Punishing firms won’t fix Britain’s water crisis

As much as I hate to admit it, there is a lot to like in the Government’s water white paper. But there’s a reason for that: the best ideas are lifted straight from the Conservative Party. Stripped of the hollow slogans and performative toughness about tackling sewage that have dominated the debate in recent years, this paper offers a credible critique of an overly cumbersome regulatory system and sketches out a more realistic path to reform.

Kitty Thompson | Head of Campaigns

For too long, simplistic solutions to the sewage problem – nationalisation, putting water company bosses in prison, ever-higher regulatory hurdles, etc – have been touted to appease baying campaigners and the public alike. They may satisfy the desire of politicians to look tough, but they will do very little to clean up our waterways or secure our water supply in the decades ahead. The real challenge is not a lack of punishment, but the difficulty water companies face in investing in, and actually delivering, the infrastructure improvements we desperately need.

Against that backdrop, the white paper feels like a quiet departure from the Government’s faux tough‑guy campaigning instincts. Rather than reaching for new sticks to beat water companies with, it acknowledges with refreshing honesty that the regulatory system itself is part of the problem.

The first target for reform is the much‑maligned price review process, which determines how much water bills can increase by and what this money will pay for. It is through this process, with Ofwat, the water sector regulator, wanting to keep water bills artificially low for decades, that the problem of a lack of investment has emerged.

This five‑yearly exercise has become both intensely short‑termist and increasingly convoluted. Far from enabling investment, it increasingly obstructs it. To deliver their more than £100 billion of investment commitments for the next five years, water companies collectively submitted around 53,000 pages of paperwork for the 2025 price review, at a cost of over £250 million.

The Government’s proposed reforms rightly put investment back at the heart of the process. They aim to streamline requirements, provide clearer strategic guidance and introduce an investment framework that enables the regulator and the water companies to think about the next five, ten and 25 years. 

Welcome though this is, it is hardly a radical idea. Written in black and white for all to read in the Conservative Party’s 2024 General Election manifesto is a commitment to reform the price review process. Even in its dying breath of government, the Conservative Party put forward a sensible solution to sewage rather than a desperate eleventh hour policy which panders to the masses. By contrast, Labour’s manifesto offered little beyond a familiar suite of sticks to beat the industry with.

A pattern begins to emerge. Labour have now committed to reforming the 2013 Specified Infrastructure Project Regulations. This will make financing big water infrastructure projects, like the Tideway super sewer, easier. The regulations are a Conservative success story in themselves, and the desire to make it easier to use them for more projects is testament to that. Naturally, it was Conservative peer Baroness Coffey who made the case for reforming them, via an amendment to the Planning and Infrastructure Act, last autumn. The Government has clearly realised that she was onto something.

The paper also takes aim at our bloated regulatory system and the overly cautious, risk‑averse culture it has encouraged. This has led regulators to prioritise easily measurable outputs over actual environmental outcomes. One consequence has been the blocking of innovative nature‑based solutions, which often lack the extensive evidence base of traditional concrete‑heavy approaches, even when they promise better results for the natural environment.

To address this, the Government proposes embedding the principle of ‘constrained discretion’ into water regulation. This shift, from rigid box‑ticking to outcome‑focused judgment, is overdue. It is also strikingly familiar. In Parliament, Conservative peers Lords Roborough and Gascoigne tabled an amendment to the Water (Special Measures) Act 2025 to tackle the problem of nature-based solutions being blocked by regulators. 

All of this – of course – is not to say that the white paper is perfect. There are legitimate concerns: for example, that the Government plans to water down environmental targets. The Government also has very little substantive to say on how it hopes to keep rainwater out of the drain, and the white paper does very little to address the problems caused by non-sewage pollutants from transport and agriculture. Still, there is more substance here than many expected.

Ultimately, the proof of the pudding will be in the eating or, in this case, a new water bill reaching Parliament. There is clearly scope for budding Conservative parliamentarians to fill the gaps this bill will likely have with their own amendments. Reassuringly, if this white paper has demonstrated anything, it is that today’s Tory amendment has a habit of becoming tomorrow’s government policy.

First published by CapX. Kitty Thompson is CEN's Head of Campaigns.