Ofwat is to be abolished and replaced by one single water regulator responsible for the entire water system, the Government has announced today.

In the biggest overhaul of the water sector since privatisation, Ofwat will be abolished and its functions will be merged with water functions across the Environment Agency, Natural England and the Drinking Water Inspectorate to form a new single, powerful regulator.

In a speech at Kingfisher Wharf, the Secretary of State for the Environment, Steve Reed pledged to strengthen regulation, clean up the country’s rivers and protect the public from soaring water bills and said that having four separate regulators with overlapping and conflicting remits had created a merry-go-round that has failed customers and the environment.

Saying that the Cunliffe Review offers a blueprint for fixing a broken regulatory system so the failures of the past can never happen again, Steve Reed commented:

“I agree that water regulation has been too weak and too ineffective.

“Ofwat has failed to protect customers from water companies’ mismanagement of their hard-earned money.

“There are currently four separate regulators responsible for the water industry, a complex, tangled system of confusion. It is a merry-go-round of regulators blaming each other for breaking this country’s water system.

“Ofwat has failed customers, allowing water companies to mismanage billions of pounds of customer money while water companies paid out huge dividends and bonuses….

“The Government will abolish Ofwat. In the biggest overhaul of water regulation in a generation, we will bring water functions from four different regulators into one.”

A single, powerful regulator responsible for the entire water sector would stand firmly on the side of customers, investors and the environment and prevent the abuses of the past, he continued:

“It will provide the clarity and direction required for a strong partnership between Government, the sector and investors to attract billions of pounds of new investment.

“The creation of one powerful regulator will be responsible for the entire water sector restoring public faith and investor confidence in our water industry.”

He described the current fragmented approach of four separate regulators as a “complex web of regulators” which had led to contradictory and competing priorities.

The reforms are intended to ensure all regulation is in lock step to deliver for customers and the environment, bringing all water regulation under one roof.

The proposals will be consulted on this autumn and form the basis of a new Water Reform Bill.

During the transition to the new regulator, Ofwat will remain in place. The Government will work closely with the regulators and unions for a smooth transition.

Steve Reed added:

“We will legislate to set up the new regulator, and I will provide more details of this in Parliament later today.

“Ofwat will remain in place during the transition to the new regulator and I will ensure they provide the right leadership to oversee the current price review and investment plan during that time.

“Once the new regulator is established, the Government will publish a comprehensive long-term statement so investors know exactly what standards they need to meet and what support they can expect.”

The Environment Agency and Natural England will retain their non-water remits and responsibilities.

“Ofwat will now work with the government and other regulators to form the new regulatory body in England”

Commenting on the Cunliffe Report and today’s Government announcements, an Ofwat spokesperson said:

"The Cunliffe Report sets out a new direction for the water sector.

"While we have been working hard to address problems in the water sector in recent years, this report sets out important findings for how economic regulation is delivered and we will develop and take this forward with government. Today marks an opportunity to reset the sector so it delivers better outcomes for customers and the environment. Ofwat will now work with the government and the other regulators to form this new regulatory body in England and to contribute to discussions on the options for Wales set out in the report.

"In advance of the creation of the new body, we will continue to work hard within our powers to protect customers and the environment and to discharge our responsibilities under the current regulatory framework. We will also work collaboratively with all our stakeholders to ensure a smooth transition."

EAC Chair responds to “detailed and damning” water sector report

Chair of the Environmental Audit Committee, Toby Perkins MP, said:

“I welcome Sir John Cunliffe’s detailed and damning report. His findings make clear that current protections for our treasured waterways are failing.

“A single, more powerful regulator could be a significant step forward, especially if it delivers the resources enforcement staff desperately need to fulfil their mandate.

“But this ambitious merger could take as long as two years, In the interim, the Government must not allow its focus to drift. The measures it has already announced must be supported and augmented by the new regulator when it arrives, not be delayed until that point.

“Public outrage at the continuing flow of sewage into our rivers is rightly high. Minister must act without delay to stem the tide.”