Secretary of State Steve Reed comment on water bills

Commenting on Ofwat's PR24 final determinations and water bills, Secretary of State for the Environment, Food and Rural Affairs, Steve Reed, said:  

“Under the Conservatives, our sewage system crumbled. They irresponsibly let water companies divert customers' money to line the pockets of their bosses and shareholders. 

“The public are right to be angry after they have been left to pay the price of Conservative failure.

“This Labour Government will ringfence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts. We will clean up our rivers, lakes and seas for good.”

Background briefing

• The Government has introduced reforms so that funding for vital infrastructure investment is ringfenced so it is spent on upgrades benefiting customers and the environment – not diverted for bonuses, dividends or salary increases.
• If that money is not spent on investments, it will be returned to customers. 

PR24

• We are committed to a water sector that delivers for customers and the environment. Bills must remain affordable, and customers cannot be expected to pay the price for years of underperformance in the past.   

• Today's PR24 (Price Review) process, which determines bill rises for 2025 – 20230, is fundamentally a matter for the independent financial regulator Ofwat.  

• It is the responsibility of Ofwat to review company plans to ensure they meet legal requirements and government targets to give customers the best value for their money.    

• If companies do not agree with these final decisions, they have two months from the date of publication to ask for an appeal from the Competition and Markets Authority.  

• These bill rises equate to around £3 additional per month on average. This will pay to fix crumbling infrastructure, which will dramatically reduce sewage spills and lead to cleaner rivers, lakes and seas.

Support for vulnerable customers

• Water companies have more than doubled the number of customers that will receive help with their bills through social tariffs – from 4% to 9%.

• We expect water companies to put robust support in place for customers that are struggling to pay their bills. These include:  

o    Bill discount schemes such as WaterSure and Social Tariffs.     

o    Actively offering payment breaks or payment holidays.      

o    Adjusting payment plans urgently to help with sudden changes in household finances.      

o    Simplifying the processes for customers to get extra assistance.      

o    Helping customers get advice on benefits and managing debts.   

o    Water companies should ensure that their customers know what support schemes are available and how to use them if they need help.         

• As part of the Secretary of State's first measures to reset the water sector, he secured agreement from water companies to change their ‘Articles of Association' – the rules governing each company – to make the interests of customers and the environment a primary objective.   
• This week, the government announced a significant intervention on compensation for customersaffected by water company service failures, forcing water companies to double compensations in the event of issues like water supply outages, sewer flooding or low water pressure.   

Infrastructural improvements

• Today's final settlement for the water sector will now unlock around £104bn of spending by water companies between 2025 and 2030.  

• In the next five years, the increase in bills is expected to pay for: 

o    A £12 billion investment to reduce harm from storm overflows. 

o    Leakage reduction of 17% - taking it to the lowest since privatisation.  

o    The rollout of another 10 million smart meters.  

o    Reducing sewer flooding in homes by 27% 

o    £8bn investment to boost water supply and manage demand.

o    Increasing the replacement rate of water mains pipes.  

• By 2050, water companies have committed to deliver nine new reservoirs (excluding Havant Thicket, already in construction), and nine new water transfer schemes to share resources, 8,000 km of water mains pipes and upgrades to 2,500 storm overflows across England. These include:

o    Anglian Water and Cambridge Water have proposed the Fens reservoir, which could be operational by 2036.

o    South East Water has proposed the Broad Oak reservoir in Kent, which could be operational by 2035.  

o    South West Water has proposed the Cheddar 2 reservoir in Bristol, which could be operational by 2035.  

Water Special Measures Bill

• In their first 70 days, the Government introduced the Water (Special measures) Bill, which sets out tough new measures to crack down on water companies. This includes: 
• • Strengthening regulation to ensure water bosses face personal criminal liability for lawbreaking.  
  • Giving the water regulator new powers to ban the payment of bonuses if environmental standards are not met and introducing ‘fit and proper person' tests to further increase accountability.  
  • Introducing new powers to bring automatic and severe fines.  
  • Requiring water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators.  
  • Requiring water companies to publish annual Pollution Incident Reduction Plans to increase transparency about the actions water companies are taking to address pollution incidents. 
  • Expanding the cost recovery powers of regulators will be expanded to ensure that water companies bear the cost of enforcement action taken in response to their failings.

Independent Commission on Water

• The government has announced the launch of an Independent Commission into the water sector and its regulation, in what is expected to form the largest review of the industry since privatisation.     

• Former Deputy Governor of the Bank of England, Jon Cunliffe, is chairing the Commission. With several decades of economic and regulatory experience, his appointment demonstrates the Government's serious ambitions.  The Commission will draw upon an advisory group of experts covering areas including the environment, public health, economics, engineering, consumers and investors.

• A set of recommendations will be delivered to the Defra Secretary of State, and Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs by Q2 2025.  

• These recommendations will form the basis of further legislation to attract long-term investment and clean up our waters for good – injecting billions of pounds into the economy, speeding up delivery on infrastructure to support house building and addressing water scarcity, given the country needs to source an additional 5 billion litres of water a day by 2050.