The appointments of the current and previous chairs of the water regulator Ofwat should be investigated, campaigners have said, as the Liberal Democrats called for the watchdog to be abolished.
Jonson Cox, a former chair of the regulator, had multimillion-pound links with the privatised water industry before taking up the role. The current chair, Iain Coucher, remains a senior adviser to a global private equity firm that has interests in the water industry in the US.
Cox and Coucher declared all their interests when they were appointed by the government. Campaigners say their respective appointments represent a failure of the system and have written to Thérèse Coffey, the environment secretary, calling for an independent investigation.
Ofwat is under increasing pressure because of the scale of debts England’s water companies have been allowed to build up – £60bn – while paying out more than £72bn in dividends since privatisation. Ultimately the environment secretary is responsible for the appointment of the chair of the regulator.
Ash Smith, an activist from the group Windrush Against Sewage Pollution, said in the letter to Coffey: “The failure of the regulators is now obvious, so the reasons why supposedly highly regulated water companies have done so well by exploiting captive bill-payers should, we think, be an important subject for the secretary of state ultimately responsible for the sewage scandal. ‘Regulatory capture’ or worse are obvious features that surely require investigation.
“I urge you to order an independent investigation, but this time to extend across the board of water industry regulation; to include the influence of conflicting interests and the revolving door of employment between the regulated and the regulator.”
Tim Farron, the environment spokesperson for the Lib Dems, supported calls for an inquiry into the regulator and the industry as a whole on Wednesday. The party is calling for Ofwat to be abolished and replaced with a more powerful new regulator.
Farron said: “An urgent inquiry into the entire water industry is desperately needed. There are serious questions about how water companies have been allowed to build significant debt, still pay out millions in dividends all whilst failing to fix leaks or stop sewage dumping and we need answers.”
Cox spent years working at the top of Anglian Water and Yorkshire Water and declared a pension from the latter’s owners, Kelda Group, when he was appointed as chair of Ofwat in 2012. When Cox left Anglian in 2010 he received a payout of £9.5m.
At the time of his Ofwat appointment he said he appreciated he might be seen as “a poacher turned gamekeeper”. He held the chair until 2022, by which time water company debts had reached £54bn.
Cox also had a small financial interest – under 1% – in a startup that specialises in high-frequency pressure monitoring and leak detection in water industry pipes networks. The company, Syrinix Ltd, was sold this year for £15m. A spokesperson for Cox said his investment in the startup was £10,000 and he did not participate in any of the further financing rounds after joining Ofwat. His return on the sale this year was around £5,000.
Coucher was appointed the chair of Ofwat in 2022 by George Eustice, the then environment secretary. Coucher remains a senior adviser to HIG Capital, a Florida-based global private equity firm that has bought into the water industry in the US. He has declared the interest.
In England, more than 70% of the privatised water industry is owned by foreign-based private equity firms, investment companies, banks and pension funds. They are part of a complicated web of ownership of water companies and in some cases have been accused of asset stripping.
At a pre-appointment hearing before the environment, food and rural affairs committee, Coucher was challenged about his lack of awareness about the environmental impact of the industry. “We were surprised, however, that he had not given greater consideration to the way in which environmental sustainability should be incorporated and rewarded in Ofwat’s regulatory role,” the MPs said, but they approved his appointment.
Under Ofwat rules, no board member of the regulator may at any time have any interest directly or indirectly in an equity or other financial interest in any water and sewerage undertaker in England and Wales, or gain any employment, consultancy, directorship or any other remunerative agreement from water and sewerage companies.
But the regulator also says: “In appropriate circumstances, which are likely to be exceptional, the board may decide that what would otherwise be a prohibited interest should not be classified as such for the purposes of these rules of procedure for a particular period or with respect to particular decisions or categories of decisions.”
A spokesperson for Cox said: “All Jonson Cox’s previous appointments and interests were fully disclosed, and accepted, before and throughout his appointment and entirely in accordance with all applicable rules.
“He was specifically appointed by government, with support of the parliamentary select committee, for his knowledge and track record. His success in holding companies to account on many performance standards, improving board leadership, constraining dividend policies and degearing over-indebted capital structures are well documented.
“All this won him no friends among companies and investors. Once new flow meters confirmed evidence of unacceptable environmental performance of many sewage works in 2021, he and his board investigated immediately and brought six major enforcement cases in 2022, which are ongoing.”
An Ofwat spokesperson said: “Mr Coucher is an advisor to HIG Capital’s European fund due to his background in rail infrastructure. HIG Capital has no interests in the UK water sector. Iain’s role at HIG Capital was fully disclosed at the time of his appointment by the secretary of state, and to the environment, food and rural affairs committee who conducted the pre-appointment hearing.”
