So Ofwat is to be abolished and replaced with a new super regulator following Sir Jon Cunliffe’s Independent Water Commission report into what has been called a failing and broken industry. That it is has been failing has been fairly obvious for a number of years; the wonder is that the industry and its regulators have got away with underinvestment and blatant disregard of the law by deliberately dumping untreated sewage into rivers and the sea for so long.
A new integrated regulator for water in England and Wales, stronger consumer advocacy and nine new regional water authorities to deliver on local priorities, are among the key recommendations. A step change in how water infrastructure is managed, monitored and delivered is promised.
But within hours of the report being released and news that Ofwat was being scrapped questions were being asked whether it was going to make much or even any difference. Ofwat will be unlamented. It was clearly toothless and more or less ignored by polluting water companies seemingly more focussed on financial engineering than on their statutory duties to supply water and then take it away and clean it.
In November Ofwat said it had “elevated concern” over the finances of Affinity Water for example because of debt levels equivalent to 75% of the value of its assets, compared to the 60% Ofwat target. The company had also failed to invest in line with a previous business plan. The shareholders in February agreed to inject £150m, easing Affinity’s immediate financial pressures. But the next we heard from Affinity in July was that they were doubling the chief executive’s salary from £709,000 to £1.6 million.
This was a month or so after senior managers at six water companies were banned from receiving bonuses on top of already high salaries because of sewage spills. Continuing to pay themselves apparently unwarranted increases in the face of all that smacks of a hubris that seems endemic among water sector senior management.
Cunliffe said the level of salaries and bonuses was not what he took issue with, but the absence of any relationship to performance. All of this matters a great deal to the construction industry – the pipeline of hoped for work represents the second biggest infrastructure programme in the UK. The construction industry has laboured under the boom and bust cycle created by the AMP system, and there is no sign of respite from that. The water sector is gearing up for its next five year infrastructure plan, AMP 8, and so far it looks like it might be more of the same old, same old.
The Cunliffe report criticised the metrics Ofwat uses to measure infrastructure resilience, such as sewer collapses, mains repairs and leaking pipes, as short-termist and backward-looking. Cunliffe has called for new national resilience standards for infrastructure to help guarantee the maintenance of underground pipes and other water and water waste assets, which the construction industry has welcomed.
There is nothing in the report however about retribution for water companies’ performance, and only a reset regulatory system to improve matters. Cunliffe said his 464 page report is of Russian novel length. Dosteovsky’s Notes from Underground could be something from beleaguered water construction contractors, who could tell us at length about the Crime, but who may be asking, where is the Punishment? CL
Nick Barrett
Editor