The water regulator is expected to be scrapped next week as a government review concludes it is not fit for purpose.
Ofwat is reportedly to be abolished on Monday under recommendations from the review led by former Bank of England deputy governor Sir Jon Cunliffe.
Environment secretary Steve Reed is expected to pledge a “root and branch” reform of the water industry, saying that “regulation has failed customers and the environment”.
He will promise that “hardworking British families will never again face huge shock hikes to their bills like we saw last year”, according to The Times.
Multiple reports suggest the review has concluded and that Ofwat should be abolished as ministers look to replace it with a new regulator for the beleaguered industry. The regulator employs about 300 people.
Sir Jon’s independent review has focused on the water sector and its regulation, with no limits on the scope of its potential recommendations.
Launching the review in October, Mr Reed left getting rid of Ofwat altogether on the table.
“I don’t rule that out. What I’ve asked Sir Jon to do is a root-and-branch review of the entire sector – that includes looking at regulation and the regulator,” he told Sky News at the time.
It followed years of underinvestment, during which a growing population and extreme weather caused by climate change have led to intense pressure on England’s ageing water system, causing widespread flooding, supply issues, sewage pollution and leakages.
Public fury has swelled over the degraded state of the country’s rivers, lakes and coastal waters, while a lack of investment in water infrastructure has highlighted rising bills, high dividends, debt, executive pay and bonuses at privatised water firms.
The Environment Agency (EA) this week said serious water pollution incidents rose by 60 per cent last year, with three companies responsible for the majority of them.
The latest data from across England showed that Thames Water, Southern Water and Yorkshire Water were behind 81 per cent of cases, but added that there had been “consistently poor performance” across all nine water companies.
Meanwhile, just two companies – Northumbrian Water and Wessex Water – had no serious incidents last year, meeting the EA’s expectations to see a trend to zero pollution incidents by 2025.
Thames Water accounted for 33 of 75 serious incidents recorded by the EA, 44 per cent of the total.
Overall, the watchdog said all pollution incidents increased by 29 per cent, with water companies recording 2,801, up from 2,174 in 2023.
The EA blamed the spike on persistent underinvestment in new infrastructure, poor asset maintenance, and reduced resilience due to the impacts of climate change.
Labour’s Clive Lewis said abolishing Ofwat “would not clean up rivers or lower bills”.
“Blaming Ofwat alone is like blaming the satnav for driving off a cliff when the road was built that way,” the MP for Norwich South said.
Mr Lewis called for water to be brought into public ownership, adding: “The real problem is a privatised, extractive model prioritising shareholder payouts over public good.”
When asked if there were plans to scrap Ofwat as the regulator, Downing Street said the government will wait for a final report on the water industry due next week.
A No 10 spokesman said: “We are waiting for Sir Jon Cunliffe’s final report next week – you can expect us to set out our response after that on what more we will do to turn the sector around.”
Sir Jon’s interim report warned of “deep-rooted, systemic” failures in the water sector and said Ofwat had largely lost the public’s trust.
It comes as Britain’s biggest water firm, Thames Water, faces the prospect of nationalisation, after private equity firm KKR pulled out of a planned £3bn bailout.
Thames Water is about £19bn in debt, with MPs having been warned that it has just weeks’ worth of cash in hand as it seeks to avoid going bust.
