Government: Ofwat to be abolished in biggest overhaul of water since privatisation
Newsflash: water regulator Ofwat is to be abolished, the government has announced.
Ministers are promising the “biggest overhaul of water since privatisation”, as they pledge to take on one of Sir Jon Cunliffe’s 88 recommendations to fix the sector.
Ofwat will be replaced by a “new, single, powerful regulator”, which will take on responsibility of water functions from Ofwat, the Environment Agency, Natural England and the Drinking Water Inspectorate (as recommended by Cunliffe’s Independent Water Commission at 6am this morning).
Secretary of State for the Environment, Steve Reed, says this move will end the “complexity” that is hurting customers.
In a speech at Kingfisher Wharf now, Reed is pledging to strengthen regulation, clean up the country’s rivers and protect the public from soaring water bills.
Reed says:
“Our water industry is broken. That is why this Government will fix our broken regulatory system so the failures of the past never happen again.
“The Government will abolish Ofwat. In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one.
“A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.”
“It will provide the clarity and direction required for a strong partnership between Government, the sector and investors to attract billions of pounds of new investment.”
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Updated at 10.56 BST
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Independent Age, the charity supporting older people facing financial hardship, has welcomed the Independent Water Commission’s recommendation of a national water social tariff.
Independent Age director of policy and influencing Morgan Vine says this is a “welcome development”, adding:
If implemented effectively, a national water social tariff in England would help people of all ages living on a low income, including the older people Independent Age supports, afford their bills and end the postcode lottery that currently blights the system. Where you live shouldn’t dictate how much financial support you receive.
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Reed: children shouldn’t have to worry about toxic sewage pollution once we’ve cleaned the sector up
Steve Reed ends his response to the water review by saying today is the start of a ‘water revolution’ to clean up the sector.
The Secretary of State for the Environment says:
This is our chance to make sure our children, and their children, can create the same wonderful memories we remember from our own childhoods.
Splashing around in the waves on a beach, rowing along a river, without having to worry about toxic sewage pollution.
Reed promises a new partnership between water companies, investors, communities and the government will work together to clean up rivers, lakes and seas for good.
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Back at Kingfisher Wharf, Steve Reed, is running through the failings of the water industry.
Responding to the Cunliffe report into the water sector, Reed points out:
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Our rivers, lakes and seas are polluted with record levels of sewage
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Water pipes have been left to crumble into disrepair
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Soaring water bills are straining family finances
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hosepipe bans are coming into force because no new reservoirs have been build in the last 30 years.
Reed then blames a “broken regulatory system” for allowing water companies to profit at the expense of the British people, rather than investing in the water infrastructure.
Reed then explains that Ofwat will remain in place until the new water regulator has been created.
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Replacing Ofwat could take two years, Cunliffe tells the Guardian
Helena Horton
Setting up the new regulator to replace Ofwat will take around two years, Sir Jon Cunliffe has predicted.
“We looked at Ofcom, which took two years,” he told the Guardian.
Cunliffe added:
“Some of it depends on how fast legislation could be introduced, because you can do things before legislation, but actually you need the legislation to come in, and it was two years to bring the regulator together. I’m under no illusion that there is a whole tale of culture and systems that have to happen after that.”
Sir Jon suggested the leadership of Ofwat has to change.
He said:
“On leadership, this sort of thing requires very high level leadership, but it also requires a sort of balance of skills and expertise that we don’t have at the moment because the regulators aren’t set up in that way.”
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Government: Ofwat to be abolished in biggest overhaul of water since privatisation
Newsflash: water regulator Ofwat is to be abolished, the government has announced.
Ministers are promising the “biggest overhaul of water since privatisation”, as they pledge to take on one of Sir Jon Cunliffe’s 88 recommendations to fix the sector.
Ofwat will be replaced by a “new, single, powerful regulator”, which will take on responsibility of water functions from Ofwat, the Environment Agency, Natural England and the Drinking Water Inspectorate (as recommended by Cunliffe’s Independent Water Commission at 6am this morning).
Secretary of State for the Environment, Steve Reed, says this move will end the “complexity” that is hurting customers.
In a speech at Kingfisher Wharf now, Reed is pledging to strengthen regulation, clean up the country’s rivers and protect the public from soaring water bills.
Reed says:
“Our water industry is broken. That is why this Government will fix our broken regulatory system so the failures of the past never happen again.
