Environment secretary: Labour’s water revolution will give investors certainty
Abolishing Ofwat and streamlining water regulation will give the sector the clarity and accountability it needs to attract private investment, says environment secretary Steve Reed
Today is the start of a water revolution. When I came into office a year ago, it was immediately clear our water system needed a complete reset. There were high levels of sewage pollution, ageing infrastructure, a lack of investment and an unpredictable regulatory system.
I did not hesitate to act, bringing in new laws through the Water Act to make immediate, necessary changes to stabilise the water system. During the last 12 months our language has been uncompromising on water companies, but standards haven’t been met, and the public has been let down.
But I also want to acknowledge where the water industry has been making an important contribution to this government’s central mission of growth and opportunity. Investment over the coming years will deliver thousands of jobs, new reservoirs and new innovations like use of Artificial Intelligence to detect leaks and sewage spills are positive.
I want to restore the confidence of the public and that of investors in our water system. For these reasons, I also asked the former Deputy Governor of the Bank of England, Sir Jon Cunliffe, to undertake the biggest review of the water sector since privatisation.
This serious and comprehensive review, published on Monday, is one of the most important we will see in our lifetime, offering 88 recommendations and solutions to fix the system. Past failures must never be repeated.
We’re already rebuilding our water infrastructure through £104bn of investment, one of the largest infrastructure projects in history. It will upgrade crumbling pipes and cut sewage in half by 2030, alongside commitments to build nine new reservoirs by 2050 to shore up water supplies, all the while creating tens of thousands of jobs.
A regulation revolution
And now we will turn the page and revolutionise our regulatory approach.
Sir Jon’s report is clear. Having four separate regulators – Ofwat, the Drinking Water Inspectorate, the Environment Agency and Natural England – with overlapping and conflicting remits has created a merry-go-round that has failed customers, investors and the environment.
This government will abolish Ofwat and merge water regulatory functions of all organisations into one. This will give us clearer accountability, and a complete reset of culture. This will provide clarity for investors and the new body will contain experts with the skills necessary to support the sector.
Ofwat will remain in place during the transition to the new regulator and I will ensure they provide the right leadership to oversee the current price review and investment plan during that time. There will be an interim Strategic Policy Statement published to give both regulator and investors clarity during this time, and we will work in partnership with the industry to make this a success. A full transition plan will be published as part of the government’s White Paper in the autumn.
Water should be a clear, stable, low-risk investment model that provides steady and predictable returns. We realise investors have had concerns, but our reforms will create a sector that recognises the risks and provides a fair bet
As well as abolishing Ofwat, I told the House of Commons yesterday that we will also be streamlining the 100+ pieces of regulation on how our water is managed.
Water should be a clear, stable, low-risk investment model that provides steady and predictable returns. We realise investors have had concerns, but our reforms will create a sector that recognises the risks and provides a fair bet.
It is right for us to demand high standards from our water sector, but it needs to be matched by simple and unambiguous regulation from one single source, so investors and companies know exactly what needs to be done.
As we deliver the 1.5m homes this country needs and get our economy growing again under our Plan for Change, this government will also make sure our water sector is fit for the future.
As we enter a decade of national renewal, I believe that future can be bright.