Nationalising water firms would cost up to £100 billion and “not resolve the problems” faced by customers, according to the Environment Secretary.

Steve Reed ruled out bringing the companies back into public ownership as he outlined an independent review into the industry following a public outcry over bills, bonuses and sewage pollution.

Mr Reed said the money to pursue nationalisation “doesn’t exist” and rivers, lakes and seas would be “filled with even more sewage and pollution” during the time it would take to unpick current models of ownership.

The UK and Welsh governments have announced what they said was the largest review of the sector since privatisation, with an independent commission chaired by the former deputy governor of the Bank of England, Sir Jon Cunliffe.

A chalk stream in Hertfordshire flows under tree branches
Public fury has swelled over the degraded state of the country’s rivers, lakes and coastal waters (Emily Beament/PA)

It will focus on the water sector and its regulation, and will have no limits in the scope of its potential recommendations, including wholesale reform of Ofwat and how it interacts with other watchdogs such as the Environment Agency.

Speaking in the House of Commons, Green Party co-leader Adrian Ramsay raised the “scandal” of sewage in seas and rivers before telling Mr Reed: “Since privatisation, £72 billion has been paid to shareholders in dividends while his own department highlights that it would cost £56 billion to carry out the necessary investment.

“So privatisation has failed as a model for getting the investment in place.

“And will the Secretary of State, therefore, confirm the commission will look at the ownership model for water that’s going to be effective in addressing this scandal, including considering the option of bringing water back into public hands?”

Independent Water Commission
Environment Secretary Steve Reed told the House of Commons that he had ruled out renationalising water in England (House of Commons/UK Parliament)

Mr Reed replied: “The reason I’ve ruled out nationalisation is because that would not resolve the problems that we face.

“We see at the Olympics in France the River Seine unable to be used for swimming because of pollution – that is a state-owned water system. We see the problems in Scotland – that is a state-owned water system as well.

“The problems are those of governance and regulation. If we were to look at nationalisation that would cost up towards £100 billion of public money, money that doesn’t exist, and the time it would take to unpick current models of ownership – during which time investment would be choked off – would see our rivers, lakes and seas filled with even more sewage and pollution rather than less.

“I’m more interested in the purity of our water than the purity of our ideology. I will do what works best as quickly as possible, the commission will give us guidance on how to change the system to make sure it works for everybody.”

Ministers say the Water Commission’s recommendations, which will be handed to them in the second quarter of next year, will form the basis of further legislation to attract long-term investment and clean up the country’s polluted waterways and coasts.

The move comes after years of underinvestment, a growing population and extreme weather caused by climate change have led to intense pressure on England’s ageing water system, causing widespread flooding, supply issues, sewage pollution and leakages.

Public fury has swelled over the degraded state of the country’s rivers, lakes and coastal waters and at a lack of investment in water infrastructure, rising bills, high dividends and debt and executive pay and bonuses at privatised water firms.

Campaigners who want to see the water sector renationalised criticised the review for continuing with privatisation.

Matthew Topham, lead campaigner at We Own It, said: “The review is deaf to the calls of the public, anti-sewage groups and the international community to wrestle with the root cause of the sewage crisis: privatisation.

“Without serious thought, this Labour Government will be remembered for its re-privatisation of England’s water system – repeating a failed experiment which has been studiously avoided the world over.”

But a spokesperson for industry body Water UK said the sector welcomed the commission.

“Our current system is not working and needs major reform. The regulatory system is overly complex and too slow to approve vital new infrastructure.

“New homes have been blocked and even a new cancer hospital has been held up due to a lack of water.

“We hope this Water Commission can take a fundamental look at the root causes and provide clear recommendations on the changes needed.”