Darren Jones, the Labour MP who chairs parliament’s influential business and trade committee, has slammed Ofwat’s regulation of the water industry.
He told BBC’s Today Programme he is “increasingly sick” of seeing the same failings, and that the watchdog has a case to answer over widespread issues in the much-maligned sector.
“We know that companies that are too important to fail must be regulated differently to other companies,” he said.
Jones argued the regulator had been too focused on its remit to drive down prices following privatisation, and had neglected its duty to ensure the conduct of the owners and managers “acted in the interest of the country and consumer.”
“For too many years, decades even, we’ve allowed these companies to be operated with high risk stakes, with high levels of debt, with wealth being extracted from the companies, with investment not being high enough,” he said
Jones’ comments follow reports the UK’s largest supplier, Thames Water, is under increasing financial stress with the reportedly government weighing up a number of contingency options in case it collapses.
A government spokesperson told City A.M. they are preparing “for a range of scenarios” across its regulated industries, including water.
It confirmed the “sector as a whole is financially resilient,” but declined to comment specifically on Thames Water.
Labour stops short of nationalisation support
However, Jones stopped short of backing a return to nationalisation, recognising that it was an “option, but not necessarily the right one.”
In his view, the problem was not the ownership model, but instead the behaviour of “the directors and the shareholders who own and operate these businesses.”
Jones also criticised reports customers could face higher bills of up to 40 per cent to tackle sewage leaks, increased water demand and climate change – as first reported in The Times.
He said: “We’re in a situation where we’re being told that customers, taxpayers are going to have to pick up the bill for a failure of good corporate behaviour at these companies, and by the sounds of it poor regulation.
“These companies have been allowed to not invest for the future, even though we know in many ways what we needed them to do for the future, and the regulators have allowed them to get away with it.”
Jeremy Hunt, the chancellor, is set to raise the matter at a meeting later today with the water regulator Ofwat.
Industry body Water UK recently confirmed the industry’s £10bn investment plan to tackle sewage leaks will be funded by hiked bills for customers, after publicly apologising for its failure to combat the issue.
Meanwhile, Thames Water is facing an increasingly challenging situation with chief executive Sarah Bentley abruptly stepping down without explanation yesterday, with the supplier facing a £14bn debt pile and rising sewage spills and leaks across its creaking infrastructure.
Ofwat has been approached for comment.