Government reforms of the water sector will unlock the biggest private sector investment in its history, Environment Secretary Steve Reed has said.
The Cabinet minister addressed industry representatives, academics, investors and environmental groups about the newly-announced Water (Special Measures) Bill at the Thames Rowing Club in Putney, west London, on Thursday.
The legislation comes as Labour’s first major step towards delivering on its manifesto pledges to reset the broken water system.
Under the proposed laws, industry watchdog Ofwat and the Environment Agency will be handed new powers to take tougher action against water firms which damage the environment and fail customers, such as banning bonuses and creating jail terms of up to two years for executives who obstruct investigations.
Years of under-investment by the privately-run firms, combined with ageing water infrastructure, a growing population and more extreme weather caused by climate change, have seen the quality of England’s rivers, lakes and oceans plummet in recent years.
Some water utilities are also creaking under high levels of debt or face criticism over dividends to shareholders and executive bonuses while sewage spills pollute England’s waterways.
Mr Reed said the reforms ultimately aim to primarily clean up rivers, lakes and seas but also to shore up future drinking water supplies in England, which are forecast to be outstripped by demand by the mid-2030s.
Opening his speech, Mr Reed blamed the former Conservative government for failing to upgrade infrastructure as well as the inevitable increases in water bills that are to come.
“Firmer action should have been taken over the last 14 years to ensure money was spent on fixing the water and sewage system and not siphoned off for bonuses and dividend payments,” he said.
“I am angry that over a decade of Conservative failure means customers will now have to pay higher bills to fix the system. This did not need to happen.”
Mr Reed went on to call the new Bill a “down-payment” on the wider reforms that are needed after years of failure and environmental damage.
“It will unlock the biggest ever investment in our water sector and the second biggest private sector investment into any part of the economy for the entirety of this Parliament,” he said.
Outlining how the money will be spent, he said it will help to build nine new reservoirs, multiple large-scale water transfer schemes, nearly 5,000 miles (8,000km) of water main pipes and upgrades to 2,500 storm overflows.
However, tightened regulations and tougher penalties have already raised questions about how the sector will attract the levels of investment and talent needed to achieve this major reset.
Challenged by reporters, Mr Reed said the Government will launch a review and consultation on how the entire sector works, which will ultimately shape future legislation and establish the long-term framework for reforms, including pollution targets and plans for attracting private investment.
The Environment Secretary did not give a timetable for when the review will be carried out or published, saying details will be announced in autumn.
Pressed on when the public might see results on water pollution and if the Government has a target yet, he said: “What we’re doing now is working with the entire sector to develop a long-term plan that will have milestones in it to show how much sewage will be reduced by which point, ending at the point where we’ve eliminated pollution.”
During his speech, Mr Reed also ruled out any future nationalisation of water firms under the Labour Government.
He said: “Nationalisation, which some will advocate, would cost billions of pounds and take years to unpick the current ownership model, leaving sewage pollution in the meantime to get worse and halt the much-needed investment.
“I am more interested in a model that works.”
Ofwat is currently negotiating with water companies on the level of private investment they will make from April next year, and how much water bills will need to rise, with the final determination in December.
On the regulator’s initial proposals that firms should invest £88 million, Mr Reed said: “It may vary from that but it will be of that order.”
