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Ofwat plan to cut sewage fines ‘sends dangerous message to water firms’

Water regulator Ofwat has been ridiculed after reports suggested fines may be reduced for polluting water companies to help them avoid financial collapse.

Ofwat is currently drawing up plans for a special regulatory status for Thames Water and other struggling water companies under which firms could avoid fines for spilling sewage in exchange for boosting infrastructure, according to the Financial Times.

Campaigners have slammed the proposals arguing that lighter penalties “send a dangerous message that companies can get away with pollution”.

Several of England’s water companies are struggling with huge debt burdens, most notably Thames Water, whose parent company, Kemble, is saddled with £16bn in debts and recently defaulted on a £400m loan.

At the same time, firms are under pressure to increase investment in their infrastructure due to public outrage over the huge volumes of raw sewage that are being discharged into England’s rivers, seas and lakes.

A number of firms have requested that Ofwat should allow them to hike bills by significant amounts to meet these costs. Thames Water has asked to increase bills by 59 per cent to £749 per year, while Southern Water has requested to increase bills by 91 per cent to £915.

Ofwat was due to make an initial decision on these proposals on Wednesday 12 June but this has now been delayed until after the election.

While it is thought that Ofwat is on the verge of drawing back from any large increases to consumer bills, it appears the regulator may now be considering lowering fines for struggling firms as an alternative.

According to the Financial Times, struggling water firms could be put in a “recovery regime” by the regulator, which could see them avoid fines and be given easier targets for sewage spills, water leaks and outages.

The proposal could initially apply to Thames Water, as part of a move to avoid nationalisation as the firm struggles financially. However, other firms grappling with their finances, such as Southern Water, South East Water and Yorkshire Water, could be eligible.

Such a move could placate shareholders, who have argued that a tightening regulatory regime is making water companies uninvestable.

Questions remain over whether the regime will become reality.

Shadow Environment Secretary Steve Reed said the plans would not happen “with a Labour government”. He said: “Labour will put the water companies under tough special measures. We will block law breaking bosses’ bonuses until they clean up their filth.”

Environmentalists have criticised the proposals, arguing that it would absolve water companies of decades of under investment and pollution.

“The idea that Ofwat would slash the water company fines whilst they continue to systematically break the law by illegally polluting our rivers, lakes and seas is just beyond outrageous,” said Charles Watson, founder and chair of the campaign group River Action.

He said the fines are already “so pathetically small”, adding that fines levied against water companies last year equate to roughly one per cent of the amount paid to shareholders in dividends.

Nick Measham, chief executive of WildFish, said water companies have “persisted in breaking the law” and that Ofwat’s proposals would “let them off the hook again”.

“How out of touch do you need to be to slash fines for water companies that have devastated our rivers and seas, after such an immense public backlash?” added Kierra Box, campaigner at Friends of the Earth.

Ali Morse, water policy manager for The Wildlife Trust, also criticised the proposals and said water companies “must invest upfront to rapidly reduce sewage spills so penalties aren’t needed down the line”.

She said “a greater use of nature-based solutions”, such as creating wetlands to trap rainwater and avoid overwhelming sewers, can help firms “meet environmental requirements in a more cost-effective way”.

The timing of the election means it could be up to Labour to work with Ofwat to decide what to do over Thames Water and the wider water industry.

If the party wins the election, the future of Thames Water could be one of the party’s first major challenges in Government.

There is wide public support for nationalisation of the water firm, but Labour leader Sir Keir Starmer has backtracked on plans to take struggling water companies into public ownership.

Ofwat declined to comment.

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