Chris Mason
Political editor

Image source, Get

The Liberal Democrats are claiming a win this morning – pointing out that they called for the scrapping of the regulator Ofwat in their general election manifesto last year.

Party sources say Labour and the Conservatives used to sneer at the Lib Dems for raising an issue they say they helped make mainstream.

The Lib Dem environment spokesperson Tim Farron says: “This is a big win for the Liberal Democrats who have led the campaign against the sewage scandal for years. Since 2022 we have called for Ofwat to be replaced with a tougher regulator, now finally the government appears to have listened.

“There's no doubt these major reforms would not be happening if it wasn't for our record general election win and the millions who voted for us last year.

“We will now be studying this report in detail and holding the government’s feet to the fire to ensure these promises are delivered on. The days of wild west water companies paying out huge bonuses while ruining rivers with filthy sewage must finally be brought to an end.”

Esme Stallard
Climate and science reporter

In his report and speaking to BBC News this morning, Sir Jon Cunliffe has repeatedly said that underinvestment for years in our water infrastructure now means that massive funding is required, which could put significant burden on households.

To ease this pressure, he makes two recommendations, including the compulsory introduction of smart metering.

This would work in a similar way to how energy meters currently work, where people would be charged for the water they use rather than paying a flat fee. More than 60% of households have a meter already. This normally gets read manually once a year, whereas smart meters track water use in real time.

Currently only 12% of households have smart meters. As well as reducing costs for users of less water, it could help in driving down demand across the country, Cunliffe says.

Increasing demand for water is putting pressure on water supplies and infrastructure. The report reads: "By 2055, it is anticipated there could be an additional 8 million people living in England, and public water supply could experience a shortfall of up to 5 billion litres per day."

Additionally, the report recommends the introduction of a national social tariff. Currently, water companies have their own voluntary tariffs but that means that the support people get and who is eligible can vary.

Will these proposals make any difference to water industry?published at 08:35 British Summer Time

08:35 BST

Simon Jack
Business editor

If these proposals are adopted in full it would be hard to see how things couldn't get better than where the sector is now - underinvested and widely derided.

We already know that water companies will invest over £100bn in upgrading systems over the next five years - and that bills will rise sharply to pay for it.

What the Environment Secretary Steve Reed wants - and Cunliffe suggests - is a way of making sure bills don't have to spike so dramatically in future to catch up for years of underinvestment - as we have just seen.

Ofwat is paying the price for that by being abolished.

Throughout the report, there are continual references to the media regulator, Ofcom - which is seen to have done a better job by maintaining a focus on continual investment in better infrastructure over time.

There's a lot to digest in this - compulsory metering, public health officials on water planning bodies, requirements for companies to keep minimum levels of capital.

If it all happens it will indeed be the biggest overhaul of the water sector since privatisation.

But it will take time to take effect. But at least the government will be able to point to the Cunliffe review and insist it has set the wheels of change in motion.

Image source, PA Media

Environment Secretary Steve Reed should think about resigning his position, environmental campaigner Feargal Sharkey tells BBC Radio 4's Today programme.

Sharkey says that after having 14 years to prepare for government, Reed should reflect on what he has achieved in the last 12 months, citing a report on Friday that serious pollution incidents had increased by 60%.

He also rounds on the government's decision to limit the scope of Sir Jon Cunliffe's review to exclude the possibility of renationalising the water industry, saying the heart of the problem was "corporate greed and the exploitation and abuse of bill payers and the environment".

Sharkey also rails against pay for executives of water companies, and the idea that high salaries were a function of operating in a privatised system. "There's nothing competitive about running a monopoly," he adds.

Esme Stallard
Climate and science reporter

Over the last couple of hours, I've picking through the 88 recommendations listed in the report. Here are some of other ones that stand out to me:

• An end to "operator self monitoring". Currently, water companies themselves are expected to report any sewage spills or pollution incidents. It's recommended that this role will be handed to the regulator in full - though this will require proper funding
• Sewage spills data needs reviewing. Data is collected in near real time as spills happen under the present system. The report says this uses a lot of resources and doesn't tell you how much sewage is spilt
• The government should be using its new Water Special Measures Act to impose more penalties on water companies more quickly, to "hold companies to account", it says
• The current "right to connect" for new households wanting to get a water supply should be reviewed. This seems surprising considering every person has a right to water, but Cunliffe says that new homes are being built without considering if there is enough supply of water and sewerage services. Water companies should be allowed more of a say in new developments - which could impact the government's housebuilding plans

In response to this morning's report, water minister Emma Hardy tells BBC Breakfast "it's clear that the water system is broken".

