The Government has rejected a call from the House of Lords Industry and Regulators Committee to strengthen the Strategic Policy Statement for Ofwat and also declined to introduce a single social tariff.

The comments come in the Government response to the recommendations set out in the Committee's  report ‘The affluent and the effluent: cleaning up failures in water and sewage regulation’ published on 22 March 2023.

Referring to the ‘Environmental Improvement Plan’ and the ‘Plan for Water: our integrated plan for delivering clean and plentiful water’ published by the Department for Food Environment and Rural Affairs (Defra), the response says both plans have already addressed a number of the Committee’s recommendations.

In particular, it says the Plan for Water sets out actions that government will take to transform the management of the water system, clean up the water environment and create a sustainable supply of water for people, businesses and nature.

“It brings together the significant action already taken by the Government and regulators, along with more investment, stronger regulation and tougher enforcement on those who pollute,” the response says.

However, the Government has declined to adopt the Committee’s recommendation that it should update the Strategic Policy Statement (SPS) published in March 2022 to strengthen the language contained within it to ensure that Ofwat requires companies to meet SPS priorities. The response says:

“The Strategic Policy Statement (SPS)…...sets out clearly the Government’s priorities to Ofwat and the water industry to enhance water quality and deliver a resilient and sustainable water supply. The Government recognises that a system that works for consumers does not simply mean lower prices in the short-term at the expense of future generations.

“The Government does not intend to update the SPS, recognising Ofwat’s ongoing 2024 Price Review process (PR24). Water Companies are separately expected to fulfil statutory duties and Ofwat is expected to allow funding to fulfil them.”

With regard to the recommendation that the Government should consider legislating to remove the scale and complexity test from the Water Industry Act 1991 and the Specified Infrastructure Project Regulations, ensuring that special purpose vehicles can be used "much more frequently" to build large water infrastructure projects, the response says the Government is currently considering Ofwat's proposals on how competition could be increased for high-value infrastructure projects by amending legislation and is working with the regulator to explore its recommendations further.

It goes on to point out that the Government has already set out in the Plan for Water that “Defra will improve value for money of large projects by supporting the use of innovative financing arrangements, as was used for the Thames Tideway Tunnel, and encouraging water companies to use more competitive tendering, such as direct procurement for customers.”

Commenting on the Committee’s recommendation that the Government should legislate for a single social tariff in the next Price Review, the response document says:

“this is not a matter for Ofwat, which is the subject of the inquiry….,,,

“There are no plans to introduce a single social tariff.”

Click here to download the Government’s response to the Committee’s report in full