Water Companies: Environmental Pollution

Tuesday 19th July 2022 Lords Chamber

Question

15:08

Asked by

[Lord Rooker]

To ask Her Majesty’s Government what plans they have to change the penalties for environmental pollution by water companies.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

My Lords, the law currently allows Ofwat to issue fines of up to 10% of annual turnover and the Environment Agency to prosecute water companies and their directors, leading to court-imposed fines. We have been clear that regulators should not hesitate to bring the strongest enforcement action where companies have broken the law. The independent Sentencing Council has agreed to review guidelines to ensure that fines, applied by the courts, remain an effective deterrent.

[Lord Rooker (Lab)]

Does the Minister support the call by the chair of the Environment Agency for prison sentences for chief executives and board members of the worst water company offenders and for their directors to be struck off, so they cannot simply alter their CV and move on to another role? The two water companies outlined last week as “terrible across the board” are Southern Water and South West Water. Is the Minister aware that the chairs and CEOs of those two companies—Keith Lough, Lawrence Gosden, Gill Rider and Susan Davy—have at least eight other roles between them? Should they not be removed from those external roles so they can concentrate on what they are being paid for—delivering clean water and cleanly getting rid of wastewater?

[Lord Benyon (Con)]

The Environment Agency is part of Defra, so absolutely I agree with what the chair of the Environment Agency said in relation to a report that was published on Thursday. I shall read a section of it:

“The sector’s performance on pollution was shocking, much worse than previous years … Company directors let this occur and it is simply unacceptable. Over the years the public have seen water company executives and investors rewarded handsomely while the environment pays the price. The water companies are behaving like this for a simple reason: because they can. We intend to make it too painful for them to continue as they are.”


That report speaks for the Government.

[Baroness McIntosh of Pickering (Con)]

Does my noble friend agree that there would be less environmental pollution if developers were not allowed to connect wastewater to inappropriate pipes? When will my noble friend enforce the provision to make sure that water companies will be allowed to invest in adequate pipes and force developers to create natural flood prevention schemes to stop wastewater entering rivers in the first place? It is an unacceptable situation and developers must be prevented from contributing to it.

[Lord Benyon (Con)]

My noble friend will be pleased to know that we are undertaking a review of the case for implementing Schedule 3 to the Flood and Water Management Act. We will report on this in September, and I hope that will bring my noble friend to the realisation that the Government are determined to act on it.

[Lord Oates (LD)]

My Lords, is the Minister aware that over the past two years water company bosses have paid themselves a staggering £27 million in bonuses, during which time they have been responsible for 772,009 spills of raw sewage over a period of 5,751,524 hours? Is it not time to outlaw these outrageous bonuses and make water company bosses pay the price of polluting our rivers and beaches?

[Lord Benyon (Con)]

The fines, which have amounted to record sums in recent years, can be paid out of water companies’ income only and cannot be downloaded on to the customer. The Government have taken unprecedented measures to bring into balance the remuneration of water company executives. Ofwat has made it clear that water companies must be transparent about how executive pay and dividends align to the delivery of services to customers, including environmental performance.

[Lord Berkeley (Lab)]

Can the Minister answer my noble friend’s Question? When will the directors and chairmen of these companies be sent to jail for what they have done rather than the company paying the fines?

[Lord Benyon (Con)]

I refer the noble Lord to my earlier Answer: the independent Sentencing Council has agreed to review guidelines to ensure that the sanctions we apply to water companies are appropriate.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, the Minister said just now that the fines are not downloaded on to the customer, but in fact that is what happens because companies pay the fines and do not invest in infrastructure. Having visited Cambridge at the weekend, I saw that it is not only sewage discharges but water abstraction, yet the Government had the choice to vote for the amendment moved by the noble Duke, the Duke of Wellington, on the Environment Bill and did not. They gave up any responsibility, which I think is appalling. Does the Minister agree?

[Lord Benyon (Con)]

Strangely, no. The investment that water companies put into our water infrastructure is agreed with Ofwat. They cannot go away from that in their five-year plan. If the noble Baroness can give me evidence of where they have broken the requirements of the independent regulator, I will be very happy to take it up.

[Baroness Altmann (Con)]

My Lords, I commend the Government on accepting much of the thrust of the amendment tabled by the noble Duke, the Duke of Wellington, to the Environment Bill, but I hope the Minister will agree with me that we need to go further and need urgent action. At a meeting with Ofwat, I was pleased that it seemed to be taking this issue more seriously. I would be grateful if my noble friend can confirm that, first, the scale of the fines needs to be larger so that it does not become an acceptable cost of doing business rather than a deterrent to bad behaviour. Secondly, might the Government support Fleur Anderson’s Private Member’s Bill to tackle upstream causes by banning plastic wet wipes which cause such problems for the sewage network?

[Lord Benyon (Con)]

I thank my noble friend. She makes very good points. The independent Sentencing Council review will, I hope, tackle her first point. I entirely agree about the problems imposed on customers and us all by wet wipes. We have announced a call for evidence which will explore a possible ban on single-use wet wipes containing plastic. I am very happy to work with Fleur Anderson on that.

[Baroness Hayman of Ullock (Lab)]

My Lords, the Government’s response to the Environment Agency’s report said:

“We are the first government to set out our expectation”—


expectation—

“that water companies must take steps to significantly reduce storm overflows and earlier this year we consulted—

they consulted—

“on a comprehensive plan.”

They also said:

“We will not tolerate this behaviour and we will take robust action if we don’t see urgent improvements.”


Is now not the time to take robust action? The situation is getting worse, and the public have had enough. Will the Government support the Environment Agency’s proposals?

[Lord Benyon (Con)]

I would hate any noble Lord to be under the impression that our attempts to resolve this problem start here. We have record levels of investment in our water infrastructure. Between 2020 and 2025, £3.1 billion is being invested by water companies specifically in storm overflow improvements. We have set out target dates by which we want to see these improvements, and we will report by 1 September on precisely how they are going to be delivered.

[Baroness Ludford (LD)]

My Lords, the term “storm overflow” was just used. In a debate last week, the Minister agreed with me that the term “storm overflow” is very misleading and said that he would look at it. Water companies love it because it sounds as if raw sewage is going into rivers and seas as an exceptional act of God. Can the Minister confirm that he is going to ban it from his department?

[Lord Benyon (Con)]

I will have a look at the lexicon we use. The real problem is illegal storm overflows. There have been overflows from our sewage systems into our rivers for centuries. It has reached an unacceptable level, which is why we have set out a clear plan for dealing with it. Perhaps we need to use better terminology. There are permitted storm overflows and there are illegal storm overflows.

[Lord Sikka (Lab)]

My Lords, Section 172 of the Companies Act 2006 requires directors to have regard to the interests of customers, the community and the environment. The UK does not have a central enforcer of company law, and Ofwat is not concerned with compliance with company law, so the buck must stop with the Government. Can the Minister explain when his department last investigated the conduct of water company directors and what the conclusions were?

[Lord Benyon (Con)]

Ofwat is the main regulator in this area, as well as the Environment Agency. The Government give very clear directions to Ofwat. In our strategic policy statement for Ofwat, we set out an expectation on water companies, including making

“a progressive reduction in the adverse impact of discharges from storm overflows”

including reducing their frequency and volume. The noble Lord made a point about the existing sanctions. We recently saw a fine of £90 million against one water company. We want to make sure that continued sanctions are going to bear down on this problem. That is why we have asked the Sentencing Council to carry out this work.