The water industry is set to be completely overhauled following the publication of a landmark review of the sector on Monday.
Environment Secretary Steve Reed is expected to promise “root and branch reform” of the sector in a bid to clean up England’s rivers and limit rises in water bills.
The commitment follows the publication of the final report of the Independent Water Commission led by former Bank of England deputy governor Sir Jon Cunliffe.
In a speech responding to Sir Jon’s report, Mr Reed is set to describe the water industry as “broken” and welcome the commission’s recommendations to ensure “the failures of the past can never happen again”.
He is also widely reported to be preparing to abolish the industry’s beleaguered regulator Ofwat, which has faced criticism for overseeing a sharp rise in sewage pollution while failing to crack down on executive pay and large dividends at debt-ridden water companies.
In his interim report, Sir Jon criticised the way the sector was regulated, with duties split between Ofwat, the Environment Agency and the Drinking Water Inspectorate.
Sir Jon said: “Restoring trust has been central to our work. Trust that bills are fair, that regulation is effective, that water companies will act in the public interest and that investors can get a fair return.
“Our recommendations to achieve this are significant. They include the management of the whole water system, regulation of the water industry, the governance and financial resilience of water companies and a stronger voice for local communities and water customers.
“In this report, I have considered what is best for the long-term future of water. This is a complex sector with a highly integrated system, responsible for the second-largest infrastructure programme in the UK.”
He continued: “Resetting this sector and restoring pride in the future of our waterways matters to us all. In countless conversations in the last nine months I have been struck by the urgent need and passion for change. Doing this will require hard work, strong leadership and sustained commitment. But it can and must be done.
“I am grateful to all to all those who have contributed generously and constructively to our work with their time, expertise and challenge.”
On Sunday, Mr Reed would not confirm that Ofwat was in line to be scrapped, but declined to express confidence in the regulator either, saying it was “clearly failing”.
Both the Conservatives and the Liberal Democrats have agreed that water regulation needs to change.
Urging the Government to be “transparent” about what would replace Ofwat and how it would work, Tory shadow environment secretary Victoria Atkins said: “No one disputes that the water sector is under pressure, and we all want to see meaningful improvements.
“Reforming regulation must be focused on improving performance and guaranteeing water security.”
Lib Dem leader Sir Ed Davey has called for the creation of a Clean Water Authority that could “hold these water companies to account” and “fine them when they fail”.
While Mr Reed has pledged to avoid the need for “huge shock hikes” in water bills, such as the 26% increase seen this year, reform is unlikely to lead to a fall in costs for consumers.
The Government hopes that investment in long-neglected infrastructure will make large bill increases unnecessary, but Mr Reed acknowledged on Sunday that there needed to be “appropriate bill rises” to secure “appropriate levels of investment”.
He is also unlikely to commit to expanding social tariffs that could help households struggling with bills at the cost of higher charges for wealthier families, saying he was yet to be convinced that this was needed.
Prior to Monday’s announcement, Mr Reed had already committed to halving sewage pollution in England’s rivers by 2030 thanks to a £104 billion investment from the sector in upgrading infrastructure.
He has also announced the creation of a new, legally binding water ombudsman, expanding the role of the voluntary Consumer Council for Water and bringing the sector into line with other utilities.
But the Conservatives have accused Labour of copying the policies of the previous government.
Ms Atkins said: “Labour have already wasted a year since the general election as they came into office with no plans for water, instead claiming that the work we started in office is their own.”
