‘England was facing water rationing’: Why industry regulator Ofwat had to be scrapped
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England's water industry is facing major changes after a new review criticised major providers and industry regulators for financial mismanagement and other major failures since privatisation in 1989. Ofwat will be scrapped – but how far will the government go to save the industry?
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In brief…
- The government will scrap water regulator Ofwat, following a report into major failings in England's water industry since it was privatised.
- Environment secretary Steve Reed tells The News Agents the water industry is “broken from top to bottom” and England was set to run out of clean drinking water by the 2030s.
- Despite huge investment which will be used to repair and replace crumbling pipes, bills are expected to rise – and industry bosses will still receive huge cash incentives, but they won’t be called bonuses any more.
What’s the story?
Soaring bills, rivers and lakes full of sewage, massive bonuses paid to the CEOs of failing companies – England's water industry is in a mess, and the government knows it.
This summer, the Labour government banned some of England's water companies from paying bonuses to chefs executives due to widespread failings – and according to environment secretary Steve Reed, that’s just the beginning.
Following recommendations in an independent review into the water industry, regulator Ofwat is to be scrapped, and replaced with a new "powerful" water regulator.
Ofwat has been accused of failing to invest in the infrastructure of water services and of financial mismanagement since it was first created after the industry was privatised in 1989.
Reed tells The News Agents that England has a “water system that is absolutely broken from top to bottom.”
Reed describes the government’s ban on bonuses being paid to the heads of failing water companies as part of his plan to “reset the sector”, along with a £104 billion investment which will be used to rebuild England's crumbling water system, which in some parts of the country, has been in use for more than a century.
The money will be used to fix broken sewage and water pipes, and build new reservoirs, and this spending began in April 2025.
“We need to make sure that we can still have clean drinking water whenever we turn on the taps,” Reed adds.
“Because, as things stood by the middle of the 2030s this country was looking at water rationing because we were running out.”
Can the government really stop CEOs taking home huge bonuses?
Reed says that after the government blocked CEOs bonuses, it was then also forced to stop plans to simply rename big cash payments in order to continue rewarding its top dogs.
Despite this, the head of Thames Water takes home an £850,000 salary, and was given £102,000 in pension contributions this year – among other cash rewards – as the company continued to make substantial losses.
But while Reed says he is firmly against bosses receiving “bonuses for failure”, he says the government won’t get involved in how much water industry CEOs are making.
“I’m also not happy that the government should start regulating people's pay,” he says.
“I think if you go down that route, you end up in a very dangerous position.”
Why are water industry bosses getting paid so much money?
Labour reforms won’t stop bills increasing
Despite the huge investment the government will use to rebuild broken pipes and build new reservoirs in England, the money won’t prevent bills continuing to rise, with Sir Jon Cunliffe, who carried out the Independent Water Commission review, has warned.
“This government is intent on ensuring that bill rises will be modest and fair for years to come,” Reed explains, saying the enormity of the problems facing England's water industry is due to neglect under the previous Tory government.
“In future, the water companies will be monitored to make sure they are investing appropriately in upgrading the pipes and the sewage system and the reservoirs that we need to keep ourselves safe, secure and reduce pollution, but it also keeps bills down.
“If the previous government had done this 14 years ago, we would not be in the state we're in today.”
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