UK, Environment Secretary Steve Reed has announced immediate changes and a review of environmental law in response to the Independent Water Commission’s 465-page report (the “Cunliffe Report”) on the UK’s water industry. These changes are part of a package of measures in support of the Government’s pledge to ‘cut water companies’ sewage pollution in half by the end of this decade’ and could have wide-reaching impacts.

The Cunliffe Report makes 88 recommendations to restore public confidence in the water industry and consolidate the sector’s regulatory requirements. In this article our Environment and ESG team highlights how the proposed restructuring of environmental law may:

increase prosecution risk and investment uncertainty for water companies;

create potential conflicting priorities for regulators; and

impact a range of businesses producing trade effluent as the cost of treatment upgrades gets passed upstream.

Background

Established in October 2024, the Independent Water Commission, led by Sir Jon Cunliffe, reviewed the water industry in England and Wales amid public concern over rising household water bills and increasing sewage spills in UK rivers, lakes and seas. The Commission released its interim findings in June 2025 and went on to publish the complete Cunliffe Report on 21 July 2025.

The findings have been met with overall Government approval, which in response has pledged to abolish Ofwat (the UK water services’ economic regulator) and reduce water companies’ sewage pollution by 50 per cent. by the end of the decade. Environment Secretary, Steve Reed, has announced the immediate implementation of three of Cunliffe’s recommendations.1 These include the establishment of a new statutory water ombudsman, a mandatory transition from operator self-monitoring to “Open Monitoring”, and the introduction of a catchment-based model in water system planning to more efficiently address regional infrastructure issues. The Government will also publish a White Paper this Autumn, detailing its response to the Cunliffe Report in full, and launch a further consultation on Cunliffe’s findings. Thereafter, the Government will introduce a “new water reform bill” early in the lifetime of this Parliament, to address the industry’s reform in the long-term.2 Encompassed in this broad approach are several key changes to environmental law.

1. ‘Open Monitoring’

In a seismic shift in transparency, it would appear that the Government’s intention through the introduction of ‘Open Monitoring’ is to have monitoring data instantaneously available to both the regulator and the public. The laudable intention behind this action appears to be to rebuild public confidence. Confidence, of course, depends on results rather than immediacy of information, and perhaps such transparency could cut across other good intentions of the Cunliffe Report.

As the Government seeks private sector finance to deliver its £104 billion investment in infrastructure overhaul, creating an environment of efficient and consistent regulatory enforcement is critical. Yet there is a clear risk that ‘Open Monitoring’ will fuel the recent trend in private prosecutions and create greater defence costs for water companies and more uncertainty for investors. Private prosecutions can be lodged by any member of the public, including public interest groups, to enforce statutory offences in the absence of a public prosecution.

The Environment Agency currently has a sophisticated range of enforcement responses available to deploy in the event of a sewage pollution incident. Whilst some stakeholders are critical of the way the Environment Agency has exercised its discretion to use the range of enforcement responses available to it in response to sewage pollution events, opening the floodgates to non-professional enforcement must be a retrograde step and contrary to the overriding objective of incentivising the investment needed to address the root cause of wastewater pollution – failing infrastructure.

2. ‘Constrained discretion’

The Cunliffe Report recommends emboldening the regulator and empowering it to take risk-based decisions. These recommendations are a response to the finding that the complexity and rigidity of the current legislative framework has left the Environment Agency with little room for discretion and engendered an overly cautious approach to regulation.

Cunliffe finds the answer to this conundrum in the Corry Review, where, in a review of DEFRA’s regulatory landscape, Corry proposes ‘constrained discretion’ as a way to deliver culture change to the regulators and address the perception of overly cautious decision-making. This will be an area of the restructuring of environmental law to watch closely both for water companies and the new regulator. Important questions include, how:

risk-based decision making will be hard-wired into the Environmental Permitting (England and Wales) Regulations;

the administrative burden for the regulator of reporting on the exercise of its ‘constrained discretion’ will be managed;

the ‘constrained discretion’ will be supervised; and

pragmatic exercising of ‘constrained discretion’ will be squared with the ‘precautionary principle’?

On this last point, the Corry Review references the precautionary principle3 as one of the factors inhibiting bold regulator decision making, suggesting that the exercise of discretion, constrained by ministerial directions (in pursuit of Government policy objectives), can release this bottleneck. This topic needs careful examination. The precautionary principle has been deployed in multiple international treaties, leading some commentators to assert it is customary international law. To subvert the precautionary principle by way of ministerial directions risks subverting the rule of law. And it is the rule of law that delivers certainty, consistency and clarity that all stakeholders, including investors, need.

3. Tackling micro-pollutants

An important area of regulatory expansion recommended in the Cunliffe Report covers micro-pollutants. Innovative proposals are included in the Report to address the risks posed by the contamination of both sludge used for agricultural purposes and effluent discharged into English and Welsh waterways by micro-pollutants, such as forever chemicals (e.g. PFAS) and microplastics.

Wastewater Treatment Works are simply not currently equipped to deal with micro-pollutants, but the bio-accumulative nature of these substances is a present and ever-increasing human health risk. There are creative legal mechanisms emerging globally to address the risk of diffuse bioaccumulating pollutants, such as extended producer responsibility (EPR). EPR is a new wave of producer responsibility laws (which began with waste streams such as packaging waste in late the 1990s) that seek to pass on the costs of addressing waste streams to those who place the products on the market that ultimately result in the waste. In this way, those who place products that give rise to micro-pollutants would meet an obligation which would essentially fund the stage of wastewater treatment that is required to remove them from water discharges and sludge.

Cunliffe’s reference to EPR and the use of ‘constrained discretion’ with regards to the permitting regime necessarily reaches beyond the water sector and underscores why a broader range of stakeholders should take note of what Environment Secretary Steve Reed has called a ‘regulatory revolution’.

Imogen Laycock (Trainee, London) contributed to the development of this publication.

1 Statement to the House of Commons outlining the government response to the Independent Water Commission’s final report, Environment Secretary Steve Reed, Delivered on 21 July 2025,

2 Statement to the House of Commons outlining the government response to the Independent Water Commission’s final report, Environment Secretary Steve Reed, Delivered on 21 July 2025,

3 The precautionary principle is a philosophical approach to risk prevention which aims to protect the environment and human health by seeking to prevent harm even if there is insufficient scientific information as to the risks posed to the environment or human health by the activity or substance. The principle is incorporated into a number of international conventions including the Rio Conventions on Climate Change and on Biological Diversity and the 1992 Helsinki Convention on the Protection of the Baltic Sea.

White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.