Question to the Department for Environment, Food and Rural Affairs:

To ask the Secretary of State for Environment, Food and Rural Affairs, what recent assessment she has made of the effectiveness of Ofwat.

The Government has established a robust system of independent economic regulation for the purpose of ensuring the public receive excellent service and value for money from their water companies.

Ofwat, as the independent economic regulator, protects the interests of consumers by making sure water companies carry out their statutory functions and are financially resilient, as well as holding them to account on performance and the delivery of essential services for customers.

Where companies fail to meet their obligations, regulators have not hesitated to act. Ofwat’s annual performance assessment process, and the automatic penalties that apply to companies who underperform, represents an excellent example of strong economic and environmental regulation. In November 2022, Ofwat announced financial penalties of £132 million applying to 11 water companies, in response to underperformance in areas such as water supply interruptions, pollution incidents and internal sewer flooding. Money from Ofwat’s penalties will rightly be returned to customers through water bills in 2023-24.

Regulators are going further to improve water company performance. The Government supports Ofwat’s recent decision in December 2022 to strengthen its powers on executive pay awards by setting out that shareholders, and not customers, will fund pay awards where companies do not demonstrate their decisions on pay awards reflects overall performance. Ofwat also recently strengthened the existing dividend licence condition so that it can take enforcement action against water companies that do not make an explicit link between dividend payments and their performance for customers and the environment. This measure on dividends was made possible by new licence modification powers that this Government gave to Ofwat via the Environment Act 2021.

The Government will continue to work with water sector regulators to hold water companies to account on poor performance and drive improvements which benefit customers and the environment.