Roadmap to rebuild trust in water sector unveiled in major new report
Source: gov.uk (2025-07-20)

Sir Jon Cunliffe publishes final recommendations

A new integrated regulator for water, stronger consumer advocacy and 9 new regional water authorities to deliver on local priorities are among the final recommendations (https://www.gov.uk/government/publications/independent-water-commission-review-of-the-water-sector) set out today (21 July) by the Independent Water Commission.

Chaired by Sir Jon Cunliffe, the Commission sets out 88 recommendations in its report to the UK and Welsh governments to transform the sector.

The report covers how the system is regulated, how to manage the competing demands on water, how water companies are governed and how critical water infrastructure is kept resilient both now and in the future.

It follows just under nine months of extensive engagement, analysis and research, including the 50,000+ responses submitted to the Commission’s Call for Evidence (https://www.gov.uk/government/calls-for-evidence/independent-commission-for-water-call-for-evidence).

Key recommendations include:

Single integrated water regulators. The report recommends a single water regulator in England and a single water regulator in Wales. In England this would replace Ofwat, the Drinking Water Inspectorate and water-environment related functions from the Environment Agency and Natural England. In Wales, Ofwat’s economic responsibilities would be integrated into Natural Resources Wales. Water is a complex sector responsible for the second-largest infrastructure programme in the UK. Water companies will spend £104 billion on investment and operation over the next 5 years. Climate change, population growth and economic development will put huge pressure on water systems over the coming decades. The current regulatory landscape is fragmented and overlapping and fully joined-up regulation is essential for the system to meet the demands of the future and ensure that private water companies act in the public as well as the private interest. A powerful, single regulator for water would simplify the system, reduce duplication, close regulatory gaps and ensure a much stronger “whole-firm” view of each company.* It would also improve investor confidence through a more stable regulatory regime. In making this recommendation, the Commission has looked closely at other regulatory models such as Ofcom.**

Eight new regional water system planning authorities in England and one national authority in Wales. As part of a radical overhaul of water system planning, the report recommends devolving current planning responsibilities and transferring resources from the regulators to 9 new regional water authorities. These would be responsible for developing water investment plans that reflect local priorities and voices. They would streamline existing planning processes and be empowered to direct funding and ensure accountability from all sectors that impact water. They would be independent and include representation from local councils, public health, environment, agriculture and consumers, among others.

Greater consumer protection. The Commission sets out proposals to improve affordability and customer service. That includes upgrading the consumer body CCW into an Ombudsman for Water to give stronger protection to customers and a clearer route to resolving complaints. It then proposes transfer responsibility for consumer advocacy to Citizens Advice. The Commission also recommends the introduction of a national social tariff to provide consistent support for low-income customers who need support to pay their bills. This will help address the widely different levels of support currently in place, with caps on bills varying by £100s in different parts of the country.

Stronger environmental regulation. The report recommends significant improvements to areas such as Operator Self-Monitoring through greater digitalisation, automation, third-party assurance and inspections. It proposes stronger regulation on abstraction, sludge, drinking water standards and water supply. After one of the driest springs on record, it recommends compulsory water metering, changes to wholesale tariffs for industrial users and greater water reuse and rainwater harvesting schemes. It also sets out where environmental legislation needs updating and why, including proposals for a new long-term and legally binding target for the water environment.

Tighter oversight of water company ownership and governance. The Commission recommends new powers for the regulator to block changes in water company ownership – for example, where investors are not seen to be prioritising the long-term interests of the company and its customers – as well as potential new ‘public benefit’ clauses in water company licences. It recommends that the regulator set “minimum capital” requirements so that companies are less reliant on debt and more financially resilient. On investment, the report sets out proposals to improve investor confidence, including government direction to the regulator to support stability and predictability for long-term investors.

Public health reforms: The report covers legislative reforms to better manage public health risks in water, recognising the many people who swim, surf and enjoy other water-based activities. These include a) new public health objectives in water quality legislation b) senior public health representation on regional water planning authorities and c) legislative changes to address emerging pollutants such as PFAS, micropollutants and microplastics.

