The end of ofwat

With a whopping 464 pages, this week Sir Jon Cunliffe published his final recommendations for reform to improve the water sector regulatory system in England and Wales with the Independent Water Commission. 

With 88 recommendations spanning regulation, planning, investment, and public engagement, the review sets out multiple overhauls and is grounded in an acknowledgement that the current system for regulating water is fundamentally broken. While (to the frustration of many campaigners) nationalisation of water companies was explicitly ruled out as an option, the scale of proposed reform is significant.

The review has been widely welcomed. With Cunliffe also acknowledging that such sweeping changes could introduce new layers of complexity at a time when the sector is already under intense scrutiny, there seems to be an overall appreciation for the challenge at hand.  Regardless, change is what everyone is calling for, and that’s what Cunliffe recommends in earnest. 

The headline story, which the environment secretary, Steve Reed, had already confirmed, is the replacement of Ofwat with a new, integrated water regulator for England, and a separate body for Wales. It’s a big move, but one that reflects a consensus that fragmented oversight, and blurred responsibilities have contributed to a lack of delivery. Lack of delivery has therefore led to a public distrust. The review argues that a single, empowered regulator could provide clearer accountability, more coherent decision-making, and give the sector a stronger chance to drive long-term resilience.

How much people care about water is obvious, and anger at its mismanagement has only increased since the pandemic. Water companies are unique in how directly people feel the impact in a way that’s different from the transmission and distribution sectors. From boil notices to sewage spills and hosepipe bans, if you’re not impacted, you’re likely seeing a story about an area that is. 

Most themes in the review are not isolated to the water industry. Coherence runs through the review’s planning recommendations, and it calls for a more strategic, cross-sector approach to infrastructure delivery. This is language we’ve already seen in the many consultations, roadmaps, and reviews Labour has been churning out to make good on the promise to remove the blockers on the planning system.  

What is notable is the creation of regional planning bodies to coordinate long-term investment. However, this is where the review also acknowledges the risks that these new bodies could add complexity rather than reduce it.

From a policy standpoint, the review recommends updating the National Policy Statements for water and wastewater and questions whether Critical National Priority Status could help accelerate delivery. This has been implemented in the approach for low-carbon infrastructure (in NPS EN-3) and has given more certainty to developers on the approach taken on the swathe of large scale solar that’s coming through the DCO regime at pace.

A message that’s clearly landed is about trust. The review is explicit that the sector has lost public confidence, and that rebuilding it will require more than technical fixes. Transparency, accountability and meaningful engagement with communities will be essential. 

More than anything, there’s a sense that people want to see stuff happening.  But while multiple of this week’s headlines for Thames Water ask, “why don’t we let them go bust?”, critics are questioning the point of privatisation if water companies are going to be bailed out. Both The Guardian and The Spectator have argued that Thames Water should be allowed to fail and while this debate rumbles on, it’s hard to see how any confidence will be installed. 

Rebuilding public trust is a communications challenge as well as a technical one. The review calls for greater transparency in how decisions are made, how performance is measured, and how customers are engaged. It criticises the current model of consultation as too transactional and calls for a more strategic approach; one that builds relationships over time and reflects local concerns. This includes involving communities in shaping nature-based solutions and ensuring that infrastructure projects deliver visible, local benefits.

The Cunliffe Review is a serious, considered attempt to turn the corner for the water sector. Whether its recommendations are implemented in full is now in the hands of the Government, but the direction of travel has been set.