Labour will unveil plans for a new water watchdog with the power to intervene if customers are overcharged to replace the soon-to-be-abolished Ofwat.

The water ombudsman will be handed the statutory authority to settle disputes as part of sweeping reforms to the sector announced today.

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.

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The change falls under the Government's plans for a "root and branch" reform of the water industry, to be unveiled alongside a review by ex-Bank of England deputy governor Sir Jon Cunliffe.

It follows mounting criticism of water firms for environmental failures and excessive shareholder payouts - all while investment targets go unmet.

The current regulator 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.

On Sunday, Environment Secretary Steve Reed declared that Ofwat is "clearly failing" and that "regulation must change".

Reed has also condemned the salary of Lawrence Gosden, Southern Water's chief executive, calling it "outrageous" and urging the company to "think about how this looks to their customers".

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Steve Reed has declared that Ofwat is 'clearly failing'

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.

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'Ministers must also explain how replacing one quango with another is going to clean up our rivers and lakes,' Victoria Atkins said

"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.