A new, "powerful" water regulator should replace Ofwat, the Drinking Water Inspectorate and the Environment Agency to "reset" a sector tarnished by scandals over sewage spills and financial mismanagement, a major review has recommended.
The government is expected to adopt the recommendation for England and Wales made in the review it commissioned from Sir Jon Cunliffe, a former deputy governor of the Bank of England, which was released on Monday.
Critics have said Ofwat has presided over a culture of underinvestment in infrastructure and financial mismanagement by water companies since its creation as the industry was privatised in 1989.
Thames Water, the most troubling case for the government and the UK's largest water company, is loaded with £20bn in debt and struggling to stave off financial collapse into a special administration, a form of temporary nationalisation.
Cunliffe's review suggested a new regulator, with powers to "direct", or take control of, failing water firms.
Speaking on BBC Radio 4's Today Programme, Cunliffe said Ofwat has "failed" because "for many years it didn't have the powers". He added: "To be blunt about it, it was directed by government to take a light touch to regulation."
The environment secretary, Steve Reed, also announced on Monday he would be taking up the recommendation in the report to create an ombudsman with legal powers to compensate consumers who are failed by the water industry, for example with taps running dry due to burst pipes and sewage leaks in gardens.
The report found that there are just 58 members of staff charged with protecting the safety of the country's drinking water because of civil service rules on headcount and pay.
This means, the commission said, the Drinking Water Inspectorate in its current form may not be able to meet the "challenges of the future". The report also said the country is not protected from pollutants in water such as PFAs, or "forever chemicals" and microplastic, and recommends legislative changes to address these and remove them from the water supply.
It also recommends that bills are not raised dramatically, as they were in April and will be until the end of the decade, with the new regulator prioritising consistent investment in infrastructure so companies do not have to "play catch up" and have to increase bills to urgently build or repair sewers and reservoirs.