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

To ask His Majesty's Government what direction they have given, if any, to OFWAT to increase the penalties imposed on water companies for failing to rectify or prevent water leakages.

The Environment Secretary made it clear that water companies must improve their environmental performance and deliver more for customers.

Water companies have targets set by Ofwat that they need to meet (performance commitments), and reducing leakage is one of these. They face automatic financial penalties when these are missed.

Ofwat also has enforcement powers in regard to legal obligations companies have in legislation or their license. If a company significantly misses its leakage performance commitment this could indicate the company might be breaching a legal obligation, which would prompt Ofwat to investigate further.

Ofwat has already put in place clear financial consequences for companies that underperform on leakage. For example, in 2018 Thames Water was found to have breached its general duty under Section 37 of the Water Industry Act 1991 in regard to leakage. Enforcement action resulted in them paying rebates totalling £120 million back to customers, comprising underperformance penalties of £55 million and an additional £65 million to reflect failures of the company.

Ofwat has also set requirements for water companies to cut leaks by 16% and reduce mains bursts by 12% by 2025. In July, Ofwat reported that industry wide leakage has reduced by 11% since 2017-18. Water companies have committed to delivering a 50% reduction in leakage from 2017 to 2018 levels by 2050, and we expect Ofwat to challenge companies to deliver this and monitor progress.

In addition, water companies will need to contribute to delivery of Defra’s proposed Water Demand Target under the Environment Act 2021 to reduce the use of public water supply per person in England by 20% by 2037. This includes a 31.3% reduction in leakage by 2037, a pathway for companies to meet their 50% reduction in leakage commitment by 2050.