Question to the Department for Environment, Food and Rural Affairs:

To ask the Secretary of State for Environment, Food and Rural Affairs, what steps her Department is taking to help improve the financial stability of the water industry.

• The sector as a whole is financially resilient. Water companies are responsible for ensuring that they remain financially resilient, however, over recent years, as investment requirements have risen, Ofwat has taken further steps to strengthen the financial resilience of companies. This includes increasing its financial monitoring, improving levels of reporting transparency and strengthening the ring-fence licence conditions, which ensure the regulated company maintains sufficient financial and management resources which enable it to carry out its functions in a sustainable manner.

• Government and Ofwat take the financial resilience of the water sector very seriously. Government gave new powers to Ofwat through the Environment Act and in March 2023, Ofwat set out new measures to increase financial resilience in the sector. This includes additional powers to stop water companies making dividend payments earlier if the company's financial resilience is at risk.

• Ofwat has also strengthened the existing dividend licence condition so that there is an explicit requirement for companies to measure performance by reference to delivery for customers and the environment. Companies will need to demonstrate this in their annual reporting on dividends and dividend decisions.

• In addition, Ofwat has also tightened up the measures around water company executives’ bonuses so that Ofwat will make shareholders pay for bonuses, not the customer, where there is poor performance.