She says the report is "stage three" in a "revolution" of the water sector, following changes to the law which banned bonuses for water bosses and the introduction of criminal liability for failures.

Hardy welcomes the report, but refuses to confirm exactly how many of its 88 recommendations the government will adopt.

Instead, she says ministers plan to study them throughout the summer, before introducing a new water bill next year.

One of Cunliffe's key recommendations is to scrap the regulator, Ofwat. While Hardy calls this a "really important recommendation", she isn't drawn on whether it will be implemented before Environment Secretary Steve Reed makes a speech later.

Image source, PA Media

Surfers Against Sewage is unimpressed with the recommendations in Cunliffe's report - claiming they are "putting lipstick on a pig".

Chief executive Giles Bristow says today's report "utterly fails to prioritise public benefit over private profit".

He says: "Only one path forward remains: a full, systemic transformation that ends the ruthless pursuit of profit and puts the public good at the heart of our water services."

While the campaign group welcomes the report's call for "a national strategy", Bristow says: "We won’t be taken for fools — abolishing Ofwat and replacing it with a shinier regulator won’t stop sewage dumping or profiteering if the finance and ownership structures stay the same."

Image source, UK Parliament/PA

Next up on the BBC Breakfast this morning is water minister Emma Hardy.

You can watch live at the top of this page, while we bring you the key lines here.

We heard from chair of the Independent Water Commission a little earlier, and now Sir Jon Cunliffe is appearing on the Today programme on Radio 4.

He is asked by Justin Webb about nationalisation - even though he was asked by the government not to consider moving the water industry back into the public sector.

Our current system of regulated monopolies can work, he says, and there were initial improvements after privatisation.

He says he is old enough to remember what the system was like before privatisation when we were the "dirty man of Europe".

On pay, he says companies need to be turned around and they need to attract the best people - but what annoys the public is when "the pay is there, and the performance is not".

That's when the regulator has to step in, he says.

Sir Jon Cunliffe's report, which was released at 06:00 BST, has 88 recommendations on how to transform the water industry in England and Wales. We're still going through it, but here are some key points:

• It calls for single integrated water regulators in England and Wales - to simplify the system, and close gaps, with the current regulator Ofwat being replaced
• Devolving planning and resources, through eight new regional water system planning authorities in England and one national authority in Wales
• Greater consumer protection - including proposals to improve affordability and customer service, for instance through a water ombudsman
• Stronger environmental regulation, through changes including compulsory water metering
• Tighter oversight of water company ownership and governance - including a new "public benefit clause" in water company licences
• Public health reforms, to better manage public health risks in water
• Clear strategic direction - with a new long-term National Water Strategy published by both the UK and Welsh governments
• Infrastructure reforms - companies should map their assets and ensure water provision and waste management is safeguarded for future generations

We’ve more now from Water UK CEO David Henderson, who’s been grilled on water company bosses’ pay on BBC Breakfast.

For context: Environment Secretary Steve Reed yesterday urged Southern Water’s chief executive to turn down a pay rise worth hundred of thousands of pounds - while concern has long been raised about companies paying dividends to shareholders at the same time as getting into debt.

Pressed on why bosses are receiving bonuses while sewage is pumped into waterways, Henderson accepts that "water company performance in some parts of the country has not been where it should be".

"I can completely understand why people are frustrated," Henderson adds. "What people want is pay to reflect performance and they want performance to rise."

But, he puts this down to a lack of investment due to a regulatory system that is "far too complicated".

"We can only invest what we're allowed to by our regulator," he says.

"That is one of the core problems that this report exposes in very clear detail, and crucially gives us very clear details on how to address that problem."

We're hearing now from the boss of Water UK, the trade organisation that represents the various water companies across England and Wales.

