Ministers will make an unprecedented intervention in water bills and how companies prioritise investment, directing bosses to bring down costs and stop leaks and sewage overflows. Angela Eagle, the environment secretary, has told suppliers in England and Wales she plans to intervene in the next price review conducted by the water regulator, Ofwat.
Sources at the Department for Environment, Food and Rural Affairs (Defra) said Prime Minister Andy Burnham's 10-year plan, which will follow next week's budget, would hand the government more robust powers to lower bills and direct local investment. But sources close to Eagle said there also needed to be immediate action as companies began to make decisions before the next price-setting process, expected to conclude in 2029. There has never been government intervention in the five-year review process.
Eagle has written to regulators and water company chief executives, saying that the process must meet specific government priorities, including offering bill payers much better value for money, though stopping short of demanding bill cuts. The letter calls for investment in new technology to save money, early intervention on leaks and sewage, and far better communication and decision-making power handed to local communities and leaders.
"Affordability means a laser focus on value for money for customers," the letter says, adding that the public is clear about the objectives. "They want clean rivers. They want reliable water services. They want to know that their money is being spent wisely, and that bills are kept affordable."
The letter warns company bosses that it will "not be a business-as-usual price review ... it is the beginning of a long-term transition to a different model for the water sector".
Defra sources said Eagle intended it to be the first in a series of changes that will be announced in the coming months, calling it "one of the clearest symbols of public frustration with Britain's infrastructure". A Defra source said the intervention was "a down payment on bigger changes that would come in the 10-year plan".
The new intervention from Eagle comes as the government continues to explore more radical options for the stricken company Thames Water, which is running out of cash and recently asked its creditors for an additional 2.4 billion pounds. Burnham previously said he would nationalise Thames Water but is struggling to find a way to do so without spending billions of pounds or getting tied up in a lengthy court battle.
The outcome of the last price review process in 2024 led to highly controversial bill rises, after Ofwat authorised a 104 billion pound modernisation programme, funded in large part through progressive annual rate increases that will see average water bills surge by 36 percent over the second half of the decade. The biggest increase was allowed for Southern Water, whose customers will pay 53 percent more by 2030, at an average of 642 pounds per year.
Burnham criticised the decision, warning that bill payers must no longer be treated as a "blank cheque" or a "bottomless source of funding for other people's failures".
However, campaigners for public ownership have warned the move will do little in practice to reduce bills or the environmental impact of sewage or leaks. Sophie Conquest, the lead campaigner at We Own It, said: "These proposals are yet more reshuffling of the deckchairs on the Titanic, and fall far short of Burnham's promise to end 40 years of neoliberalism. If water companies can't function without siphoning more and more money out of our pockets, then this government should let them go bust. Under public ownership, we can put people and the environment ahead of the interests of faraway shareholders and hedge funds."