“The Government will abolish Ofwat. In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one.
“A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.”
“It will provide the clarity and direction required for a strong partnership between Government, the sector and investors to attract billions of pounds of new investment.”
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Updated at 10.56 BST
Water companies, and their owners, must bear a major part of the responsibility for the failures we have seen in recent decades, Sir Jon Cunliffe adds.
He repeat that some companies have pursued short-term private interest at the expense of public interest, and at the cost of the long-term resilience of their companies.
Cunliffe says the Commission’s call for evidence heard a lot of disquiet and real concern about the inclusion of the profit motive in the provision of water.
He says he understands those concerns, given recent experiences.
But the Commission’s terms of reference was to focus on a regulated, privately owned water sector.
Cunliffe adds that the Comission did look at ownership structures, and did not find a ‘causal link’ between ownership models and a range of environmental and performance indicators.
ShareHelena Horton
The Independent Water Commission has recommended reducing regulatory risk to investors and making investibility of water companies a duty of the new regulator, Sir Jon Cunliffe says.
He tells his audience at the London Water and Steam Museum:
“The changes to regulation we propose, particularly to economic regulation are intended in part to lower regulatory risk and to reduce the variability of returns to deter such investments.
The Commission has also recommended that the government make the stability of the regulatory system an objective in the National Water strategy, and that maintaining the investability of the sector become one of the duties of the new regulator for water”
Cunliffe added that the evidence does not show privatisation is a problem:
“And I have to say on the data and on the comparable metrics available, which are not strong, I admit we did not see evidence of a causal link between ownership models and a range of environmental performance indicators.”
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Cunliffe: Ofwat’s econometric approach has gone before limits of effectiveness
Helena Horton
Speaking in front of a display of sewage pumps at the London Water and Steam Museum in west London, Sir Jon Cunliffe then adds that the regulatory system had become “too adversarial on both sides” and that Ofwat had made overuse of its “econometric tools and industry wide benchmarks”.
He said:
“The Commission recognizes the motivation behind this, but our assessment is that it has taken this approach beyond the limits of its effectiveness, and indeed to a point where it may have become counterproductive in terms of the performance of the industry as a whole and of its ability to attract investment.”
Watching the speech is Iain Coucher from Ofwat, who may soon find himself out of a job as Sir Jon has recommended Ofwat is abolished and replaced with a more powerful regulator.
Cunliffe adds that a “rebalancing” is needed, adding:
“In the Commission’s view, it is important to have an objective framework for setting prices and incentives based on model outputs and based on comparability between companies. But this approach alone, no matter how aggressively pursued, cannot drive the improvement of the sector to deliver the public goods that are necessary, nor to attract the investment that is now required.”
Cunliffe added that companies “could be fined by Ofwat and the Environment Agency for the same pollution”.
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Cunliffe: current regulators will not achieve what is needed
Sir Jon then runs through the main recommendations from his report (see here).
Delivering the outcomes we want to see in the water sector depends, crucially, on having the right regulators, he says.
That means…
Regulators that command public confidence and industry respect. Regulators that have the capacity and the capability to do their job effectively.
And most importantly… a structure of regulation that can focus on the water system as a whole.
Our assessment is that the current environmental and economic regulators have not achieved what is needed, and will not achieve what is needed.
Cunliffe adds that the Environment Agency has not been given the resources, people, skills or technology needed to hold the water industry and other sectors to account.
And Ofwat, he adds, was encouraged to regulate with a lighter touch and keep bills down for most of the last 20 years, and didn’t have the powers or capability to supervise the financial structure of much of the industry.
That allowed some companies and their owners to take decisions that “reflected their private interests” but badly damaged the companies and the public interest.
Cunliffe says:
We are seeing some of the consequences of that failure to defend the public interest in the news every day.
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Cunliffe: water industry has not met public expectations
Sir Jon Cunliffe then defends the length of his report (465 pages), comparing it to a Russian novel.
If we are to achieve the water sector we need, we need to look at all the factors that have contributed to our Great Stink moment.
He adds that the water industry has not met public expectations or maintained public trust in recent years.
He tells his audience at the London Water and Steam Museum:
Some companies have manifestly acted in their private interest but against the public interest. That must be prevented in future.
The industry does not exist in a vacuum, though, he adds – it sits in a framework of law and regulation operated by the government (who must now decide which of Cunliffe’s 80-plus recommendations to implement).
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