The industry needs “root-and-branch reform” and recommend that a review being carried out by Sir Jon Cunliffe examine different forms of corporate ownership, which “could offer a better culture of responsible leadership.”
Regulators including Ofwat must “better vet or veto potential owners of water companies to prevent bad actors from running critical national infrastructure”, the report by the Environment, Food and Rural Affairs Select Committee (EFRA) said.
The sector’s poor performance has sparked widespread public anger prompting Ministers to set up the Independent Water Commission, a government-commissioned review, which is looking at the industry’s future.
Public trust has been seriously undermined by the multimillion-pound bonuses repeatedly paid to senior executives over many years, regardless of performance, the committee said.
More money from investors and customer bills needs to find its way to greater investment in infrastructure and delivering a better service to consumers and “less towards debt repayment or financial rewards for executives”.
“Despite some initial success after privatisation in 1989, root-and-branch reform of the water sector is now needed to improve the sector’s culture,” the committee said.
Their report said alternatives such as not-for-profit enterprises, community interest companies and co-operatives should “be on the table”. Sir Jon Cunliffe needed to keep an open mind about alternative ownership models forwater firms, the report said but ministers have told him to rule out full nationalisation on cost grounds.
They stop short of calling for the renationalisation of the water industry. They say taking troubled Thames Water into special administration, if it fails to solve its financial problems should only be a last resort given the high initial cost to the taxpayer.
MPs want water companies to be legally obliged to publish performance, environmental and financial data on a regular basis.
“Water companies’ complex and sometimes impenetrable financial structures, with their myriad subsidiaries, holding companies and parent organisations, seem to suggest that their purpose is less to provide a good service to their customers and more to allow them to juggle their finances and their increasingly unsustainable levels of debt.
A Defra spokesperson said new legislation has banned unfair bonuses for bosses at six water companies and launched 81 criminal investigations.
Water UK said companies are focused on investing to secure supplies, end sewage entering our rivers and seas and support economic growth.
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