Environment secretary ‘furious’ about England and Wales water bills | Water industry

The environment secretary, Steve Reed, has said he is “furious” about an average 36% rise in water bills in England and Wales but was unable to rule out further above-inflation increases in future to fix the broken water sector.

Reed said he hoped that “root and branch” reform of the industry would lead to billions of pounds more in investment, which would mean companies would “never again” have to increase bills in the way they did last year.

However, asked by the BBC’s Laura Kuenssberg whether he would allow water companies to increase bills even further, as many have already askedsaid the decision would be up to regulators.

“I‘m furious about the bill rises that we saw last year,” he said. “They happened because of 14 years of failure under the previous government. They could have intervened and made sure that that investment to fix the broken sewage pipes was going in. They didn’t.

“The point is you can learn from the past to improve the future. If you see a crack in the wall of your home and you leave it for 10 years, it gets much more expensive to fix. That’s what happened with our water pipes. Bill payers were made to pay the price of failure.

“I’m furious about that. By changing the whole system, root and branch reform, I can make sure enough money is going in every year that we will never again see that kind of massive bill hike that customers had to pay last year.”

Ministers will this week announce a consultation into creating a new water regulator, with a government-commissioned review expected to confirm on Monday that Ofwat, the watchdog that polices how much water companies can charge for services, will be abolished.

“A key part of that will be you make the water companies upgrade the pipes so they don’t collapse to the extent that you need huge bill rise to put them back into a decent state,” Reed said.

“If we can get that right, we will get that right, you have a much [more] level model for how bills will go up, no more massive bill shocks, like we had at the end of last year.”

Critics have said Ofwat has presided over a culture of underinvestment in water infrastructure and financial mismanagement by water companies since its creation in 1989. Thames Water, the most troubling case for the government and the UK’s largest water company, is loaded with £20bn in debt and struggling to stave off financial collapse.

Earlier, Reed told Sky News’ Sunday Morning with Trevor Phillips programme that households expected “a small, steady increase” in water bills rather than massive hikes. “Bills need to be as low as possible,” he said.

There needed to be “appropriate bill rises” to secure “appropriate levels of investment”, he said, adding: “A small, steady increase in bills is what people expect. That’s what happens in most bills that I pay this year.”

Industry leaders have also long complained about a lack of coherence in water regulation, with different regulators and agencies doubling up on areas of investigation. This has made it hard to have timely decisions, allowing investigations to drag on rather than prevent or address environmental harm and pollution.

Reed said that it was “outrageous” that Southern Water’s chief executive, Lawrence Gosden, was given a pay rise that almost doubled his income, adding that he should have turned it down.

“Trust between the customers and the water companies is at the lowest point probably ever, and by paying their senior executives rises of that kind, what message are they sending to their customers?” he added. “I really would urge them to think about this very, very, very carefully.”

He said he would resign as environment secretary if the government failed to halve sewage pollution in rivers by 2030. “Politicians come and say we’re going to do things. Of course our job should be on the line if we don’t.”

Nigel Farage told the BBC the water industry was in a “hell of a mess” before adding that the government should not bail out investors if water companies go bust, even though Reform’s policy is to bring 50% of the sector under state control.

Ofwat estimated it would cost £99bn to nationalise the sector, but Farage said it would cost “a lot less” than £50bn if the right deal was struck. “It’s public-sector thinking, we need private-sector innovation,” he added, although the industry is run by the private sector currently.

Ed Davey, the Liberal Democrat leader, called for a public benefit corporation model to restructure the water industry, with a new regulator to replace Ofwat. He told the BBC that the private capital model brought in by the Conservatives had failed but that nationalisation also would not work.

Kevin Hollinrake, the shadow communities secretary, said he was not opposed to new regulation of the water industry but was concerned it “might just be shuffling the deckchairs on the Titanic”.