour would look at “possible further regulation” to tackle pollution and rising bills.
On Thursday, water bosses met the environment secretary, Steve Reed, to promise to fix sewage leaks and serve customers better.
Ofwat’s review, its first assessment of English and Welsh water companies’ spending plans for 2025-30, ruled they could spend £88bn over the five-year period, which would be recovered from bills.
The figure is £16bn lower than companies had proposed but still raised concerns that consumers were paying the price for previous underinvestment by water companies, which have paid out £78bn in dividends since 1989, and accumulated £60bn in debt.
Sharkey added: “I am now so outraged with the contempt Ofwat is showing to customers that we should be taking to the streets outside parliament to show that we will no longer take their greed, their incompetence and their complete and utter disregard for customers and the environment.”
The price review was seen as critical for debt-laden Thames Water. Ofwat took the unprecedented step of putting the company into a “turnaround oversight regime”, subjecting it to extra scrutiny and forcing it to regularly report on the progress of moves to reduce sewage spills by 64%, cut leaks by 19% and slash supply interruptions by 66%.
The review is seen as unlikely to have improved investor sentiment towards the company, which could be put into a government-handled administration if it fails to raise fresh funds. Such a collapse could mean Thames’s £15.2bn of debts being added to the public purse.
Water company executives signed up to a set of reforms after meeting Reed on Thursday. The new measures ensure funding for vital infrastructure is ringfenced for upgrades that benefit consumers and the environment, and is refunded if it is not spent.
Companies have also pledged to make the interests of customers and the environment their “primary objective”, and that households and businesses will see compensation for water supply outages double.
Consumers will also receive payments if suppliers issue “boil water notices”, as occurred this year when a parasite caused a spate of illness in Devon.
Reed said: “The new government will force water companies to tackle illegal sewage dumping into our rivers, lakes and seas. Firm action should have been taken much earlier to ensure money was spent on fixing the sewage system, not siphoned off for bonuses and dividends.”
Starmer said Labour was devising a plan to “get to grips” with the governance of water. He said this would not involve nationalising the entire industry, which some campaigners have called for. It would, however, potentially involve more regulation and “something I’m very keen on, which is to have sort of personal responsibility from the top”.
The Liberal Democrats called for “insulting price hikes by water companies” to be blocked. Their environment spokesperson, Tim Farron, said: “It is a national scandal that these disgraced firms are demanding more money from families and pensioners in a cost of living crisis, all while dumping raw sewage into our rivers.”
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The Environment Agency has previously said water company bosses ought to be jailed for serious pollution. Ofwat belatedly brought in powers to block executive bonuses if a company has committed serious criminal breaches.
The water bill rises are expected to pile further pressure on households struggling with the cost of living crisis.
Mike Keil, the chief executive of the Consumer Council for Water, said: “Millions of people will feel upset and anxious at the prospect of these water bill rises and question the fairness of them, given some water companies’ track record of failure and poor service.”
Doug Parr, policy director for Greenpeace UK, said: “It’s now glaringly obvious that these water firms will continue to demand dividends and bonuses for continuing to not do their job for as long as they are allowed to do so. The regulator can’t solve this without full government backing for a more interventionist approach.”
The Green MP Siân Berry, the party’s former leader, called for the water companies to be nationalised, saying this would allow government to “invest affordably in the creaking infrastructure without all the harm falling on to our bills”.
Ofwat’s chief executive, David Black, said: “Let me be very clear to water companies. We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers.”
Water UK, which represents water companies, reacted angrily to the limits in the planned spending. A spokesperson said: “Today’s announcement is the biggest ever cut in investment by Ofwat. If it doesn’t put this right, Ofwat will be repeating the mistakes of the past.”
The body argued that new housing would be blocked, improvements in river water quality would be slowed and water shortages would become more likely if companies were not allowed to spend the more than £100bn they had proposed.
Despite this, shares in the listed water companies rose on Thursday, with South West Water’s owner, Pennon, up 11%, indicating investors believe Ofwat’s verdict was positive for the industry.
The biggest bill increases Ofwat allowed were for Southern Water, with a £183 rise to £603; Dŵr Cymru in Wales, which will increase bills by £137 to £603, and Hafren Dyfrdwy, whose bills will be rising by £128 to £524.
Ofwat said companies would invest £10bn to tackle storm overflows, with a target to reduce spills by 44% from levels in 2021. A string of new environmental targets will be introduced, including tasking companies in England to limit spills to 16 incidents a year by 2029.