The House of Lords Industry and Regulators Committee has criticised the Government’s “lack of leadership and deep-rooted complacency” in the conclusion to its follow-up inquiry into Ofwat, the water industry and the role of Government.

The Committee also says that significant past underinvestment in the sector has left a cumulative backlog in the face of the significant challenges of reducing water pollution and increasing water supply, warning that “the need for investment in the sector is huge.”

In a detailed 15 page letter to Thérèse Coffey MP, Secretary of State for Environment, Food and Rural Affairs, the cross-party committee has set out a number of conclusions and recommendations on a range of issues including: investment and bills; financial resilience; wet wipes; future water supply; and regulatory powers and resources.

While the Committee acknowledges changes in water policy and regulation since its March 2023 report: ‘The affluent and the effluent: cleaning up the failures of water regulation’, it criticises the “dismissive brevity and complacent tone” of the Government’s response to the report. The Committee also comments:

“We object to the apparent insinuation that our conclusions and recommendations were outside the scope of our inquiry, which appears to be an attempt to avoid parliamentary scrutiny. It is for parliamentary committees to determine the subjects of their own inquiries. Broader water policy and regulation and the relationship between the Government and regulators are highly relevant subjects when considering the work of Ofwat.”

"Continued under-investment in water infrastructure will have serious long-term consequences"

In its letter, the Committee: 

• warns that continued under-investment in water infrastructure will have serious long-term consequences for the environment and the security of water supplies, risking the possibility of future water shortages;
• expresses doubt that the sector will be able to attract the investment it needs, despite the publication of the National Water Strategy;
• warns that water bills are likely to increase, and expresses disappointment that the Government has not introduced a single social tariff to ensure consistent support for those struggling to pay their bills;
• expresses dismay with delays in banning wet wipes containing plastics, delays which are unnecessary and deeply damaging to the environment;
• concludes that Ofwat and the Environment Agency’s lack of confidence is holding back nature- and catchment-based approaches, in particular in relation to reducing storm overflow discharges;
• concludes that proposals for reducing water demand are insufficient to meet Government targets.

“We believe it is inevitable that water bills will increase, given the huge need for investment”

Commenting on the lack of investment, the letter says:

“Significant past underinvestment in the sector has left a cumulative backlog of investment in the face of the significant challenges of reducing water pollution and increasing water supply. The need for investment in the sector is huge. However, despite the publication of a National Water Strategy, the Government has not clarified its view on how this should be paid for, beyond relying on the current regulatory system. The water industry’s proposed investment, if approved, still represents less than the annual amount required to meet the Government’s storm overflows targets, showing the need for greater investment. We do not share the confidence of the regulator and the Minister that the sector will be able to attract this investment under current regulatory arrangements….

“We believe it is inevitable that water bills will increase, given the huge need for investment.”

The Committee is calling on the Government to:

• set out what action it intends to take to increase investment in the water sector;
• give clear guidance to Ofwat on the balance between investment and the affordability of customer bills ahead of the next Price Review;
• announce its proposals on social tariffs as soon as possible;
• provide long-term, outcomes-based targets for the key areas of investment needed in the sector, particularly in relation to infrastructure investment;
• introduce compulsory water metering;
• set out whether it intends to introduce sustainable drainage requirements in advance of any relaxation of nutrient neutrality rules.

"Cross-party committee has concluded unanimously that there is insufficient policy or drive to meet the Government’s targets"

Lord Hollick, Chair of the Industry and Regulators Committee said:

“While the Government has begun to set out its vision for the sector, our cross-party committee has concluded unanimously that there is insufficient policy or drive to meet the Government’s targets. Sadly, the only thing that is becoming clear in the murky, polluted waters of the sewage crisis is a lack of leadership and deep-rooted complacency.

“The Government must therefore provide firmer policy detail and greater guidance to regulators, who cannot be left to resolve these huge challenges by themselves. In particular, the Government must give clear guidance on the trade-off between much-needed investment and the level of customer bills. We look forward to the response from the Secretary of State, setting out how she intends to do this.”

The Committee has told the Government that it expects a response to its conclusions and recommendations in writing within 20 working days.

The Committee published its report ‘The affluent and the effluent: cleaning up the failures of water regulation’ in March 2023 which concluded that a slurry of under investment, insufficient government strategy, and inadequate co-ordination had resulted in a failure to “treat water with the care and importance it deserves”.

Click here to read the Committee’s letter to Thérèse Coffey MP in full.