Water regulators and the government have failed to provide a trusted and resilient industry at the same time as bills rise, the state spending watchdog has said.

Public trust in the water sector has reached a record low, according to a report from the National Audit Office (NAO) on the privatised industry.

Not since monitoring began in 2011 has consumer trust been at such a level, it said.

At the same time, households face double-digit bill hikes over the next five years.

The last time bills rose at this rate was just before the global financial crash, between 2004-05 and 2005-06.

Regulation failure

All three water regulators – Ofwat, the Environment Agency and Drinking Water Inspectorate – and the government department for environment, food and rural affairs (Defra) have played a role in the failure, the NAO said, adding they do not know enough about the condition or age of water infrastructure and the level of funding needed to maintain it.

Since the utilities were privatised in 1989, the average rate of replacement for water assets is 125 years, the watchdog said. If the current pace is maintained, it will take 700 years to replace the existing water mains.

Water firms have grappled with leaky pipes and record sewage outflows into UK waterways in recent years, with enforcement action under way against all wastewater companies.

Despite there being three regulators tasked with water, there is no one responsible for proactively inspecting wastewater to prevent environmental harm, the report found.

Instead, regulation is reactive, fining firms when harm has already occurred.

Financial penalties and rewards, however, have not worked as water company performance hasn’t been “consistent or significantly improved” in recent years, the report said.

‘Gaps, inconsistencies, tension’

The NAO called for this to change and for a body to be tasked with the whole process and assets. At present, the Drinking Water Inspectorate monitors water coming into a house, but there is no entity looking at water leaving a property.

Similarly no body is tasked with cybersecurity for wastewater businesses.

As well as there being gaps, “inconsistent” watchdog responsibilities cause “tension” and overlap, the report found.

The Environment Agency has no obligation to balance customer affordability with its duty to the environment when it assesses plans, the NAO said.

Company and investment criticism

Regulators have also been blamed for failing to drive enough funding into the water sector.

From having spoken to investors through numerous meetings, the NAO learnt that confidence had declined, which has made it more expensive to invest in companies providing water.

Even investors found Ofwat’s five-yearly price review process “complex and difficult”, the report said.

Financial resilience of the industry has “weakened” with Ofwat having signalled concerns about the financial resilience of 10 of the 16 major water companies.

Most notably, the UK’s largest provider, Thames Water, faced an uncertain future and potential nationalisation before securing an emergency £3bn loan, adding to its already massive £16bn debt pile.

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Water businesses have been overspending, with only some extra spending linked to high inflation in recent years, leading to rising bills, the NAO said.

Over the next 25 years, companies plan to spend £290bn on infrastructure and investment, while Ofwat estimates a further £52bn will be needed to deliver up to 30 water supply projects, including nine reservoirs.

What else is going on?

From today, a new government law comes into effect which could see water bosses who cover up illegal sewage spills imprisoned for up to two years.

Such measures are necessary, Defra said, as some water companies have obstructed investigations and failed to hand over evidence on illegal sewage discharges, preventing crackdowns.

Meanwhile, the Independent Water Commission (IWC), led by former Bank of England deputy governor Sir Jon Cunliffe, is carrying out the largest review of the industry since privatisation.

What the regulators and government say?

In response to the report, Ofwat said: “The NAO’s report is an important contribution to the debate about the future of the water industry.

“We agree with the NAO’s recommendations for Ofwat and we continue to progress our work in these areas, and to contribute to the IWC’s wider review of the regulatory framework. We also look forward to the IWC’s recommendations and to working with government and other regulators to better deliver for customers and the environment.”

An Environment Agency spokesperson said: “We have worked closely with the National Audit Office in producing this report and welcome its substantial contribution to the debate on the future of water regulation.

“We recognise the significant challenges facing the water industry. That is why we will be working with Defra and other water regulators to implement the report’s recommendations and update our frameworks to reflect its findings.”

A Defra spokesperson said: “The government has taken urgent action to fix the water industry – but change will not happen overnight.

“We have put water companies under tough special measures through our landmark Water Act, with new powers to ban the payment of bonuses to polluting water bosses and bring tougher criminal charges against them if they break the law.”

Water UK, which represents the water firms, has been contacted for comment.

Nearly 1,000 jobs could be under threat at The Original Factory Shop (TOFS), one of Britain’s largest discount retailers, as part of a survival plan which centres on plans for swingeing rent cuts.

Sky News has learnt that Modella Capital, the new owner of TOFS, has drawn up plans to renegotiate rents at 88 of the company’s 178 stores.

The proposals are contained in a company voluntary arrangement (CVA), a last-ditch restructuring process, which was launched on Thursday.

TOFS employees are said to have been briefed on the plans.

The chain sells beauty brands such as L’Oreal, the sportswear label Adidas and DIY tools made by Black & Decker.

It employs about 2,000 people, with a proportion of its 176 head office and warehouse employees understood to be facing redundancy.

Creditors will be asked to vote on the plans at a meeting in mid-May.

The CVA is being handled by Interpath Advisory.

Although there are no definite store closures, people familiar with the plans said half of TOFS’ estate was at risk if landlords did not agree to the rent demands.

It is the second such brutal restructuring to be launched by a Modella Capital-owned retailer this week.

