Plans for a Water Ombudsman and new regulator announced – but Martin Lewis says it's a 'mistake' not to create a national social tariff

The measures form part of a new Government 'Water White Paper' for England published today (Tuesday 20 January). This includes plans to tackle the current water system's infrastructure and governance, pollution and environmental issues, and more – though we've only focused on the financial impact for households in this news story.

This is in response to a Government-commissioned independent report into the water industry led by Sir John Cunliffe, which was published last July, and which made a number of recommendations to the Government.

However, new legislation will be needed to enable any new system to take effect. The UK Government says it's working closely with the Welsh Government, as billing is similar in Wales. The Welsh Government's position on water reform will be set out in more detail in its forthcoming Green Paper. A joint 'transition plan' on the water industry in England and Wales is also expected to be published later this year.

In Scotland, water and sewerage prices depend on your council tax band, while in Northern Ireland there are currently no domestic water charges.

Martin Lewis: 'We need a stronger focus on consumers' needs, giving them better rights and clear, consistent rules'

What's been announced in more detail

Here are the key changes impacting household water bills:

• Creating a new Water Ombudsman with legally binding powers to resolve consumer complaints. The Government says this means companies will face tougher requirements to respond quickly and compensate you fairly when things go wrong – though further detail is yet to be announced.
  
  Currently, if you have no luck complaining directly to your water company you can contact the Consumer Council for Water in England. We've long called for all Ombudsmen to have statutory powers and for ineffective ones to be stripped of their title.

• Introducing a new single water regulator. Dedicated supervisory teams for each water company will replace the current one-size-fits-all approach, which the Government says will give the new single regulator a thorough understanding of how each company operates – and the ability to intervene before problems take hold.
  
  The Government adds that the new regulator will also have stronger inspection powers, including being able to conduct 'no notice' inspections.

• Improving the guidance around social tariffs. The Government says this could include making the different schemes more consistent, as Martin calls for above, and increasing awareness and uptake of the support on offer.

• Putting "an end" to huge price hikes and failures of service. This includes "putting stronger protections in place to make sure a customer's monthly water bill is a predictable cost that rises smoothly, that represents good value for money and that households can reliably budget for".

• Making it mandatory for white goods, such as dishwashers and washing machines, to include water efficiency labels. The Government says this is designed to help households monitor their water use and cut costs.

Commenting on the shake-up, environment secretary Emma Reynolds said: "Water companies will have nowhere to hide from poor performance, customers will get the service they deserve."

New water compensation rules took force in England in October, with payouts for outages more than doubling in some cases.

Our top tips for saving on your water bills

Households are locked in to using the water company that supplies their area, meaning that unlike energy and broadband, you can't switch away if you're unhappy. But there are still ways to cut down your bill:

• Switch to a free water meter. If you live in England or Wales and there are more bedrooms in your home than people, getting a free water meter could help you save £100s as you only pay for what you use instead of a fixed amount. In Scotland, it's not free to have a water meter installed (it's actually quite pricey), so you're probably better off sticking to the estimated payments.

• Ask for an 'assessed charge bill'. Those living in England or Wales who can't get a water meter should look into getting an 'assessed charge bill'. This is worked out on details such as how many people live in your home, but varies from company to company. See our Cut your water bills guide for more info.

• Struggling to pay? Contact your supplier. All companies offer some kind of support – this can be anything from providing social tariffs, discounts or even a cap on how much you pay, and repayment plans. Support offered currently varies by supplier.

• Try cutting your usage. See if you can get free water-saving gadgets. And see MoneySavers' top tips for using less water.