Ofwat could be scrapped in water reforms
An independent review of the water industry is to recommend sweeping changes to the way the sector is managed, including the potential replacement of Ofwat with a strengthened body combining economic and environmental regulation.
Former Bank of England governor Sir Jon Cunliffe will publish the findings of the Independent Water Commission on Monday, with stakeholders across the industry expecting significant changes to regulation to be at its heart.
The existing regulator Ofwat has been under fire from all sides in recent years amid rising public anger at levels of pollution and the financial management of water companies.
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Campaigners and politicians have accused Ofwat of failing to hold water operators to account, while the companies complain that its focus on keeping bills down has prevented appropriate investment in infrastructure.
In an interim report, published in June, Sir Jon identified the presence of multiple regulators with overlapping responsibilities as a key issue facing the industry.
While Ofwat is the economic regulator, the Environment Agency has responsibility for setting pollution standards, alongside the Drinking Water Inspectorate.
Sir Jon’s final report is expected to include a recommendation that the government consider a new regulator that combines Ofwat’s economic regulatory powers with the water-facing responsibilities currently managed by the EA.
In his interim report, Sir Jon said options for reform ranged from “rationalising” existing regulation to “fundamental, structural options for integrating regulatory remits and functions”.
He is understood to have discussed the implications of fundamental reform with senior figures in industry and government in the last week as he finalised his report.
Environment Secretary Steve Reed is expected to launch a consultation on the proposals following publication of the commission report.
The commission is also expected to recommend a “major shift” in the model of economic regulation, which currently relies on econometric modelling, to a supervisory approach that takes more account of individual company circumstances.
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How water can teach Labour a much-needed lesson
On Monday, the government’s long-awaited review into the UK’s water industry will finally report.
The expectation is that it will recommend sweeping changes – including the abolition of the regulator, Ofwat.
But frustrated customers of the water companies could rightly complain that the process of taking on this failing sector and its regulator has been slow and ineffective.
They may be forgiven for going further and suggesting that how Labour has dealt with water is symbolic of their inability to make an impact across many areas of public life, leaving many of their voters disappointed.
This is an industry that has been visibly and rapidly declining for decades, with the illegal sewage dumping and rotting pipes in stark contrast with the vast salaries and bonuses paid out to their executives.
It doesn’t take a review to see what’s gone wrong. Most informed members of the public could explain what has happened in a matter of minutes.
And yet, despite 14 years in opposition with plenty of time to put together a radical plan, a review is exactly what the government decided on before taking on Ofwat.
Month after month, they were asked if they believed the water industry regulator was fit for purpose despite the obvious disintegration on their watch. Every time the answer was ‘yes’.
As in so many areas of government, Labour, instead of acting, needed someone else to make the decision for them, meaning that it has taken over a year to come to the simple conclusion that the regulator is in fact, not fit for purpose.
As they enter their second year in office, maybe this can provide a lesson they desperately need to learn if they want to turn around their fortunes.
That bold decisions do not require months of review, endless consultations, or outside experts to endlessly analyse the problem.
They just need to get on with it. Voters will thank them.
Sir Jon has said the water industry requires long-term strategic planning and stability in order to make it attractive to “low-risk, low-return investors”.
The water industry has long complained that the current model, in which companies are benchmarked against a notional model operator, and penalised for failing to hit financial and environmental standards, risks a “doom loop”.
Thames Water, currently battling to complete an equity process to avoid falling into special administration, has said the imposition of huge fines for failing to meet pollution standards is one of the reasons it is in financial distress.
Publication of the Independent Commission report comes after the Environment Agency published figures showing that serious pollution incidents increased by 60% in 2024, and as Thames Water imposes a hosepipe ban on 15m customers.
Ofwat, Water UK and the Department for the Environment all declined to comment.
The US ambassador to the UK has said Britain should carry out “more drilling and more production” in the North Sea.
In his first broadcast interview in the job, Warren Stephens urged the UK to make the most of its own oil and gas reserves to cut energy costs and boost the economy.
“Electricity costs are four times ours in the UK, versus the US,” he told Mornings with Ridge and Frost.
“I want the UK economy to be as strong as it possibly can be, so the UK can be the best ally to the US that it possibly can be.
“Having a growing economy is essential to that – and the electricity costs make it very difficult.”
Mr Stephens told Wilfred Frost he hoped Britain would “examine the policies in the North Sea and frankly, make some changes to it that allows for more drilling and more production”.
“You’re using oil and gas, but you’re importing it. Why not use your own?” he asked.
Mr Stephens said Britain should make more of its own oil and gas
The ambassador said he had held meetings with Sir Keir Starmer on the energy issue while US President Donald Trump was in the room, and that the prime minister was “absolutely” listening to the US view.
“I think there are members of the government that are listening,” Mr Stephens told Sky News. “There is a little bit of movement to make changes on the policy and I’ll hope that will continue.”
