Five key takeaways from the landmark water sector review

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Forward:

Foreword It has been a privilege to lead this Commission. All of us depend, every day, on the supply of safe drinking water and treatment of wastewater. It is fundamental to our economy, public health and food production. But it is more than a utility. Our rivers, lakes, coasts and estuaries are part of our national identity. Resetting this sector and restoring pride in the future of our waterways matters to us all.

In countless conversations I have been struck by the urgent need and passion for change. My team and I have met just shy of 250 organisations and individuals between us. I am grateful to all those who have contributed generously and constructively with their time, expertise and challenge. That includes the 50,000+ responses to our Call for Evidence. I have said it before, but it bears repeating.

There is no single, simple change, no matter how radical, that will reset the water sector and restore the trust that has been lost. This sector requires fundamental reform on all sides – how we manage the demands on water, how the system is regulated, how companies are governed and how we manage the critical infrastructure on which we all rely. In this report, my objective is to set the system for water in England and Wales on a course to lasting change across several key areas.

First, we must address the absence of a long-term, cross-sector strategy for water. It may sound academic, but it is profoundly important. A clear set of national priorities for water – covering the water industry, agriculture, land-use, energy, transport, housing development – is essential. Without it, we will continue to be dogged by inconsistency, short termism, unintended consequences and risk willing the ends without ever fully understanding the means required.

National priorities must be translated into locally owned plans, through empowered and accountable regional bodies. At present, that local engagement and ownership is missing, cutting off decisions on water from local development and leaving many communities feeling excluded from decisions that affect their water environment.

We propose a new system to put this right.

Second, the legal framework for water must be modernised. The way we use and interact with water has changed dramatically since many of the existing environmental laws were introduced.

We set out where legislation needs updating Independent Water Commission.We have also set out where we believe greater flexibility in the legislative framework would be helpful, provided strong safeguards are in place.

Third, we have made significant recommendations on how the water sector is regulated. Organisational change is never an easy option, but I believe that a new integrated regulator for water bringing together environmental, economic and drinking water functions would be in the best long-term interests of our water supply, our water environment, consumers and investors in the water industry.

Much of what we care about is environmental outcomes under one set of regulators, yet how those are delivered and paid for is done via a different regulatory system. A single regulator would also ensure a ‘whole firm view’ of water company performance and compliance.

We therefore recommend bringing together Ofwat, the Drinking Water Inspectorate, and the water environment functions of the Environment Agency and Natural England into a new organisation in England.

In Wales, we propose embedding new economic regulatory responsibilities within Natural Resources Wales. In addition, we have made specific proposals on economic, environmental, water supply, drinking water and consumer regulation.

There is a great deal to cover here. For the environment, we recommend greater transparency in areas such as operator self-monitoring and scrutiny of water company reporting, and stronger oversight of pollution from other sources such as agriculture and highways.

We also cover abstraction, drinking water standards and water supply. After one of the driest springs on record, we believe more compulsory water metering, changes to wholesale tariffs for industrial users, and greater water reuse and rainwater harvesting schemes are all needed.

For consumers, we have set out changes to improve affordability and customer service, including the introduction of a single social tariff. As part of this, I have recommended the Government consider upgrading the Consumer Council for Water into a fully-fledged ombudsman for customers and transferring responsibility for consumer advocacy to Citizens Advice.

For economic regulation, we have set out detail of a new, fundamental rebalancing with the introduction of a company-specific supervisory function to sit alongside and to inform the econometric, industry-wide benchmarking approach that currently dominates Ofwat’s Price Review and incentive-setting framework. We are also proposing changes to the Price Review process that include new mechanisms to make sure sufficient funding is dedicated to asset maintenance, to make the appeals process shorter and simpler and to restore investor confidence that investing in the sector is a ‘fair bet’. We look at water company structures, ownership and governance.

I understand the concerns raised by many about profit in the provision of water and wastewater. Within our Terms of Reference, we have looked in depth at ways to ensure water Independent Water Commission Independent Water Commission companies are aligned with the public interest. A

longside a stronger regulatory approach, we have set out changes to governance including a new regime for senior accountability and changes to company licence conditions. We also propose giving the regulator the power to block material changes in control of water companies – for example, where investors are not seen to be prioritising the long-term interests of the company and its customers.

And finally, we cover infrastructure – the underground pipes and other assets that underpin our water and wastewater services. We need far greater clarity on the health of these crucial assets and the resilience of the system as the infrastructure ages and the pressures upon it increase.

Given the importance of this vital national infrastructure, we have proposed new national resilience standards to drive the action and funding necessary to ensure these assets are fit for the future. As I bring the Commission to a close, I would like to thank the Secretary of State and Deputy First Minister for Wales for appointing me to lead such important work. I would like to thank my excellent Advisory Group, whose insights have shaped and sharpened our thinking.

And finally, I must thank the incredibly hard-working and indefatigable Commission Secretariat team without whom this report would not have been possible. Throughout my career, I have encountered many complex and important public policy issues but securing the future for water has, perhaps, been the most important of them all. While it will not happen overnight, I am convinced that if the major changes recommended in this report are adopted and pursued with sustained commitment, we can restore trust and have a future for water that is desired on all sides. Sir Jon Cunliffe, July 2025

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Taxonomy

• Water Supply
• Water Supply Commission
• Drinking Water
• Water Governance
• Water Supply Regulation
• Water and Wastewater