The government has announced it will abolish Ofwat as part of the biggest overhaul of water regulation in a generation, following a review led by Sir Jon Cunliffe, a former deputy governor of the Bank of England. The new single regulator will combine the powers of Ofwat, the Drinking Water Inspectorate, the Environment Agency, and, in England, Natural England.
Environment Secretary Steve Reed said the current system had failed customers and the environment, with water companies accused of underinvestment and financial mismanagement. The new regulator will have powers to direct failing water firms, effectively taking control where necessary. Reed also confirmed plans to create an ombudsman with legal powers to compensate consumers affected by issues such as burst pipes or sewage leaks.
The review, released on Monday, highlighted that only 58 staff were responsible for protecting drinking water safety, and warned of inadequate protection against pollutants like PFAS and microplastics. It recommended a less desk-based approach to regulation, criticising Ofwat's over-reliance on econometric tools. To avoid sharp bill increases, the regulator will prioritise consistent investment in infrastructure.
Compulsory smart metering for homes and businesses is recommended to reduce water use, alongside a national social tariff for vulnerable customers. The government will introduce a water bill next year to implement many of the report's 88 recommendations, with five to be fast-tracked immediately. The review did not consider nationalisation, but discussed a not-for-profit model similar to Welsh Water.
