tapRui Vieira/PA Wire/Press Association Images

Water regulation needs to move away from its focus on improving quality and concentrate instead on driving down price, a former chief regulator argues in a new report.

Ex-Ofwat chief Sir Ian Byatt called for a price cap to keep hikes in water bills at inflation or below.

Cut your bills


And he said reforms were needed to encourage more choice and more trading within the water market in England and Wales, to ensure that they do not face significant water shortages in the future.

Mechanisms such as water trading and abstraction-right trading, together with incentives to take a long-term view when taking investment decisions, can help alleviate water shortages, reducing the use of hosepipe bans and ensuring supplies reach parts of the country where they are most scarce, he said.

Sir Ian, who was director general of water services between 1989 and 2000, said it was right to make environmental improvements a priority when Ofwat was created in 1989, at a time when Britain was known as "the dirty man of Europe".

But his report, published by the Institute of Economic Affairs, added: "Environmental spending is now distorting investment... Meanwhile, increases in bills have created social problems for customers, particularly in the South-West."

Sir Ian said: "At a time when many families are struggling to get by, reducing the costs of basic necessities, like water, should be a priority. The increasing burden of regulatory policy on the water industry has contributed to rising prices and it is time for change.

"Water regulation needs to focus on driving down prices and ensuring we have enough supply. Sensible policies, such as encouraging more water trading between regions, would help to ensure Britain doesn't face hosepipe bans in the future."

More stories