Energy Secretary Ed Miliband has said the UK should be prioritising net zero by 2030 to limit climate change, rather than issuing new oil and gas drilling licences.
The Thistle Alpha platform, north of Shetland, stopped production in 2020 . Pic: Reuters/Petrofac
However, the ambassador said it would take “all energy for all countries to compete” in the future, given the huge power demands of data centres and AI.
“I don’t think Ed Miliband is necessarily wrong,” said Mr Stephens. “But I think it’s an incorrect policy to ignore your fossil fuel reserves, both in the North Sea and onshore.”
The ambassador hosted Mr Trump on the first night of his second UK state visit in September – a trip that was seen as a success by both sides.
Mr Stephens said Mr Trump and Sir Keir had a “great relationship” and pointed to the historic ties between Britain and the US as a major factor in June’s trade deal and the favourable tariff rate on the UK.
The ambassador said Sir Keir and President Trump have a ‘great relationship’
“The president really loves this country,” the ambassador told Sky News.
“I don’t think it’s coincidental that the tariff rates on the UK are generally a third, or at worst half, of what a lot of other countries are facing.
“I think the prime minister and his team did a great job of positioning the United Kingdom to be the first trade deal, but also the best one that’s been struck.”
Mr Stephens – who began his job in London in May – also touched on the Ukraine war and said Mr Trump’s patience with Russia was “wearing thin”.
The Alaska summit between Mr Trump and Vladimir Putin failed to produce a breakthrough, and the US leader has admitted the Russian president may be “playing” him so he can continue the fighting.
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The ambassador told Sky News he had always favoured a tough stance on Russia and was “delighted” when Mr Trump sanctioned Russia’s two biggest oil firms a few weeks ago.
However, he emphasised the president’s call that other countries must stop buying Russian energy to really tighten the screw.
“The president, has been, I would say, careful in ramping up pressure on Russia. But I think his patience is wearing out,” said Mr Stephens.
“One of the problems is a lot of European countries still depend on Russian gas,” he added.
“We’re mindful of that. We understand that, but until we can really cut off their ability to sell oil and gas around the world, they’re going to have money and Putin seems intent on continuing the war.”
The ambassador also struck a cautious but hopeful tone on future US and UK relations with China.
It comes after Mr Trump said his meeting this week with President Xi Jinping was a “12/10”, raising hopes the trade war between the superpowers could be simmering down.
China’s huge economy is too big to ignore – but it remains a major spy threat; the head of MI5 warned last month of an increase in “state threat activity” from Beijing (as well as Russia and Iran).
Mr Stephens praised the country’s economy and said it would be “terrific” if China could one day be considered a partner.
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But he warned “impatient” China is ruthlessly focused on itself only, and would like to see the US and the West weakened.
“There’s certainly things we want to be able to do with China,” added the ambassador.
“And I know the UK wants to do things with China. The United States does, too – and we should. But I think we always need to keep in the back of our mind that China does not have our interests at heart.”
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Ryanair’s boss has accused the chancellor of having no idea how to grow the UK economy as the airline reported hikes to fares had delivered a 42% rise in half-year profits.
Michael O’Leary told Sky’s Mornings with Ridge and Frost programme that Rachel Reeves “hasn’t the rashers how to deliver growth” while taking aim at a planned rise in air passenger duty slated for next April.
He called for the hike, revealed at her first budget last October, to be reversed in her speech to the Commons on 26 November – a budget business believes could further harm investment in jobs and growth.
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“Until she starts cutting these insane taxes and stop trying to tax wealth, the UK economy is doomed to continue to fail”, he said.
“But, in a bizarre way, that’s probably good for Ryanair’s business because as people get more price sensitive, more and more of them will fly Ryanair,” he concluded.
Mr O’Leary was speaking after the no frills carrier, which is Europe’s largest airline by passenger numbers, reported profit after tax in the six months to the end of September came in at €2.54bn (£2.2bn).
The better-than-expected sum followed a second quarter recovery for fares – the cost of a seat before add-ons – in the wake of a 7% decline across its last financial year.
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Ryanair said revenues per passenger were up 9% over the six months, helped by a 13% rise in fares and higher revenues from additional things like baggage fees and seat selection.
It reported record passenger numbers of 119 million for the half year – the summer season that tends to be the most profitable – and guided that fares, despite some discounting, were on track to end the financial year on a positive footing.
The airline raised its passenger traffic forecast due to earlier-than-expected deliveries of more efficient Boeing aircraft and strong first-half demand.
Ryanair said it expected to fly 207 million passengers in the year to the end of March, up from an earlier forecast of 206 million.
Mr O’Leary told investors: “While Q3 forward bookings are slightly ahead of (PY) prior year, particularly across the Oct. mid-term and Christmas peaks, we would caution that we face more challenging PY fare comps in H2 (second half) making fare growth more challenging”.
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