Water firms sacrificing environment for bumper profits, Lords say

The Industry and Regulators Committee (IRC) has been investigating the regulation of the water industry by Ofwat, including the investment and approach needed to prevent storm overflow overuse and the steps that must be taken to secure future water supply.

It blamed “insufficient government strategy” and inadequate co-ordination resulting in a failure to “treat water with the care and importance it deserves”.

In particular, it was found that Ofwat had not ensured that companies were investing sufficiently in water infrastructure in an effort to keep bills low at the expense of badly needed investment.

In 2021, a review conducted by the Environment Agency found that firms in the sector had hit their lowest ever level with regards to environmental protection while most companies’ performance was declining further still.

According to IRC, this was largely because water companies have been “overly focused” on maximising financial returns at the expense of the environment, operational performance and financial sustainability.

It recommended that bosses should not be able to receive substantial bonuses while their companies have missed performance targets and polluted the water environment.

Lord Hollick, IRC chair, said: “During our enquiry, we have taken evidence from local communities and activist groups and received a considerable amount of written evidence. There is an overall feeling of dismay, anguish and anger from respondents about the state of our waterways and the apparent failure to get to grips with the problem.

“We are calling on regulators and the government to consider our report’s findings and recommendations and act fast before we are all left up sewage creek.”

The Committee called on the government to give Ofwat guidance on how it should handle the trade-off between balancing the financial needs of customers during a cost-of-living crisis with the urgent need for infrastructure and environmental investment.

It also wants legislation to introduce a single social tariff in time for its inclusion in the next Price Review, which will protect vulnerable customers from bill increases.

Other suggestions include banning the sale of wet wipes that are not rapidly biodegradable as they can clog up sewer infrastructure, and a National Water Strategy which sets clear expectations about the quality of the water environment and the resilience of water supplies.

The Tories were recently accused of attempting to weaken EU environmental laws through a new bill, which could cost the UK economy £82bn over 30 years.

This included an estimated £20.6bn lost over 30 years from damage to rivers, lakes and coastal waters as a result of losing Water Framework Directive standards.

Clean river campaigner Feargal Sharkey said of the committee: “They’ve just now confirmed formally what any number of people have been trying to tell government and the regulators – that the whole system has become completely dysfunctional.

“There has been a massive lack of political oversight and direction and steer in support to the regulators.

“The regulators themselves simply spend an awful lot of time going off at completely opposite tangents to one another and, in the meantime, the water industry games the whole system to themselves.”

A spokesperson for the Department for Environment, Food and Rural Affairs said: “We’ve put the strictest targets ever on water companies to clean up our waters and worked closely with the regulator to drive tougher enforcement against underperforming and polluting companies, including clamping down on excessive cash payouts.

“That’s alongside the requirements we’ve set them to deliver the largest infrastructure programme in their history – worth £56bn – to tackle sewage spills, but we know that more needs to be done, which is why we will go further and faster to hold companies to account in delivering for customers and our environment.”