Water industry watchdog OfWat's approval for massive bill increases by companies including Yorkshire Water was today heavily criticised by an influential group of MPs.

The regulator has been accused of being "passive" in overseeing water companies and paying "little heed" to the interests of consumers.

Ofwat is responsible for setting price limits that allow the water companies in England and Wales to meet future demands for water at the lowest cost to the consumer.

The House of Commons Public Accounts Committee said water suppliers should face "the maximum financial penalties" if they missed their annual leakage targets.

OfWat can fine failing companies up to ten per cent of their water-related turnover - but has so far been reluctant to use its power.

Committee chairman Edward Leigh MP accused OfWat of taking a "limp attitude" towards the industry. He said: "OfWat has been passive in its regulation of the water industry. At the same time it has paid little heed to the interests of water users."

Pointing to the watchdog's inaction over Thames Water, which missed its annual leakage targets six years in a row "without so much as a slap on the wrist", Mr Leigh said: "In future, such a wanton waste of water by a company must be rewarded with the maximum possible fine."

Today's report urges OfWat to take legal advice on the possibility of revoking companies' licences if they miss their targets.

Yorkshire Water was not available to comment last night.