Ofwat will be abolished and a new regulator will be set up that will take over responsibility of water functions that are currently across the regulation authority, the Environment Agency, Natural England and the Drinking Water Inspectorate.
Environment secretary Steve Reed said the reform is “the biggest overhaul of water regulation in a generation”.
The change, which is subject to consultation, was recommended in Sir Jon Cunliffe’s Independent Water Commission report, published yesterday.
The report said: “Much of what we care about is environmental outcomes under one set of regulators, yet how those are delivered and paid for is done via a different regulatory system. A single regulator would also ensure a ‘whole firm view’ of water company performance and compliance.”
Announcing the change in a speech at Kingfisher Wharf yesterday, environment secretary Steve Reed said: “Our water industry is broken. That is why this government will fix our broken regulatory system so the failures of the past never happen again.
“A single, powerful regulator responsible for the entire water sector will stand firmly on the side of customers, investors and the environment and prevent the abuses of the past.
“It will provide the clarity and direction required for a strong partnership between government, the sector and investors to attract billions of pounds of new investment.”
The government’s full response to the Water Commission’s recommendations will be outlined later this year through a white paper, which will then be consulted on. The proposed reforms will then form the basis of a new water reform bill.
Reed said the government will work with the existing regulators and unions to ensure a smooth transition to the single new regulator. Ofwat will remain in place during the transition and Reed said the government will ensure “they provide the right leadership to oversee the current price review and investment plan during that time”.
He also committed to work with colleagues in the Welsh Government to “ensure these reforms protect water customers across both England and Wales”.
Commenting on the Cunliffe Review recommendations, Prospect deputy general secretary Steve Thomas said: “It is essential that the specialist workforce of the new single regulator is given the requisite power and investment to do its job effectively, whilst ensuring that environmental regulation remains robust and is not diluted.
“Recommendations around strengthening the regulator’s ability to recruit and retain the right staff through greater pay flexibility would be a welcome first step in achieving this.
“The government must also ensure that any decisions regarding the abolition and merging of arm's-length bodies in this space is done through meaningful engagement with trade unions and the specialist workers in the sector and does not come at the expense of the vital work carried out by existing environmental regulators.”