Murk in Every Sense: Sewage, Debt and Reform in England and Wales’ Privatised Water

January 2026. Ofwat set to be abolished in what could be the most radical overhaul of the water sector since privatisation. The operations of England and Wales’ privatised water and sewage systems are murky in more ways than one. Polluted rivers and untreated sewage, opaque finances, blurred accountability, a regulatory system that struggles to see clearly beneath the surface.

‘Murk in every sense’

Does the government’s “New Vision for Water” genuinely cut through the fog, or stir the sediment? Is this a genuine break from decades of financial extraction and systemic obscurity, or is the murkiness of the system baked in by design? The Department for Environment, Food & Rural Affairs’ white paper, presented to Parliament, lays out the plan.

Ambitious, controversial and far from fully tested.

The water industry review was led by Jon Cunliffe, former deputy governor of the Bank of

England © Anna Gordon/PA Wire

Cunliffe’s review draws an evident parallel to the Great Stink of 1858, a moment when crisis compelled action and public disgust catapulted into reform. Joseph Bazalgette built a sewer system not for London as it was, but for London as it might become, planning for a city to grow from two million to four. Even by modern standards, this was "extremely farsighted for the time".

Joseph Bazalgette (top right) at the northern outfall sewer being built below London’s

Abbey Mills pumping station. Photograph: Otto Herschan/Getty

Today, however, London stands at nearly ten million people. Infrastructure previously designed to stay ahead of demand now struggles to keep pace with it. This is the consequence of sustained underinvestment and a failure to plan ahead. The National Audit Office (NAO), verdict is stark: environmental regulation in England has been reactive, fragmented and outdated. Constrained by poor data and legacy systems. Conditions that perhaps make preventative regulation more aspiration than reality. According to Calafati et al. (2025), the public understands the failings of England and Wales’ privatised water system through three overlapping stories: financial extraction, service failure and environmental damage. These threads tangle together, producing water regulation that is murky in every sense.

1. The Financial Extraction Story

Debt-laden companies. Sky-high dividends. And yet, operations falter. Thames Water, for example, was allowed nearly £170 million in dividend payments despite widespread failures.

This triggered Ofwat’s first-ever enforcement action linking dividends to environmental performance. And in May 2025, Ofwat handed down its largest fine ever: nearly £123 million to Thames Water.

As the figure above shows, investors "took out more money in dividends than the company made in profit and made up the shortfall by borrowing heavily while letting debt levels soar".

2. The Service Failure Story

The public sees this failure firsthand. Sewage spills. Overflowing treatment works. The NAO reports that Defra’s regulation has often been reactive, responding to high-profile crises rather than planning strategically. Informational murk adds another layer. Since 2020, Thames Water

discharged at least 72 billion litres of untreated sewage into the Thames, crucially, only revealed through a Freedom of Information request. In 2021 alone, the worst year on record, 32 billion litres of sewage flowed into the river. Importantly, companies report duration, not volume, arguably a legal blind spot that keeps much damage invisible. Finally, Infrastructure is overstretched: 157 wastewater treatment works, 66% of the total, failed to meet permit conditions due to capacity or operational issues.

3. The Environmental Challenge Story

The rivers tell the same story. Pollution persists, agricultural runoff continues and environmental groups like Rivers Trust and River Action have documented the impacts. These challenges are inseparable from financial extraction and service failure. However, digital reform and investment pledges are on the horizon, with £300 million earmarked for improvements between 2026–27

and 2028–29. Arguably, this reform could succeed. The scale of reform of pressure shows that this is not tinkering at the margins. In total, three recent reviews have generated 149 recommendations for reform. Demonstrating the depth of concern laid bare.

But success is fragile. Conditional. Only if a long-term, strategic approach manifests. Precisely the challenge the white paper now confronts.