LONDON, July 20 (Reuters) - Britain announced on Sunday

it would create an ombudsman to oversee its broken water sector

ahead of a major review which is expected to recommend a reset

of how the industry is structured and regulated.

After winning power last year, the Labour government ordered

an examination of the privatised water industry in England and

Wales, which needs huge investments to fix aging infrastructure

and stem record sewage spills into rivers and lakes that have

angered the public.

Former Bank of England deputy governor Jon Cunliffe, who has

led the review, is due to publish his findings on Monday.

Indications are that he will suggest scrapping Ofwat, the water

industry's financial regulator.

Ahead of the publication, the government said it would set

up a water ombudsman with legal powers to help customers dealing

with leaking pipes, incorrect bills or supply problems.

"The water industry is broken," environment minister Steve

Reed is expected to say in a speech on Monday, according to his

office.

"Today's final report from Sir Jon Cunliffe's Independent

Water Commission offers solutions to fix our broken regulatory

system so the failures of the past can never happen again."

In an interim report in June, Cunliffe recommended

overhauling regulation to lower investment risk, merging

regulators to give companies clearer direction and new rules on

river bathing standards.

His final report comes as Thames Water, the country's

biggest water company which is facing 1.4 billion pounds ($1.9

billion) in pollution fines and penalties over the next five

years, teeters on the brink of failure with the possibility the

government might have to step in.

In his speech, Reed, who promised on Sunday to halve sewage

pollution by 2030, was expected to announce "root and branch"

reform of the sector's regulation, his office said.

"We are establishing a new partnership where water

companies, investors, communities and the government will work

together to clean up our rivers, lakes and seas for good," he

was expected to say.

($1 = 0.7460 pounds)