The Water Commission has a soggy mess on its hands, and abolishing Ofwat may not help

An independent commission looking into the English and Welsh water sector would have been an excellent idea about 20 years ago. It is hard to pinpoint precisely when the industry went seriously off the rails but Ofwat's infamous price review of 2004 is one starting point.

- Nils Pratley

It is when the gains from higher investment in the decade after privatisation in 1989 started to evaporate and the story turned into one of financial engineering and grossly inadequate regulation.

That 2004 settlement was wildly generous to the companies and kickstarted the disastrous take-private buyout boom by private equity and global infrastructure funds. Dividend extraction and "whole business securitisations" followed, tolerated by an economic regulator that, absurdly, took the view at the time that worrying about sky-high debt levels and Cayman Islands financing vehicles was not its job.

Meanwhile, enforcement at the Environment Agency was stripped to the bone, with inevitable consequences. A few high-profile pollution cases - usually involving Thames Water and Southern Water - did reach the courts, but campaigners and citizen scientists were correct when they said the rot went deeper. In 2021, when new data provided shocking evidence of mass noncompliance with wastewater permits, the EA and Ofwat finally had to confront the reality of the scale of illegal spills. That saga is still playing out in the form of fines.