Parliament committee slams water company culture and urges tougher action.

Committees – UK Parliament

A failing water sector in which “water companies increasingly look like financial institutions rather than businesses servicing monopolised critical infrastructure” is in need of “root and branch reform”, according to a new report by Parliament’s Environment, Food and Rural Affairs Committee.

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• Environment, Food and Rural Affairs Committee

MPs say there is a cultural problem in the sector and call for “a major refresh of the incentives and drivers” and “much more regulated management of financial incentives for senior executives”.  

The report follows the Committee’s evidence sessions with the leadership of ten of England and Wales’ major water and sewerage companies in 2025.  

The MPs’ ‘Priorities for water sector reform’ report makes recommendations to the Independent Water Commission, ahead of its Chair, Sir Jon Cunliffe, publishing his final report next month. The Committee will put their findings to Sir Jon in an evidence session tomorrow (Tuesday 17 June). 

Culture, ownership, leadership and bonuses  

The report urges the Water Commission to consider a variety of models of corporate ownership, which they say “could offer a better culture of responsible leadership.” 

MPs want the Commission to “determine how regulators can better vet or veto potential owners of water companies to prevent bad actors from running critical national infrastructure”.  

The report notes that bonuses totalling millions of pounds have been repeatedly paid to senior executives over many years, despite poor performance, which they say “seriously diminish trust” and may fail to incentivise improvement. 

MPs want the Commission to consider reforms to “ensure that the right people are put into senior positions” as they call for greater oversight from Ofwat before appointments are made and bonuses are paid, as well as “clearer statutory expectations on the criteria for bonuses”.  

The report states that “privatisation has almost certainly weakened the accountability of the water industry to the public”, noting that water data is often not public in practice. MPs want water companies to be legally obliged to publish performance, environmental and financial data on a regular basis. 

Financial management and structures  

The report today says there has been “serious economic mismanagement of companies” and calls for greater regulation of debt accumulation and debt management, saying that “a culture of relying on debt must never be allowed to arise again”.    

On the issue of dividends, MPs call for safeguards “to prevent egregious dividend payments” and say that examples of excessive dividends contrasted with poor performance, are “symptomatic of a culture of profiteering over duties to regulators and customers”. 

Stating that “investors need to see stable but modest long-term returns”, the report stresses that the regulatory system should “ensure that services for customers and the environment take priority”. MPs say that dividends should correlate to a company’s performance. 

On the question of special administration, MPs believe it should be a last resort given the high initial cost to government but say “it is unclear whether allowing a failing company to struggle on and accumulate progressively more debt is a better outcome than assuming temporary national control more quickly, with the associated costs that it could incur”. 

The Price Review Process and the regulatory environment  

The Committee supports the Water Commission’s focus on creating a better regulatory framework, but says “a good framework is nothing without well-equipped regulators to act against bad actors and poor behaviours”.   

MPs want the Commission to ensure that data on water is as open as possible and believe that regulators should gain automatic access to water companies’ data relevant to their regulatory functions. 

They say that the current regulatory system, which has not incentivised enough investment in water infrastructure, impacts both short-term resilience against asset failures and long-term water security. The report cites that, despite well-known population and climate pressures, such as drought in the South and South East, efforts to ensure future water supplies are regarded by some stakeholders as insufficient.   

MPs say that if the price review process is to be retained, it needs to be reformed. They want the Commission’s proposals to result in a price review process and regulatory system that encourages better resilience, to protect customers from short term shocks and to ensure that water resources are protected in the future.   

Relationship with consumers and need for single social tariff  

During its inquiry, the Committee heard of instances of inadequate communication from some water companies during events such as water outages or raw sewage entering homes and was particularly concerned to hear of vulnerable customers not receiving the support they needed. MPs also say that “it is generally thought that levels of compensation after these events are too low and easy to avoid paying.”   

The report urges Defra and the Water Commission to address the issues of local coordination with key bodies and communication with customers, and to consider the introduction of statutory standards to “create a customer-first culture” among water companies.  

The Committee wants the Commission to make provisions to establish a single social tariff to protect low-income households and for the Commission to establish how effectively water poverty is being tackled. 

Chair comment (The Rt Hon Mr Alistair Carmichael is the Liberal Democrat MP for Orkney and Shetland)

“The water sector has a serious culture problem. Water companies are the keepers of a vital national infrastructure. They exist to provide an essential service to the public and to protect the environment. But these primary functions seem to have been forgotten. Amidst growing public outrage at the poor performance of water companies, some companies have been paying out high dividends to shareholders and excessive bonuses to their senior executives.   

