Liberal Democrats have led the charge for a new water regulator, now we want a new ownership model that puts customers before profits

The Independent Water Commission Final Report, and the Government’s subsequent Water White Paper offers a once-in-a-generation opportunity to address the issues in the system that for so long has seen sewage pumped into our rivers and beaches. For those of us that believe in the need for fundamental reform, not least of the ownership structure, the outcome is a disappointment.

However, I must also recognise the progress that is being made. The Final Report contains important proposals: embedding public health into law, improving regional planning, strengthening monitoring, and replacing Ofwat with a new integrated regulator.

The Water White Paper now states that Ministers “will also consider the role of water and sewerage companies in relation to planning applications” as part of reforms to statutory consultees. That is a welcome change but simply considering it, is no longer enough. Making water companies and National Landscapes statutory consultees for major developments would be a preventative, low-cost reform that aligns planning decisions with environmental reality, reducing flood risk.

The Commission is also right to highlight the importance of “pre-pipe” solutions. Recommendation 10 calls for legislative changes to expand pre-pipe solutions so we can stop pollutants and rainwater entering the system in the first place. In too many places, combined sewers are overwhelmed by rainfall mixing with raw sewage, triggering sewage spills. This is not sustainable in a changing climate. We need a long-term National Rainwater Management Strategy, with sustainable drainage systems mandatory in all new developments and a serious programme of retrofitting in existing communities.

On regulation, the Commission’s call to replace Ofwat with a new integrated regulator is welcome, and long overdue. It is something the Liberal Democrats have been calling for this since 2022. Ofwat’s primary duty to ensure reasonable returns has shaped a culture that tolerated pollution, debt-loading and underinvestment. A regulator with explicit duties to protect public health and the environment is a step forward.

I am glad the white paper has stated that the government will commit to a new regulator by abolishing Ofwat and bringing together the relevant water system functions from the existing regulators; Ofwat, the DWI, EA, and Natural England into one new body. But again, this alone is not enough. The regulator must have teeth. It must be properly resourced, independent and willing to enforce the law.

The Commission also highlights the need for stronger customer protection. Recommendation 41 proposes strengthening the C-Mex incentive and moving to a supervisory approach. That reflects the reality that customer experience has not improved, despite financial incentives. People paying their bills expect reliable service, timely responses, and basic competence, not call centres that go unanswered and complaints that disappear into the void.

This brings me to the question of accountability and ownership.

The White Paper recognises the unsustainable debt levels created by the current model and talks about attracting long-term, low-risk investors. It also introduces new performance improvement regimes. However there is a real risk here of tinkering around the edges while leaving a fundamentally broken model intact. As long as water companies exist primarily to generate profit, decisions will be shaped by that motive. Alternative models across Europe deliver lower bills, higher investment relative to debt, and fewer sewage discharges. Yet both the Commission and the White Paper fail to engage seriously with these models. Water companies should be redesigned with public benefit and environmental protection as their core purpose. The Liberal Democrats are calling for a new ownership model with water companies mutually owned by customers and professionally managed.

As one MP noted during last week’s debate; it was not the first time we had debated water sector reform, and it certainly won’t be the last. As the Water White Paper moves forward there will be work for Parliament to do it make sure it delivers the real change needed for the public and the environment to feel the benefit.