UK government to make unprecedented intervention in setting of water bills

Exclusive: Angela Eagle tells utility bosses next price review ‘must focus on value for money for customers’

Ministers will make an unprecedented intervention in water bills and how companies prioritise investment, directing bosses to bring down costs and stop leaks and sewage overflows.

Angela Eagle, the environment secretary, has told suppliers in England and Wales she plans to intervene in the next price review – conducted by the water regulator, Ofwat.

Sources at the Department for Environment, Food and Rural Affairs (Defra) said Andy Burnham’s 10-year plan, which will follow next week’s budget, would hand the government more robust powers to lower bills and direct local investment. But sources close to Eagle said there also needed to be immediate action as companies began to make decisions before the next price-setting process, expected to conclude in 2029.

There has never been government intervention in the five-year review process. It is run by Ofwat, which analyses companies’ business plans and determines how much can be charged to customers in their bills to fund investment and running costs.

Eagle has written to regulators and water company chief executives, saying that the process must meet specific government priorities, including offering bill payers much better value for money – though stopping short of demanding bill cuts.

The letter to companies and regulators says they must be focused on investment in new technology to save money, and early intervention on leaks and sewage. It also called for far better communication and decision-making power handed to local communities and leaders.

The first priority must be affordable bills, the letter says, adding: “Affordability means a laser focus on value for money for customers.”

The letter says the public is clear about what the objectives for the industry should be. “They want clean rivers. They want reliable water services. They want to know that their money is being spent wisely, and that bills are kept affordable. And they want confidence that the system is working in their interests.”

The letter warns company bosses that it will “not be a business-as-usual price review … it is the beginning of a long-term transition to a different model for the water sector”.

Defra sources said Eagle intended it to be the first in a series of changes that will be announced in the coming months on the water industry, calling it “one of the clearest symbols of public frustration with Britain’s infrastructure”.

A Defra source said the intervention by Eagle was a down payment on bigger changes that would come in the 10-year plan. The source said: “Angela will take a much more bullish approach to telling water companies and regulators what is expected from them. This is the start of a journey to a very different water system and one that delivers for the public.

“There are also things we want regulators and companies to be doing now and so Angela is using the levers she’s got to influence their investment decisions at an early stage and make sure they’ve got no excuses. As well as looking at ownership structures, there are other ways we can go further than what came before.”