Water firms focused on returns at expense of environment, say peers

Water companies have been too focused on maximising financial returns at the expense of the environment, a House of Lords committee has found.

The investigation by peers into the regulation of the privatised water industry found Ofwat, the regulator, had chosen to keep bills low for customers at the expense of investment in the industry, which is now sorely lacking.

The report, by the industry and regulators committee, said that since privatisation in 1989 pressures on the sewage network had increased substantially due to a combination of population growth, property development and the climate crisis.

“Levels of investment have not risen to match these demands,” the report said. “The result is a network unable to cope, and which relies on releasing polluted water into the environment.

“Nor has investment kept pace with the demands of future water supply needs, leaving us lacking appropriate plans and infrastructure to deal with future demand, and the loss of billions of litres of water to leakage every day.”

The report said the regulators – Ofwat and the Environment Agency – had only begun penalising and prosecuting water companies for causing environmental damage in recent years, after monitoring of storm overflows and wastewater treatment sites was rolled out.

It said directors of water companies who were responsible for serious pollution incidents should be barred from continuing to work in the water sector, and for their bonuses to be removed.

“Executives and board members should face greater individual accountability and sanctions for egregious environmental crimes, including being barred from working in the sector again,” the report said.

Peers said the government’s storm water overflow plan to reduce the scale of raw sewage discharge into waterways “lacked bite”, and called for the government to consider banning the sale of wet wipes that are not rapidly biodegradable.

The report also called for the regulators to go further in holding water companies to account for environmental pollution through penalties and prosecution. Last week the new chair of the Environment Agency Alan Lovell, said fines of £250m for water companies who pollute were too high for the agency to issue. He said fines in the region of £10-20m would be more appropriate. But he said there should be no set limit on fines imposed through the courts.

The House of Lords report called for the planning process for reservoirs to be accelerated as a matter of priority, and for compulsory water metering in all households where possible.

Lord Hollick, the chair of the committee, said evidence to the inquiry had come from local communities and activist groups.

“There is an overall feeling of dismay, anguish and anger from respondents about the state of our waterways and the apparent failure to get to grips with the problem,” he said.

“We are calling on regulators and the government to consider our report’s findings and recommendations and act fast before we are all left up sewage creek.”

Nick Measham, the chief executive at WildFish, said: “The report … supports our conclusions that the government must do more to reduce pollution and secure future water supply.

“The report sets out massive failures by the government, environmental regulators and water companies to provide sufficient water to drink and treat sewage.”

He said the conclusions of the report should be used to enforce existing legislation to stop raw sewage discharge, other than in exceptional circumstances, and to bring forward water supply investment.