Letter to Sir Jon Cunliffe

Independent Commission on the Water Sector Regulators Commission

5th January 2025

Dear Sir Cunliffe

The Ilkley Clean River Group has been campaigning for the last 6 years to secure a water treatment system compliant with the law. We were the first river to secure Bathing Status for a river, a process we hoped would draw attention to the level of pollution and put pressure on Yorkshire Water and the regulators to clean up our river. From 2024 to date Yorkshire Water with the support of Ofwat and laterly the Environment Agency has been putting in a programme of improvements that will deliver the first site to secure the governments requirements of no more than 10 untreated sewage pollution incidents in a year.

As a grassroots campaign group we have found the only way we could secure a clean up was to lobby for changes at a national level for instance in how Ofwat funds improvements; to the bathing status legislation; to how the public can secure accountability from the system it pays for. We are founders of the Sewage Campaign Network, and support over 200 local campaign groups with news updates, strategy webinars, collaborative learning, resources for campaigning. We work with Surfers Against Sewage to support all Bathing Site applications.

With our years of deep experience in the concerns of the public we had intended to respond to the 78 question survey, but we find that the Commission consultation document does not meet our concerns, nor those of the many campaign groups we work with. We understand that you have talked to campaign groups, but none of the ones we work with have been part of your process to date.

We are therefore writing to set out the areas that are concerning to the public here in Ilkley and the campaign groups we work with as these are different from or not fully reflected in the 6 key concerns that you identify in your current report.

These are the areas we have found to be a barrier to securing a system that works, that should be part of your review:

  • Comply with the law

We need to enforce the laws that are already in place rather than tying everything up in complicated structures and commissions.