Fundamental reset of economic regulation. More detail is set out on the Commission’s recommendation for a new ‘supervisory’ approach to economic regulation, supporting tailored decisions and earlier interventions in water company oversight. The report also makes recommendations on the Price Review process, including changes to ensure companies are investing in and maintaining assets and to help attract long-term, low-risk investment.

Clear strategic direction. A new long-term National Water Strategy should be published by both the UK and Welsh governments. This should have a minimum horizon of 25 years, with interim milestones on a 5 and 10 year basis. It should be cross-sectoral, with a clear framework for managing the many demands on water. A set of ministerial priorities specifically for the water industry should also be issued to regulators every five years, replacing the current Strategic Policy Statement (SPS). A clear long-term strategy will help drive the right outcomes for consumers, growth and the environment and support long-term investment planning.

Infrastructure & asset health reforms. The report sets out a marked step change in how water infrastructure is managed, monitored and delivered – essential for safeguarding the provision of water and wastewater management for future generations. That includes new requirements for companies to map and assess their assets and new resilience standards that are forward-looking and applied consistently across the industry.

Sir Jon Cunliffe said:

Restoring trust has been central to our work. Trust that bills are fair, that regulation is effective, that water companies will act in the public interest and that investors can get a fair return.

Our recommendations to achieve this are significant. They include the management of the whole water system, regulation of the water industry, the governance and financial resilience of water companies and a stronger voice for local communities and water customers.

In this report I have considered what is best for the long-term future of water. This is a complex sector with a highly integrated system, responsible for the second-largest infrastructure programme in the UK.

Resetting this sector and restoring pride in the future of our waterways matters to us all. In countless conversations in the last nine months I have been struck by the urgent need and passion for change. Doing this will require hard work, strong leadership and sustained commitment. But it can and must be done.

I am grateful to all to all those who have contributed generously and constructively to our work with their time, expertise and challenge.

The final report also shares recommendations on implementation, including which reforms can be delivered in the short-term and which require new primary legislation.

As set out in the Terms of Reference (https://www.gov.uk/government/publications/independent-commission-on-the-water-sector-regulatory-system-terms-of-reference/independent-commission-on-the-water-sector-regulatory-system-terms-of-reference), the Commission has operated independently of UK and Welsh Ministers.

Sir Jon Cunliffe has been supported by an expert Advisory Group, with leading voices from areas including the environment, public health, consumers, economics and investment.

Notes to editors
- The full report is available here: Independent Water Commission final report (https://www.gov.uk/government/publications/independent-water-commission-review-of-the-water-sector)
- Sir Jon Cunliffe was appointed on 22 October 2024 to lead the Independent Water Commission. His Terms of Reference (https://defra-my.sharepoint.com/personal/juliet_kirk_defra_gov_uk/Documents/Documents/Independent%20commission%20on%20the%20water%20sector%20regulatory%20system:%20terms%20of%20reference?x) were published on gov.uk.
- The Commission launched an eight-week Call for Evidence (https://consult.defra.gov.uk/independent-water-commission/independent-commission-on-the-water-sector-regulat/supporting_documents/Call%20For%20Evidence%20%20Independent%20Commission%20on%20the%20Water%20Sector%20Regulatory%20System.pdf) on 27 February 2025. The Commission’s interim report (https://www.gov.uk/government/news/independent-water-commission-publishes-interim-findings) was published on 3 June.
- *The Commission has looked in detail at the challenges within the existing regulatory framework. The existing model of multiple regulators makes it difficult for the regulatory system to come to a clear, overall view of a water company’s performance and the challenges it faces. Enforcement action in some areas has been described as duplicative. Elsewhere, there are gaps in the oversight of asset health and monitoring water infrastructure delivery. There is an inherent complexity in the current system whereby the EA, NRW and the DWI set the requirements that determine much of water company costs, while Ofwat subsequently determines the revenues companies can receive from water bills to cover those costs.
- **Ofcom was established through combining five existing regulators into one. Further detail is covered in Chapter 4 of the final report.
- ***Social tariff variability: Evidence returned via the Commission’s Call for Evidence set out the differing levels of support a low-earner would receive under 2024/25 rates depending on where they lived. For example, a single parent with one child, working part-time and receiving Universal Credit with an income under £19,000 per year would have an annual water bill capped at £91.12 in Portsmouth, compared to £364 in Bradford.