Politicians and campaigners have condemned planned increases in water bills in England and Wales, accusing the water regulator of showing “contempt” for customers who suffer from poor service, sewage discharges and leaks.
Finance Minister Rachel Reeves described Ofwat’s recommendation on Thursday that households should pay an average of £94 more over five years to fund improvements in environmental standards as a “bitter pill”.
The regulator also imposed unprecedented special measures on struggling water company Thames Water, allowing increased scrutiny of Britain’s largest utility amid growing concerns that the water company will have to undergo a painful restructuring or be temporarily nationalised.
Britain’s private water companies are facing a flood of public anger after years of cutting millions in bonuses and dividends while underinvesting in an ageing network, leading to many leaks and sewage overflows. In March, data showed that untreated human waste was dumped into rivers and seas for over 3.6 million hours last year, 105% more than in the previous 12 months.
Ofwat’s plans to fund the necessary repairs through higher household bills have been met with anger from campaigners and politicians. Former Undertones singer and current water activist Feargal Sharkey accused the regulator of double-charging customers by “allowing water companies to increase bills by a large amount to pay for infrastructure they should already have been paying for”.
Keir Starmer said the Conservatives had allowed the water industry to “get completely out of control” and Labour would examine “possible further regulation” to tackle pollution and rising bills.
On Thursday, water industry officials met with Environment Minister Steve Reed to promise to fix sewage leaks and provide better service to customers.
Ofwat’s review is the first assessment of the spending plans of English and Welsh water companies for the period 2025-2030. It found that they could spend £88 billion over that five-year period, which would be recouped through bills.
While this figure is £16 billion less than the amount proposed by the companies, it still raises concerns that consumers are paying the price for past underinvestment by water companies, which have paid out £78 billion in dividends and accumulated £60 billion in debt since 1989.
Sharkey added: “I am now so outraged by the contempt Ofwat shows towards customers that we should take to the streets outside Parliament to show that we will no longer tolerate their greed, their incompetence and their total disregard for customers and the environment.”
The price review was seen as crucial for heavily indebted Thames Water, with Ofwat taking the unprecedented step of placing the company under a “recovery oversight regime”, subjecting it to additional scrutiny and forcing it to report regularly on the progress of measures aimed at reducing sewage leaks by 64%, spills by 19% and supply disruptions by 66%.
The review is unlikely to have improved investor sentiment towards the company. If it fails to raise fresh money, the company could be placed into state administration. Such a collapse could mean Thames’s £15.2 billion debts going into the state coffers.
After meeting with Reed on Thursday, water utility executives signed a series of reforms. The new measures will ensure that funds for critical infrastructure are used only for improvements that benefit consumers and the environment and are repaid if not spent.
The companies have also pledged to make the interests of customers and the environment their “primary priority” and to pay double compensation to households and businesses in the event of water supply outages.
Consumers will also receive payments if utilities issue boil water notices, as happened this year when a parasite caused a wave of illness in Devon.
Reed said: “The new government will force water companies to crack down on the illegal discharge of sewage into our rivers, lakes and seas. Decisive action should have been taken much earlier to ensure that money was spent on repairing the sewage system and not diverted to bonuses and dividends.”
Starmer said Labour was in the process of drawing up a plan to “get a grip” on the water industry. He said this would not mean nationalising the whole industry, as some campaigners have called for. But it would potentially involve more regulation and “something I feel very strongly about, which is some sort of personal accountability from the top”.
The Liberal Democrats called for a stop to “insulting price hikes by water companies”. Their environment spokesman Tim Farron said: “It is a national scandal that these disgraced companies are demanding more money from families and pensioners at a cost of living crisis while dumping raw sewage into our rivers.”
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The Environment Agency had previously said that water company bosses should go to prison for serious pollution. Ofwat has belatedly introduced powers to strip managers of bonuses if a company has committed serious criminal offences.
The increase in water bills is likely to further increase the pressure on households struggling with the cost of living crisis.
Mike Keil, chief executive of the Consumer Council for Water, said: “Millions of people will be angry and concerned about these water bill increases and will question their fairness given the history of failure and poor performance by some water suppliers.”
Doug Parr, policy director at Greenpeace UK, said: “It is now abundantly clear that these water companies will continue to demand dividends and bonuses for not doing their jobs as long as they are allowed to do so. The regulator cannot solve this problem without the full support of the government for a more interventionist approach.”
Green MP Siân Berry, former leader of the party, called for the nationalisation of the water companies. This would enable the government to “invest in the dilapidated infrastructure at an affordable level without the damage being passed on to our bills”.
David Black, CEO of Ofwat, said: “I want to be very clear to water companies: we will closely monitor the implementation of their plans and hold them to account to ensure they deliver real improvements for the environment and customers.”
Water UK, which represents water companies, reacted angrily to the cut in planned spending. A spokesman said: “Today’s announcement is the biggest investment cut Ofwat has ever made. If this is not corrected, Ofwat will repeat the mistakes of the past.”
The organisation argued that if companies were not allowed to spend the more than £100 billion they had proposed, the construction of new homes would be blocked, improvements in river water quality would be slowed and water shortages would become more likely.
Nevertheless, shares in listed water companies rose on Thursday, with South West Water’s owner Pennon posting an 11 percent increase in its share price, suggesting that investors view Ofwat’s ruling as positive for the industry.
Ofwat approved the largest bill increases for Southern Water with a £183 increase to £603, for Dŵr Cymru in Wales with a £137 increase to £603 and for Hafren Dyfrdwy with a £128 increase to £524.
Ofwat said companies would invest £10 billion to tackle flooding caused by rainfall, with the aim of reducing the number of floods by 44 percent compared to 2021 levels. A number of new environmental targets are to be introduced. Among other things, companies in England will be required to limit the number of floods to 16 incidents per year by 2029.
