Water industry requires fundamental reset, review finds
There is no single change radical enough to deliver the “fundamental reset” needed by the UK’s water industry, a much-anticipated review into the sector has found.
The Cunliffe review has been led by former Bank of England deputy governor Sir John Cunliffe and is the largest since the sector was privatised in the late 1980s.
Publishing his interim findings, Cunliffe, chair of the Independent Water Commission, described the “deep-rooted, systemic and interlocking failures” that have left the industry facing a crisis over sewage spills and inadequate infrastructure.
These include a failure in government strategy and planning for the future, failure in regulation to protect the billpayer and the environment, and failure from some water companies and their owners to act in the public interest.
A final report will outline in greater detail Cunliffe’s findings, but the first stage of the review comes at a critical time.
Thames Water, the UK’s biggest water supplier, was dealt a crushing blow on Tuesday after plans for a rescue deal with KKR collapsed abruptly. It is now on the brink of a special administration process.
Cunliffe said legislation would be needed to “rebuild public trust” and make the water system “fit for the future.”
This could include a more consoldiated legislative framework, with the current system having evolved in a “piecemeal fashion” over a long period of time.
Ofwat must change
Cunliffe also argued there should be a “fundamental strengthening and rebalancing” of Ofwat’s regulation, with a more supervisory approach akin to that of the banking sector.
Echoing findings from the National Audit Office earlier this year, the review concluded that there is little understanding of the current state of the water industry’s infrastructure.
The commission said it was considering requiring companies report on the status of their infrastructure at regular intervals, to stop them simply “fixing failures when they fail.”
“I have heard a strong and powerful consensus that the current system is not working for anyone, and that change is needed. I believe that ambitious reforms across these complex and connected set of issues are sorely needed,” Cunliffe concluded in a statement.
When the government launched the review, it ruled out nationalising the sector due to the expense on the taxpayer and uncertainty it would guarantee significant change.