David Henderson tells BBC Breakfast that the report represents a "fundamental change" in the water sector, which is "exactly what's needed".

He goes on to explain how a stronger regulatory system is required, with "too many regulators" currently making it difficult for the water system to deliver what the population needs.

Asked about people's water bills, Sir Jon - who wrote today's report - says there has been a "really huge rise in bills" over the past year, and says they will rise by another 30% in real terms over the next five years.

He says there are some "inescapable facts", including climate change, higher environmental standards, a growing population, and replacing ageing infrastructure.

He says "the problem comes" from not investing for a long period, to now needing "massive" investment, in order to catch up. That's what has driven the "huge" bill increases, he says.

He adds the regulator has a job to do to make sure the companies are using the money efficiently.

Sir Jon goes on to outline three other key recommendations, alongside the new regulator.

• For consumers, there will be a social tariff available for vulnerable users
• There will be an ombudsman for consumer redress
• He also says the nearly £50bn of investment that's planned in "future years" will be spent by regional planning bodies that will "target the investment to where it's needed in local water systems". This, he says, will give local people "more of a voice"

He says there are 88 recommendations, and he won't go through them all. But asked if Ofwat has failed, he replies: "Yes".

Sir Jon Cunliffe is setting out his key recommendations from his report on BBC Breakfast, saying it's an important moment for our water industry.

He says his main point is setting up a new regulator that brings together the fractured current regulators to avoid the "frictions, tensions" and inconsistencies that we have today.

He says that regulator would have new powers to protect the public's interests.

This could be the biggest set of reforms since privatisationpublished at 06:34 British Summer Time

06:34 BST

Simon Jack
Business editor

Sir Jon Cunliffe has proposed the biggest reform of the regulation and governance of the water sector in England and Wales since privatisation over thirty years ago.

He recommends establishing a single regulator in England to replace Ofwat, the Drinking Water Inspectorate, and the Environment Agency’s water responsibilities – with a similar body for Wales.

He suggests giving extra ombudsman powers to the existing Consumer Council for Water and the establishment of a new social tariff.

He also proposes eight new regional water planning authorities in England and one for all of Wales.

Excessive debt and inappropriate dividends that threaten some companies' resilience – such as Thames Water – would be addressed by minimum capital levels and powers to block ownership changes if not in the company's long-term interests.

It also suggests more government direction of the regulator to provide long term predictability for would-be investors.

Recreational use of water is recognised by proposing putting public health officials on water planning bodies.

The reforms are deep and wide, and Environment Secretary Steve Reed is expected to use them as the basis for a new white paper to be put before in the Autumn.

Image source, PA Media

We'll be hearing shortly from the report author, former Bank of England deputy governor Sir Jon Cunliffe, who led the Independent Water Commission.

He's going to be speaking on BBC Breakfast from 06:30 BST.

We'll bring you the key lines - follow along by hitting watch live.

Esme Stallard
Climate and science reporter

The final report from Sir Jon Cunliffe contains 88 recommendations for the government to transform the water industry – covering regulation, environmental monitoring, legislation and financial management of water companies.

The report stretches to 465 pages, so bear with us as we trawl through it and bring you the biggest changes Sir Jon recommends.

The report has just been published. It recommends that there be a single water regulator for England and Wales, replacing Ofwat – as well as the Drinking Water Inspectorate.

The report says of the new regulator: "In England this would replace Ofwat, the Drinking Water Inspectorate and water-environment related functions from the Environment Agency and Natural England."

You can read the report here, external.

Esme Stallard
Climate and science correspondent

The UK has an old Victorian plumbing system - something that, at the time, was revolutionary. It helped to stop the spread of disease, but now it is causing a few problems.

The way the system works is that both rainwater and sewage go into the same pipes. But with population growth, more extreme weather brought about by climate change, and ageing infrastructure, the system cannot cope with both.

Sometimes the system becomes overwhelmed and sewage has to leave via emergency points into our waterways - known as overflow points.

But investigations by the BBC have previously revealed that sometimes these overflows are being used even in dry weather or very low rainfall.

This spilling of sewage would be in breach of water companies permits - and illegal.