 “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 a reliable and safe water must be the first priorities of water companies and regulators. 

“We want the country’s water sector to be fit for purpose. Now and in the long-term. The Water Commission has got the opportunity to draw up the root and branch reforms necessary to ensure that the issues plaguing the sector are resolved. It must not shy away from bold proposals.”  

Richard Foord speaking at the end of one of the debates on Lib Dem ammendments but the Government bulldozed them all away.

Only one or two Tories bothered to speak.

Planning and Infrastructure Bill Tuesday 10 June 2025

…….I wish to put it on the record that Devon, which is rightly celebrated across Britain for its rugged coastline, its rolling farmland, its spectacular moorlands and its ancient woodlands, is subject to the diggers of developers who are encouraged by this Government. Although we all need houses and we all need the protection that they afford, this Bill, if enacted, will only damage nature. Nature in Devon is part of who we are and we face a nature crossroads. The Devon Local Nature Partnership tells us that the loss and decline of Devon’s wildlife has accelerated rapidly over the past 50 years. The wooded valleys of the Blackdown hills and the wildflower meadows of East Devon are priceless, but once they are gone, they cannot be brought back.

Yesterday in the Tea Room, we were talking about the darkening clouds of the international system and how this Government are having to deal with such grave matters of state. Somebody then pointed out that, never mind grappling with wars and conflict, we cannot even create a system where a £44 swift brick is put in a new house to encourage nature in our rural areas.

Healthy natural systems underpin our economy and our communities, but unless we restore nature, we will have nothing left. Building homes does not need to come at the cost of nature. We must build in the right places with nature embedded at the heart of planning.

Chancellor Rachel Reeves did not mention Send deficits in her spending review speech, but documents released later pledged clarification in the autumn.

Devon’s accumulated deficit of more than £130 million is greater than the council’s cash reserves.

Audit committee to hold an extraordinary meeting next month to discuss the issue in more detail.

Bradley Gerrard, Local Democracy Reporter www.devonlive.com

Fears have been raised about Devon County Council’s ability to start its budget-setting process amid ongoing uncertainty around its huge special needs deficit.

Many councils across the country, including Devon, were hoping for clarity from the government about what it will do about roughly £6 billion of special educational needs and disabilities (Send) deficits nationwide.‌

The previous government allowed councils to effectively ringfence these deficits out their annual accounts, but that permission – officially called the statutory override – ends next March unless it is extended or an alternative solution created.‌

What that means is a council’s Send deficit will be moved back onto its balance sheet.

In Devon’s case, at more than £130 million, it is greater than the council’s cash reserves.

Addressing the audit committee this week, the council’s finance director Angie Stewart said if no government action is taken it would put its finances at risk.

“This is not unique to Devon, but we have to deal with our own issues,” she said.

“We must be mindful of what the government is going to do with the end of the statutory override approaching.”

Chancellor Rachel Reeves did not mention Send deficits in her spending review speech, but documents released later pledged clarification in the autumn.

Donna Manson, the council’s chief executive, said the lack of any clarity is worrying.

“I have concerns about the ability of the council to set a budget for next year, as there are question marks on whether the Send deficit will be moved or not, and that has a significant impact on what we look at as an organisation,” she said.

“I consider this a matter or urgency as we did not hear what we expected to in the spending review.”

Committee’s chair Cllr Alan Connett (Liberal Democrat, Exminster & Haldon) expressed his frustration given the Send deficit “entirely wipes out our reserves”.

“It is the single-biggest risk to this council that has no mitigation as the government has done nothing to say whether the current arrangement carries on or what they expect us to do,” he said.

“The Safety Valve agreement does nothing to limit the demand that has to be met by the council.”

Devon secured £95 million from the Safety Valve rescue scheme run by the previous government, with funding paid over nine years.

But the current government halted new applications for such grants, meaning the future of existing agreements is unclear.

Cllr Connett agreed to hold an extraordinary meeting next month to discuss the issue in more detail, after worries from some councillors that it would be too long to wait until the next scheduled meeting in September.

Deputy chair Cllr Paul Hayward (Independent, Axminster) said: “I feel a little bit ill at ease given the chief executive’s point, because if the audit committee considers this in September, we will be well into budget preparations [for the 26/27 financial year], and waiting until then could cause problems.

“The item is so significant to this authority that I would be happier with an extraordinary meeting when the government provides clarity [to the council].”