Ordering water firms to cut bills is a mistake

Water companies have sweated the assets they were handed upon privatisation in the late 1980s. They have failed to invest properly, and have regarded fines for sewage spills as a business cost, to be balanced against the price of investment, rather than as a deterrent. They have, as Ofwat chief executive David Black told the Today programme this morning, blamed the weather rather than their own failures.

All this is true. Even so, is what the water industry really needs at the moment an order to return £158 million to customers through lower bills in 2025/26? That is what Ofwat has just ordered the water companies to do, as a punishment for failing to meet targets for reducing sewage spills. In fact, sewage spills more than doubled last year. Tempting though it may be to imagine that it is going to come out of executives’ pay packets, the reality is that it is going to lead to even less investment and even bigger problems in a few years’ time.