The government has unveiled plans that could allow water companies in England and Wales to avoid paying fines for environmental pollution. The proposals, part of a new white paper described by Environment Secretary Emma Reynolds as "once-in-a-generation reforms", aim to introduce a "turnaround regime" for financially struggling or poorly performing firms.
A 'desperate' move to protect companies?
Campaigners have reacted with anger, labelling the move to soften the approach to fines as "desperate". They argue it effectively lets companies "off the hook" for polluting rivers and coastlines with sewage.
The Guardian understands the white paper, due for publication on Tuesday, will grant the water regulator new powers to "manage" fines to prevent a company's collapse. This could involve deferring penalties or waiving certain payments altogether. A source at the Department for Environment, Food and Rural Affairs (Defra) stated the "aim is for every water company to eventually pay their fines", but the interim measures have raised significant concerns.
Richard Benwell, CEO of Wildlife and Countryside Link, was scathing in his criticism: "If a company is fined because it’s done something wrong, it should either make restitution or the polluter should pay." He added that the plan "sounds like a desperate play to be off the hook at the last minute".
Thames Water and the push for leniency
The debate is particularly acute for Thames Water, which has been teetering on the brink of financial collapse. Its creditors have previously asked for the company to be let off future fines. In May 2025, the utility was hit with a record fine of over £120 million for environmental breaches related to sewage spills, having failed to operate its treatment works and networks effectively.
The proposed turnaround regime is intended to force failing companies to fix problems with sewage pollution and water outages more swiftly. The government claims this will "give stability to investors". Industry sources reportedly welcome the possibility of such a regime, though acknowledge it would likely come with restrictions on payouts to executives and shareholders.
Broader reforms and a 'rearrangement of deckchairs'
Other measures in the white paper include the introduction of a new "MOT for water companies" to force disclosure of infrastructure health, dedicated supervisory teams for each firm, and "no notice" inspection powers for the regulator. A new chief engineer role within Ofwat will oversee hands-on infrastructure checks.
These reforms follow a wide-ranging report on the water sector by former Bank of England official Jon Cunliffe, who made 88 recommendations. Notably, his report suggested a turnaround regime that could allow fines to be deferred or waived if they hindered a company's ability to invest in vital improvements.
However, prominent campaigner Feargal Sharkey, the former Undertones singer, dismissed the plans. "This is just a rearrangement of the deckchairs," he said, highlighting recent major water outages in Kent and Sussex. He accused the government of being "terrified of dealing with privatisation" and sacrificing water quality "on the altar of shareholders and private equity".
The overhaul will be enshrined in a new water reform bill. It does not propose changes to the ownership structures of water companies, and nationalisation was explicitly ruled out during Cunliffe's review. England and Wales remain the only countries in the world with a fully privatised water system.
