Labour has announced a series of sweeping reforms intended to strengthen the industry regulator Ofwat, ensure consumers get a fairer deal from the water companies and ensure companies behave more responsibly.

Maria Eagle MP, Labour’s Environment Secretary, speaking at a debt advice centre in Essex this morning , announced details of Labour’s new deal with the water industry that puts the consumer first.

The Opposition has flagged up a number of key issues driving the changes, including:

• Under the Tory-led Government water bills are rising and companies are continuing to increase their debt levels.
• A number of companies have secretive ownership structures with reports that many are paying very little tax in relation to their profits. David Cameron’s Government has done nothing to address these issues including by closing down the quoted Eurobonds exemption.
• Water affordability problems have grown with real-term increases in water bills of almost 50 per cent since privatisation in 1989.
•  Household water bills have risen by 12.5 per cent since 2010 whilst the average household incomes have reduced by as much as five per cent.
• Ofwat, the water industry regulator, estimates that two million households in England and Wales now spend more than five per cent of their income on the cost of water.

 According to Labour, while many customers are struggling, investors are making significant returns - just last year the industry paid-out £1.8 billion in dividends while paying just £74 million in corporation tax:

“There have been high profile instances of individual water companies deliberately attracting unsustainable levels of debt in order minimise their tax liabilities- as a result they are at increasing risk of failing to meet their infrastructure requirements. “

 “David Cameron has totally failed to address the problems in the water industry. The Tory-led Government’s Water Act 2014 did not include any measures to tackle affordability.”

Labour will introduce mandatory national affordability scheme

According to Labour, the reforms will strike a fairer balance between finding new ways of supporting those who cannot pay their water bills and pursuing those who can pay but choose not to. The Labour Party said it will work with the water companies to design a mandatory ‘National Affordability Scheme’ ending the current postcode lottery.

The affordability scheme will mean that all water companies will be forced to put those people struggling most with their water bills on a cheaper tariff.

The affordability measures will be written into reformed water companies’  licences so that they cannot be paid for purely by increasing water bills for other customers (cross-subsidy).

Labour said it will work with the water industry to fund the affordability scheme by helping water companies recover ‘bad debt’ (debt which is accrued by consumers who can pay their water bill but choose not to) - which adds £15 on to each water bill. The measures will include forcing landlords to pass on the details of tenants to the water company.

The Labour Party will also:

• Give the regulator new powers to modify company licences to cut bills, ensure companies behave more responsibly and, in particular, retain sufficient funds to enable them to invest in the level needed to provide enhanced environmental standards and consumer support.
• Ensure that all water companies publish information including corporate structure and levels of investment, ownership, taxation and dividends paid to shareholders.

Maria Eagle MP, Labour’s Shadow Environment Secretary, said:

“It’s not right that some companies pay no tax while millions of customers are struggling with the cost of living crisis. It’s time for a new deal with the water companies."

"Labour will reform the water industry, creating a national affordability scheme to support those customers who are struggling most with their bills."

"We’ll also give the regulator tough new powers to cut bills and ensure that water companies play by the rules and put consumers first.”