Angela Eagle to make first government intervention in water price review

Letter calls for technology investment and early action on leaks and sewage

Environment secretary Angela Eagle has told water companies in England and Wales that she will intervene in the next price review run by the water regulator Ofwat, the first time a government has intervened in the five-year process. In a letter to regulators and water company chief executives, she set out the government’s priorities for the review, which is expected to conclude in 2029: better value for money for billpayers, new technology that reduces costs, and early action on leaks and sewage spills.

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

Eagle says the public’s expectations for the industry are clear. “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 to companies and regulators calls for investment in new technology to save money, early intervention on leaks and sewage, and better communication with more decision-making power handed to local communities and leaders. It stops short of demanding bill cuts.

The letter warns company executives that the review 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”.

Sources at the Department for Environment, Food and Rural Affairs said Eagle intended the letter to be the first in a series of changes to the water industry to be announced in the coming months, describing it as “one of the clearest symbols of public frustration with Britain’s infrastructure”. Sources close to Eagle said the intervention was also needed because companies had already begun making investment decisions, with the price-setting process not due to conclude until 2029.

Defra sources said Andy Burnham’s 10-year plan, which follows next week’s budget, would give the government more robust powers to lower bills and direct local investment. One Defra source said Eagle’s intervention was a down payment on bigger changes due in the 10-year plan. The source said Eagle would take “a much more bullish approach to telling water companies and regulators what is expected of them” and described the intervention as “the start of a journey to a very different water system and one that delivers for the public”.

The source said the government wanted regulators and companies to act now, adding that Eagle was using the levers available to her “to influence their investment decisions at an early stage and make sure they’ve got no excuses”. The source also said the government was examining ownership structures and that “there are other ways we can go further than what came before”.

Ofwat’s review works by analysing companies’ business plans and determining how much can be charged to customers to fund investment and running costs. The 2024 review authorised a £104bn modernisation programme, funded in large part through progressive annual rate increases that will see average water bills rise by 36% over the second half of the decade. The largest increase was allowed for Southern Water, whose customers will pay 53% more by 2030, at an average of £642 per year.

Over the summer, several major suppliers asked permission to charge billions more to cover mounting capital costs and debt obligations, drawing objections from campaigners and politicians including Burnham. The prime minister criticised the decision, warning that bill payers must no longer be treated as a “blank cheque” or a “bottomless source of funding for other people’s failures”, and said ordinary households were being forced to plug corporate balance-sheet deficits.

The intervention comes as the government continues to consider options for Thames Water. The Guardian reported earlier this week that Burnham had told officials to contemplate options that were not previously considered feasible, even if that meant spending taxpayer money and going to court. Burnham previously said he would nationalise Thames Water, which is running out of cash and recently asked its creditors for an additional £2.4bn, but has struggled to find a way to do so without spending billions of pounds, getting tied up in a lengthy court battle, or both.

Campaigners for public ownership have warned that the government’s approach will do little in practice to reduce bills or the environmental impact of sewage and leaks. Sophie Conquest, the lead campaigner at We Own It, said: “These proposals are yet more reshuffling of the deckchairs on the Titanic, and fall far short of Burnham’s promise to end 40 years of neoliberalism.”

Conquest said the government should intervene on behalf of households to stop bill rises, and that if water companies cannot function without taking more money from customers, the government should let them go bust. “From there, we can bring water affordably into public hands. Under public ownership, we can put people and the environment ahead of the interests of faraway shareholders and hedge funds,” she said.