Water sector needs ‘root-and-branch' reform, MPs say
The water sector is in need of 'root-and-branch reform', a committee of MPs has said as it called for 'much more regulated management' of bonuses for senior bosses.
The cross-party Environment, Food and Rural Affairs committee has said that the industry is 'failing', but that water companies are 'deaf to the crisis' that it is facing.
In their report, Priorities For Water Sector Reform released on Monday, the MPs argue that the Government 'should feel able to use its temporary nationalisation powers' when needed.
They also said the system should 'ensure that more money gained from investors and through customer bills is directed towards investment in water infrastructure and service delivery' and less towards debt repayment or financial rewards for executives.
The system of fines and rewards should also focus on a reduction in pollution incidents, responsible ownership and the need for the sector to have long-term resilience, the MPs said.
'Despite some initial success after privatisation in 1989, root-and-branch reform of the water sector is now needed to improve the sector's culture,' the committee said.
As part of their investigation, the MPs found that 'public disquiet has increasingly turned to outrage' at the way water companies and their bosses are benefiting from the sector.
'Over hearings with 10 of the largest water companies and Ofwat, we regularly encountered a culture that is deaf to the crisis thesector is facing,' they said.
#WaterCompany senior executives will be banned from receiving a bonus if they breach standards relating to consumer and environmental matters, criminal liability and financial resilience, under new powers coming into force today.
Find out more: https://t.co/cDOJjhEU54 pic.twitter.com/Nquv8EVlBl
— Ofwat (@Ofwat) June 6, 2025
Committee chairman Alistair Carmichael, a Liberal Democrat MP, said the sector 'must not shy away from bold proposals' and that it has a 'serious culture problem'.
He said: 'Water companies' complex and sometimes impenetrable financial structures, with their myriad subsidiaries, holding companies and parent organisations, seem to suggest that their purpose is less to provide a good service to their customers and more to allow them to juggle their finances and their increasingly unsustainable levels of debt.
'Meanwhile, an ineffective regulatory system has failed to protect customers, the environment and the financial stability of the sector.
'It has failed to ensure that companies invest in essential infrastructure and it has not encouraged long-term thinking.
'This has got to stop now. Trust and accountability in the water sector are very low.
'It is not acceptable that it has fallen to commendable citizen scientists to expose issues with local water resources.
'Environmental protection and the delivery of reliable and safe water must be the first priorities of water companies and regulators.'
A Defra spokesperson said: 'Our rivers, lakes and seas are polluted, and our water system is broken.
'As part of the plan for change, new legislation has banned unfair multimillion-pound bonuses for bosses at six water companies and launched a record 81 criminal investigations.
'This Government has also secured the largest investment into the water sector in history, with £104 bn in private sector investment to clean up rivers, lakes and seas and cut sewage by nearly half by 2030.'
A Water UK spokesperson said: 'Everyone agrees that the water system is not working, and we have been calling for fundamental reforms which allow investment to get quickly to where it needs to go.
'In the meantime, companies are focused on investing a record £104 billion over the next five years to secure our water supplies, end sewage entering our rivers and seas and support economic growth.'
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