  1. Regulators
    1. The Environment Agency issues permits based on the current capacity of sewage treatment works not on the legal requirements for storm overflows to only operate under exceptional circumstances. We cannot find anything in your report that addresses the EA permitting outside of legal requirements. This means here in Ilkley Yorkshire Water has been compliant with EA requirements when it was discharging untreated sewage over 100 times a year. The OEP has cited this as a major concern. When we have challenged the EA about this, in discussions they revert to saying it would cost too much for WCs to comply if they changed permits, and WCs would challenge the permit changes in court.
    2. Water Company Boards had to certify to Ofwat that the PR settlement was enough for them to maintain our infrastructure. You state in your report that mains pipe replacement has decreased. At the EFRA committee over recent weeks water company CEOs state repeatedly that bills were not high enough including Yorkshire Water’s CEO Nicola Shaw. The Southern Water CEO went further to say that there had never been enough financial resources to meet its statutory requirements (circa 11.06 on the video recording and also in Hansard). We have written to Ofwat and are meeting with them in April to discuss why Ofwat cannot prosecute companies whose Boards certified since privatisation that they have enough financing to maintain our sewage system but are now saying they didn’t. Once companies had certified they had enough funding they were allowed to make profit, increase their gearing and pay dividends. Either the water companies had enough money (as they certified) or they didn’t (as the CEOs are now claiming) and their Board’s misled Ofwat. Clearly this must now be investigated in the light of the deterioration in our water infrastructure. Note WC’s only contested the PR determinations 10 times out of the 136 opportunities they had (Mike Keil CCW evidence to EFRA).
    3. Research by Prof. Peter Hammond (Windrush Against Sewage Pollution) has revealed systemic, illegal sewage dumping by water companies, triggering the largest-ever Environment Agency (EA) criminal investigation and OFWAT’s proposals for fines. There have been no prosecutions only fines so far. All water companies are currently failing to meet their Ofwat performance targets on water quality. Why are these companies allowed to break the law with no accountability? The regulators’ failure to enforce existing laws enables obscene shareholder payouts while neglecting the core statutory duty to invest in critical infrastructure. The EA investigation into illegal pollution in 2020 is now in its 3rd year and is likely to run for another year, before anyone is held to account. The costs of this must be extensive and we have an FOI request to find out how much it has cost to date. If the EA had done its job in the first place, if monitoring was undertaken in the right places in real time, then this investigation would be unnecessary as the evidence would have been known at the time.
  2. Who Pays
      1. Your headline concerns remain with investors rather than whether the water sector has delivered value for money for the customer.
        1. There is no protection for the public who are captured by a monopoly industry. The tone of the report is the inevitability for bill rises, and concerns for future inward investment. Our concerns are for the public money that has been wasted to date as well as the lack of security for the bill payer in terms of delivery of service.
        2. At EFRA last week Yorkshire Water set out the money needed for the next 5 years, which as stated by the DoF equated pretty much to the total bills paid by the customer, if the debt didn’t have to be repaid, i.e. if there wasn’t debt owed, then the customer is covering the whole of the YW financial requirements. As customers we see no benefit in WC debt, it is not long-term investment, it is not delivering step change improvements that couldn’t be delivered by customer bills, and it is solely benefiting the shareholders saddling the public with crippling debt. Looking at WC finances, if you add up what has been spent and what customers have paid overall this seems to balance. The fact is that instead of that, customer money has been diverted into debt payments, which is being recovered not in the long term but within the AMP cycle. We are left with crippling debt, massive returns to shareholders, with failed services. When we hear the Water industry is un-investable, it is because greed has become the primary motivator. The water industry has done this to itself. Frankly we do not care about returns to investors. They have had enough of our money and left our rivers, lakes and seas in a dreadful state.
        3. We want to see an audit of water company assets to see if WCs have, as they had repeatedly self-certified, maintained the assets since privatisation. We can only assume, as you have done, that the deterioration in the assets means that historically they have not been meeting their legal and contractual requirements.
      2. You cite quadrupling of investment, but you do not address the under delivery of the current investment cycle. If for instance Yorkshire Water cannot deliver ¼ of the ‘investment’ in the last 5 years, where is the capacity to do so in the next at 4 times the level? We are concerned that we will pay for delivery that doesn’t take place, Yorkshire Water will be issued with a fine for non delivery but will pocket our money.
      3. We are concerned that water companies spend remains unchecked and this features in your report. Ofwat assures us that projects will now be scrutinised for actual spend. In our view the costs cited for projects seem inflated, and any underspend is swept up by the company as efficiency gains. This seems to us to lay open the inevitability of business plans inflating anticipated costs, particularly without proper scrutiny on actual spend. We expect the ‘Reporters’ stablished at the outset of privatisation to be delivering this intelligence, but this is not noted in your report. In our view (a) Reporters should be providing intelligence on the state of the asset, and the spend against plan and (b) project costs must be scrutinised in terms of value for money in the business plan (benchmarked costs) and actual spend.
      4. You cite the inevitability of Bill Rises, but given the inflation of costs, the under delivery against plans, the sweating of assets to secure debt returns we are convinced that WCs are not delivering value for money. The best way of confirming this is to look at European comparisons where the recovery of funds from households is lower in most European Countries whilst their rivers, lakes and seas have much better water quality (EurEau 2021)
  3.  Planning
    1. There is no joined up thinking between housing development plans and water management and security (e.g. under garden or car park grey water tanks capturing water from new houses, developers paying to de-combine water and sewage if they can or do not provide on-site alternatives etc). All new housing is de-combined until it meets the main sewage network and then it is recombined. Here in Ilkley, we have pointed out multiple times that there are estates which are combined at the end of the estate, where it would be straightforward to continue that decombining, putting in pipes so household waste continues to the STW and the rainwater and clean water to the river. There are no plans to reduce the inflow to the sewage network from housing, road runoff, climate change and this must be addressed. Household bills should not be used to pay for lack of imagination and infrastructure to decombine.
  4. Regulatory Oversight
    1. Defra, EA and Ofwat are not joined up on the government’s commitment to Nature Based Solutions. Whilst Ofwat has supported the developments here in Ilkley, Defra and the EA have been slow to respond, preferring known concrete solutions, to NBS. Whilst NBS are used internationally and in the UK, the transfer of knowledge to a new development is not happening, and bizarrely here in Ilkley there is now a trial of a reed bed solution for secondary treatment. Given how long NBS have been discussed, advocated for and in use, we would expect Defra and the EA to have a deep understanding of their use and efficacy.

Overall, the Commission’s work to date adopts the assumption that there is a need for higher bills to service the current monopoly low-risk privatised model, and proposes tweaks to the current system. We do not accept that position. We are also disappointed that these assumptions are creating the boundary to a ‘once in a lifetime’ commission billed as being a radical inquiry into our water system as a whole, sometimes called the Independent Commission on Water, sometimes labelled with the full title of being about the regulatory system.

Our campaigning, as local people trying to protect our environment and secure value for money has lead us to come up against the perverse way our precious, life giving, vital resource is being managed. Then commission must look at how best to provide water, which is the basis for life, rather than a commodity to be traded. At the outset we suggest that your commission focuses on ways to enforce the law, and to protect the environment and the public.

Yours sincerely

Prof Becky Malby

Chair Ilkley Clean River Group

Supported by Climate Action Ilkley