Today, the Independent Water Commission chaired by Sir John Cunliffe, published its interim report on reforming the water sector, claiming that “wide-ranging and fundamental change is needed to reset the water sector in England & Wales.”

The report suggests clearer direction from government, stronger regulation bringing decisions on water systems closer to local communities, and greater focus on responsible, long-term investors.”

However, Professor David Hall from the University of Greenwich, who first identified how much investors were making from consumer’s water bills and how little was going into maintaining the infrastructure and cleanliness of waterways says the interim report is not enough, and may even make things worse:

“The interim report adds little to the terms of reference. It keeps the system undemocratic and emphasises the need to keep investors happy. It talks about the need for fundamental change but doesn’t change much and not fundamentally. We still have aggressively profit-maximising companies and an unaccountable nationalised regulator captured by the companies through revolving jobs.

Cunliffe is forbidden to think about local democratisation, but some of the comments show the need for it: e.g. “…a more effective planning framework – in England, at the regional water system level; in Wales, at the national level – reflecting local priorities and respecting local voice”. These aspirations would be delivered very well by regional public water authorities based on elected local councils, which is the system used by over 90% of the world.

The interim report contains two alarming proposals which risk making things worse.

to make OFWAT into a ‘supervisory regulator’, like in the finance sector, with: “strategic oversight with a deep understanding of company-specific contexts. This means earlier, more active engagement by regulators to identify and address emerging risks”. This is still entirely in the context of private profit-maximisation. OFWAT has neither the professional capacity nor the democratic accountability to make effective judgments about what needs to be done in the public interest.
To re-assure investors of even more reliable guaranteed returns “to attract long-term investors, willing to make the substantial future investment we need, risks also need to be lower than they are presently. In large part, this means restoring confidence in the stability and predictability of the regulatory system.” It is extraordinary to imply that a regulated statutory monopoly of an essential service is somehow too ‘risky’, especially when OFWAT have just allowed the companies a 35% real price rise over the next 5 years, half of which is intended to increase the companies’ return on capital. The public cannot afford even more ‘investor confidence’.

The best news today is the decision by KKR to withdraw its proposal to ‘rescue’ Thames water by a £3billion loan at 10%, which save Thames’ customers from yet more financial expenses, which already suck out over 40% of our bills. The government can and should now take Thames into special administration, where it can be stripped of debt, and then transferred to a democratic regional water authority based on local councils.”

David Hall is a visiting Professor at the University of Greenwich, London, in the Public Services International Research Unit (PSIRU. He researches the economics, politics and law of public services globally, in Europe, and in the UK, and is an internationally recognised authority on the political economy of water and sanitation services.