A scathing review of England and Wales' water sector has called for urgent reforms to address systemic failures, placing regulator Ofwat firmly in the spotlight. The report, led by former Bank of England deputy governor Sir Jon Cunliffe, criticises the current regulatory framework for prioritising shareholder returns over consumer and environmental interests.
Key Findings of the Cunliffe Review
The independent review identifies several critical issues:
- Excessive dividend payments to shareholders at the expense of infrastructure investment
- Inadequate regulatory oversight of water companies' financial structures
- Failure to properly penalise companies for poor performance
- Lack of transparency in pricing and service quality metrics
Proposed Reforms
Cunliffe's recommendations include:
- Strengthening Ofwat's powers to intervene in company finances
- Implementing stricter performance targets with real consequences
- Introducing greater transparency in water company ownership structures
- Establishing clearer links between executive pay and service quality
The report comes amid growing public anger over sewage discharges and water quality issues, with many questioning whether the privatised water model remains fit for purpose.
Industry and Political Reaction
Water UK, representing the industry, has acknowledged the need for improvement but defended the sector's record on investment. Meanwhile, environmental campaigners have welcomed the review, calling it a 'long overdue' examination of regulatory failures.
The government is expected to respond to the recommendations within weeks, with ministers under pressure to demonstrate action before the next general election.
