Taxpayers should not foot bill for water company failings

Times

7 days ago

It keeps getting worse. Despite public protests, official hand-wringing, fines and apologies, the UK's waterways are still being befouled at an ever greater rate. According to the latest figures from the Environment Agency (EA), serious pollution incidents by water companies — defined as posing 'serious or persistent harm' to fisheries, drinking water or human health — rose by 60 per cent in England last year, to 75 from 47 in 2023. Meanwhile pollution incidents overall soared to 2,801, the highest on record. The seemingly unstoppable effluvium into rivers, lakes and seas has sickened swimmers, killed off wildlife, contaminated beauty spots and marred events such as the Boat Race and Henley Royal Regatta.
When Sir Jon Cunliffe, the former deputy governor of the Bank of England, was commissioned by the government last autumn to produce recommendations for an overhaul of the water industry in England and Wales, his task was a daunting one. Water companies' habit of over-remunerating shareholders and company bosses, while under-investing in infrastructure, has ensured that Britain's crumbling Victorian sewerage system is unfit for the demands of climate change and the 21st-century population. Sewage overflows into waterways, legally permitted only in exceptional circumstances, are now grimly routine. Yet even within this panorama of dysfunction, long highlighted by the Times Clean It Up campaign, some companies stand out: step forward Thames Water, leading the field as the organisation responsible for 33 of the most serious incidents last year. Following it are Southern Water, at 15, and Yorkshire Water, at 13.
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The myopic self-interest of water company executives has been exacerbated by a culpable failure of regulation. Three bodies are responsible: Ofwat, the financial regulator; the Environment Agency, which regulates the industry's effect on the environment; and the Drinking Water Inspectorate, which upholds the quality of drinking water. Of these it is Ofwat which has most grossly underperformed, by neglecting to rein in the companies' financial excesses and tolerating under- investment. The EA, with cuts to funding and dwindling manpower, has trailed behind, struggling to police the disastrous environmental fall-out from Ofwat's original failings.
Steve Reed, the environment secretary, encouraged the Cunliffe review to consider the future of Ofwat. The abolition of that flawed organisation now seems the most likely option. Sir Jon correctly concluded in his interim review in June that current regulation has 'largely lost public trust' and that a more streamlined, effective approach was required. Any new regulatory system, however, must involve the economic and environmental aspects working in unison, rather than jarring in a disintegrating, ill-conceived framework.
The government also has a more immediate task: how to deal with the floundering behemoth of Thames Water. The company, which recently reported an annual pre-tax loss of £1.65 billion, has blamed wetter-than-average weather for its rising pollution. But it is thanks to long-term mismanagement that its performance is now sliding from appalling to catastrophic amid climate challenges.
Having also racked up £16.8 billion in debt, Thames Water is attempting to hold a hosepipe to the government's head. Its chief executive Chris Weston has told MPs that the 'stressed' company should be let off an estimated £1.4 billion in looming pollution fines and penalties, or risk a form of emergency nationalisation. Yet the taxpaying public, which has long endured the dispiriting consequences of this private company's greed and ineptitude, must not suffer further. Whatever unfolds, Thames Water should receive no exemptions from the law, and its creditors and shareholders should expect no bailout.