Water regulator Ofwat to be abolished amid radical overhaul of 'broken' system

The changes, which will expand the role of the Consumer Council for Water (CCW), will bring the sector into line with other utilities by creating a legally binding consumer watchdog.

It will also provide a single point of contact for consumers with complaints, instead of leaving them uncertain about where to go.

The Department for the Environment, Food and Rural Affairs said the new watchdog would help "re-establish partnership" between water companies and consumers.

The much-anticipated final report from the Independent Water Commission, led by ex-Bank of England deputy governor Sir Jon Cunliffe, outlined 88 recommendations to the British and Welsh governments to turn around the ailing industry.

The review was tasked by the governments to carry out the largest probe into the sector since privatisation in the face of widespread public anger over pollution, bills and bosses' bonuses.

The report, published on Monday morning, recommended abolishing Ofwat, which oversees how much water companies in England and Wales can charge for services, as well as the Drinking Water Inspectorate (DWI), which ensures that public water supplies are safe.

It also advised removing the regulatory roles of the Environment Agency and Natural England, which monitor the sector’s impact on nature, such as companies illegally dumping sewage into waterways.

The change falls under the Government's plans for a "root and branch" reform of the water industry, to be unveiled alongside Cunliffe's reports.

Ofwat has seen vicious criticism for failing to stop sewage spills - then allowing companies to increase bills by nearly £10 a month on average to finance environmental improvements.

Environment Secretary Steve Reed said the water industry is "broken" and has been allowed to fail under a "regulatory system that let them get away with it".

Speaking in south-west London, he said: "Our rivers, lakes and seas are polluted with record levels of sewage."

Reed blamed soaring water bills for straining household finances and warned that poor infrastructure is holding back economic growth.

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Gosden took home £691,000 through a long-term incentive scheme alongside his £687,000 base salary.

Probed on whether Gosden should turn down the increase, Reed said: "I think it would be right if he did."

"Trust between the customers and the water companies is at the lowest point probably ever," he told the BBC.

Southern Water maintains the payment is standard industry practice and is funded by shareholders rather than customer bills.

Cunliffe's review into what he termed Britain's "broken" water sector is expected to include a proposal to scrap Ofwat entirely.

But Shadow Enviornment Secretary Victoria Atkins said: "We all want the water system to improve, and honesty about the scale of the challenge is essential.

"Steve Reed must explain that bill-payers are paying for the £104billion investment plan.

"Ministers must also explain how replacing one quango with another is going to clean up our rivers and lakes. Public confidence in the water system will only be rebuilt through transparency, resilience, and delivery."

Campaigner Feargal Sharkey also voiced his scepticism about how far the reforms will go.

"We were promised that the report will bring us champagne - but it will just be a saucer of milk," he said.