Sky News revealed on Tuesday that Hobbycraft, which the investor also owns, is also launching a CVA which would entail the closure of nine shops.

Hundreds of jobs could be at risk there too if rent cuts are not acceded to.

The blueprint risks becoming a controversial one for Modella and for WH Smith, which has just agreed the sale of its high street arm to the investment firm.

Retail insiders believe a similar restructuring is inevitable at WH Smith, which Modella has said will be renamed in town centres as TG Jones.

“In response to the challenging retail environment of the last year, The Original Factory Shop (TOFS) has today announced a proposed Company Voluntary Arrangement (CVA) in order to protect the future of TOFS as a business and to allow it to flourish in the future,” a statement from the company said.

“Under TOFS’ plan, which will be subject to a vote by the company’s creditors on May 14, TOFS will adjust its store estate (by, where possible, renegotiating the leases on a number of its stores that are loss-making), return to the deal-centric stock and purchasing strategy it is famous for, invest in online channels, and re-align its support centre and logistics operations.

“All employees have been informed of the CVA proposal.

“A redundancy consultation will begin with employees in those TOFS stores where the company is seeking to renegotiate the lease, in the event that those negotiations are not successful.

“There will also be a reduction in the number of employees in the company’s Head Office and Warehouse in Burnley.

“There will be no change in the day-to-day running of the business while this plan is implemented, and management will keep all TOFS colleagues updated as the process continues.

“While these changes are necessary, TOFS remains committed to serving our loyal customers across the UK.

“Our plan aims to put the business on sustainable footing, protecting as many jobs as possible, and allowing us to return to offering the exceptional value and deals our customers expect from us.”

TOFS, which was founded in 1969, was bought by the private equity firm Duke Street in 2007.

Duke Street had tried to sell the business before, having supported it through the COVID-19 pandemic with a cash injection of more than £10m.

Lisa Nandy, the culture secretary, is to sign off the appointment of a chair of English football’s new referee within days.

Sky News has learnt that David Kogan, a media industry veteran who has helped negotiate a string of television rights deals across the sport in recent decades, is to be formally approved as chair of the Independent Football Regulator (IFR).

Whitehall sources said an announcement could be made by the Department for Culture, Media and Sport (DCMS) as soon as this week, although they added that the timetable could slip by a few days.

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Once approved, Mr Kogan is expected to face a committee of MPs for a confirmation hearing early next month, the sources added.

Sky News revealed last weekend that Mr Kogan had emerged as the frontrunner for the post after an earlier shortlist of three candidates was passed over.

The new regulator has the firm backing of Sir Keir Starmer, and is a key element of legislation currently passing through Parliament.

Mr Kogan, whose boardroom roles have included a directorship at state-owned Channel 4, was initially approached during a previous recruitment process launched under the last Conservative administration.

He has some links to Labour, having in the past donated money to a number of individual parliamentary candidates, chairing LabourList, the independent news site, and writing two books about the party.

Mr Kogan has had extensive experience at the top of English football, having advised clients including the Premier League, English Football League, Scottish Premier League and UEFA on television rights contracts.

Last year, he acted as the lead negotiator for the Women’s Super League and Championship on their latest five-year broadcasting deals with Sky – the immediate parent company of Sky News – and the BBC.

His current roles include advising the chief executives of CNN, the American broadcast news network, and The New York Times Company on talks with digital platforms about the growing influence of artificial intelligence on their industries.

In recent months, Sky News has disclosed the identities of the shortlisted candidates for the role, with former Aston Villa FC and Liverpool FC chief executive Christian Purslow one of three candidates who made it to a supposedly final group of contenders.

The others were Sanjay Bhandari, who chairs the anti-racism football charity Kick It Out, and Professor Sir Ian Kennedy, who chaired the new parliamentary watchdog established after the MPs expenses scandal.

The apparent hiatus in the appointment of the IFR’s £130,000-a-year chair threatened to reignite speculation that Sir Keir was seeking to diminish its powers amid a broader clampdown on Britain’s economic watchdogs.

Both 10 Downing Street and the Department for Culture, Media and Sport (DCMS) have sought to dismiss those suggestions, with insiders insisting that the IFR will be established largely as originally envisaged.

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The creation of the IFR, which will be based in Manchester, is among the principal elements of legislation now progressing through parliament, with Royal Assent expected before the summer recess.

The Football Governance Bill has completed its journey through the House of Lords and will be introduced in the Commons shortly, according to the DCMS.

The regulator was conceived by the Tories in the wake of the furore over the failed European Super League project, but has triggered deep unrest in parts of English football.

Its creation forms part of a process that represents the most fundamental shake-up in the oversight of English football in the game’s history.

The establishment of the body comes with the top tier of the professional game gripped by civil war, with Abu Dhabi-owned Manchester City at the centre of a number of legal cases with the Premier League over its financial dealings.

The Premier League is also keen to agree a long-delayed financial redistribution deal with the EFL before the regulator is formally launched, although there has been little progress towards that in the last year.

“We do not comment on speculation,” a DCMS spokesperson said when asked about the impending announcement of Mr Kogan as the IFR chair.

“No appointment has been made and the recruitment process for [IFR] chair is ongoing.”