REGULATORS have fuelled soaring water bills by not encouraging private companies to spend “what they need to deliver the performance expected,” a damning public spending watchdog report concluded today.

The National Audit Office (NAO) highlighted “inconsistent responsibilities” and gaps in oversight within the Department for Environment, Food and Rural Affairs (Defra) and the sector’s regulators.

The watchdog examined the effectiveness of sector regulators — Ofwat, the Environment Agency, and the Drinking Water Inspectorate — as well as Defra, which sets policies for the sector in England.

It found that complex and lengthy regulatory frameworks have contributed to “worsening investor perception of the sector” which will need to attract “investment and spend at a rate not seen before” to meet its “significant environmental and supply challenges.”

NAO head Gareth Davies said: “Given the unprecedented situation facing the sector, Defra and the regulators need to act urgently to address industry performance and resilience to ensure the sector can meet government targets and achieve value for money over the long term for bill payers.”

GMB national officer Gary Carter said: “The National Audit Office’s damning report on the water sector and lack of effective regulation will come as no surprise to workers in the water sector, who have been struggling to keep ageing and failing assets going for decades.

“They know all too well that water companies have failed to invest and the money that should have been invested has been paid out in huge dividends and big bonuses.

“Successive governments and regulators have failed to hold water companies to account and ensure that bill payers’ money is spent on stopping leaks and preventing sewage spills.

“Just giving water companies more money through record bill increases is not the answer — there needs to be fundamental reform and tougher regulation so investment is delivered.”

We Own It lead campaigner Matthew Topham said: “The privatised water sector has completely failed the public and the environment, while the government and industry regulators have sat on their hands and allowed it to happen.

“What has happened under successive governments is nothing short of a wholesale betrayal of the people and our environment.”

A Defra spokesperson said: “The government has taken urgent action to fix the water industry – but change will not happen overnight.”