Households across England and Wales are facing a further increase in their water bills, driven by a sharp rise in the operating costs of the very regulator slated for abolition. The budget for Ofwat has surged by nearly a third, adding financial pressure on consumers already contending with high charges for infrastructure and environmental clean-ups.
Soaring Costs for a Doomed Regulator
Ofwat's budget for the 2024-25 period has leapt to £72 million, a significant increase of 28% from the previous year's £56.1 million. This hike is particularly controversial given the government's confirmed plans to scrap the body. The figures reveal a staggering trend: the regulator's budget has more than doubled since 2020–21, when it was just £32.1 million.
These costs are ultimately passed on to customers, meaning the budget increase will directly translate into higher water bills. This comes at a time when families are bracing for increased charges to fund the repair of crumbling water pipes and to address severe pollution in rivers, lakes, and coastal waters.
Transition to a New Regulatory Era
The decision to abolish Ofwat was announced earlier this year by then Environment Secretary Steve Reed, who labelled the water industry as "failing" and the regulatory system as "broken." He told MPs that water companies had "been allowed to profit at the expense of the British people" instead of investing in vital infrastructure.
The government's plan involves creating a new, single water regulator with a strengthened mandate to stand up for customers, investors, and the environment. This new body will replace Ofwat, the Drinking Water Inspectorate (DWI), and end the water-related regulatory roles of the Environment Agency and Natural England.
However, the transition is expected to take two years. An Ofwat spokesman stated that until the new regulators are established, they will "keep working hard to drive water companies to improve performance." This ongoing operation, officials argue, explains the need for continued funding.
Internal Expansion Fuels Budget Blowout
Critics are questioning where the extra money is going. A source close to the industry expressed bafflement, stating, "It's a mystery why Ofwat's budget has been doubled. I'm sure the price of removal men has gone up but this is a bit ridiculous." They quipped that Ofwat should be "hiring skips not bureaucrats."
Reports indicate the regulator has been expanding its workforce, advertising for numerous new roles including technical water experts, policy leads, economists, and marketing positions. It has also enlisted a management consultancy to aid in setting up the new regulator. Furthermore, it was recently revealed that Ofwat increased its internal bonus budget by 119%, attributed partly to a 25% rise in staff headcount.
This internal growth during its final years has angered consumer groups and politicians alike, who argue that households should not have to fund an inflated bureaucracy that is on its way out. The situation underscores the complex and costly challenge of reforming a sector under intense public and political scrutiny.
