The head of the water regulator for England and Wales has defended water companies against criticism over not building new reservoirs despite high levels of executive bonuses and shareholder dividends.
David Black, the chief executive of Ofwat, also said old pipes were not to blame for leaks and that most companies were meeting their leakage targets.
Water companies have come under criticism as England faces water shortages. Some homes have run out of water, rivers have turned dry and farmers are facing crop failures. Many are outraged at the companies for failing to invest in reservoirs, fix leaks and stop sewage pollution from their pipes.
The bosses of England’s water companies have been criticised for banking £58m in pay and benefits over the last five years. Since privatisation, shareholders have been paid £72bn in dividends. The cash has come from big debts, with companies having borrowed £56bn, and big bills, with prices having risen 40%.
However, Black said critics were not giving companies enough credit for actions being taken to reduce leaks and improve water supply, and suggested they did not understand the “complex” issue.
He told the BBC’s Today programme: “There isn’t sufficient account given to what’s happening in the sector; we appreciate it’s complex and difficult to understand.”
Ofwat has the power to fine companies 10% of their turnover if they do not meet targets. Despite high levels of leakage, many companies are meeting these targets, which has led campaigners to question whether they are strict enough. For instance, Thames Water has 11,000 leaks across its system but is not falling below the regulator’s standards.
Black said: “Thames Water are not in breach of their performance, by my understanding. There are risks of leaks across the networks. Some of the biggest problems we face on networks are in modern infrastructure, it’s simply not the case that this is down to old pipes.”
Many have also criticised water companies as no new major reservoir has been built since privatisation in the 1980s, but Black said they were not needed. He said: “The reason there were no reservoirs is that demand had actually fallen over that period.”
He also defended the large pay water company bosses and shareholders have been given, saying it made them more competitive in the global market.
Campaigners said they did not agree with Black’s assessment and were shocked that he suggested they did not understand the issue.
Stuart Singleton-White, head of campaigns at the Angling Trust, said: “It is painful to hear Ofwat, who are complicit in our broken water sector, acting as apologists for that system and water companies. Ofwat have prevented a lot of the investment needed and allowed companies to take huge profits and screw our rivers.”
Christine Colvin, advocacy and engagement director at the Rivers Trust, said: “This drought highlights that the targets and timelines agreed with the water sector are not enough to ensure we are climate resilient for the long haul. Why are we now talking expensive inter-basin transfers when we’re leaking a fifth of our water supply?”
Some MPs also believe that Ofwat needs to take firmer action against water companies. Philip Dunne, the Conservative MP and chair of the environmental audit committee, said the regulator needed to do more to restore public trust in water companies.
He told the Guardian: “The performance of water companies is under the spotlight now more than ever before. Sewage pollution incidents and leaks wasting 20% of our mains water supply every day is eroding public trust. It is clear that there is much to do to make our water sector fit for purpose, particularly as the effects of climate change are likely to make water scarcity worse in the coming decades.
“To lead to meaningful improvements, the boards of water companies must be encouraged to develop plans to manage water resources and treatment, and work with the regulators to ensure that these can be delivered.”
Ofwat declined to comment further.
