AS the Coalition Government continues with its “bonfire of the quangos” the next body to be subjected to minute performance inspection is Ofwat, the water regulator which, in the past, has been accused of being too close to the major public utilities.

Although it has not been scrapped like several other “hands length” bodies – as the Government now likes to call quangos – Ofwat’s performance is to undergo intensive surveillance by an outside expert to see if it is fit to face future challenges brought about by climate change and massive population growth.

The economic regulator was set up 20 years ago, at the time the water industry was privatised, to ensure customers receive good services at a fair price. The independent body can take action against companies that fail to deliver this.

Says Environment Secretary Caroline Spelman: “Ofwat has been successful in holding down household bills while water companies invest in their infrastructure.

"But we need to make sure the regulator is in good shape to help the industry prepare for a changing climate and a growing population, at the same time as keeping bills affordable.

"It’s important to reassure water companies and bill payers that Ofwat provides good value for money by carrying out its duties without unnecessary red tape."

The review will be carried out by David Gray from the Department for Transport’s review of airport regulation and has widespread knowledge of financial markets, government and utility sector regulation.

One of Defra’s main concerns about English water supplies is the huge amount wasted underground through leaking pipes, many of which have not been moderbnised since they were laid down in Victorian times. This calls for massive investment which some providers have seemed reluctant to make.