Water (Special Measures) Bill [HL]

Committee stage
Wednesday 30th October 2024 Lords Chamber

Committee (2nd Day) (Continued)

20:45

Amendment 52

Moved by

[Lord Blencathra]

52: Clause 3, page 8, line 6, at end insert—
“141H Monitoring of river health after emergency overflows(1) Where there is a discharge from an emergency overflow of a sewerage undertaker into inland waters, the undertaker must regularly assess the environmental health of that inland water within 500 metres downstream of the overflow.(2) The methods used to make assessments under subsection (1) must include the use of fish counters or other methods of accurately monitoring the fish population.(3) The undertaker must prepare a report on the results of these assessments on a quarterly basis and submit this report to the Authority.(4) The undertaker must publish this report within 30 days after it has submitted it to the Authority.(5) The information must—(a) be in a form which allows the public to readily understand it,(b) be published in a way which makes it readily accessible to the public, and(c) be published on the undertaker’s website.”

[Lord Blencathra (Con)]

My Lords, on behalf of my noble friend Lord Bethell, I am pleased to move Amendment 52 in his place. This amendment seeks to increase and improve the monitoring undertaken by water companies after an emergency overflow.

The amendment is quite straightforward. It makes the case that, where there is a discharge from an emergency overflow, the undertaker must regularly assess the environmental health of that inland water within 500 metres downstream of the overflow. My noble friend then suggests that the methods used to make assessments under that subsection must include the use of fish counters or other methods of accurately monitoring the fish population. I accept that there may be a weakness here because, unless one knows what the fish count was before the overflow happened, it may be difficult to come to a conclusion as to the number of fish which should be in the river after the overflow has taken place. The undertaker must also prepare a report on the results of these assessments on a quarterly basis and submit it to the authority, and, after having done so, the undertaker must publish the report within 30 days. In addition, in accordance with everything else which has been said in debates tonight, the information must be in a form which helps the public to readily understand it, be published in a way which makes it readily accessible to the public, and be published in the undertaker’s name.

For those reasons, we on these Benches want to protect our rivers and restore the health of those rivers that have been seriously affected by pollution. Thanks to our efforts in government to drive up monitoring, 100% of emergency overflows are now monitored, and as such, we are able to access information about all emergency overflows that occur. This was a seriously transformative step forward compared with the situation we inherited in 2010 but we accept the need to go further, and we support better monitoring of both overflows and of the overall health of rivers themselves.

With the level of monitoring achieved under the Conservatives, it is now possible to learn far more about these incidents and therefore to take action to prevent them happening again. However, this does not mean that water companies are now taking enough responsibility to publish the results of this monitoring and to report their findings so that they can be held to account.

This amendment focuses on an area that the Bill does not address and ensures that the health of our rivers, not just the extent of pollution incidents, is a central component of the Bill. The inclusion of monitoring 500 metres down the river will give a real insight into the impact that an overflow is having on the overall health of a river over time. This monitoring will ensure that water companies cannot downplay the damage and leave the natural area to be ruined; instead, they will have to take a responsibility for a wider area that these emergency overflows can impact.

We on these Benches support this amendment in its intention to ensure that regular reporting is done so that the public are able to access up-to-date information on the overall health of our rivers beyond the immediate aftermath of any emergency overflow.

I know that many amendments in the previous group were related to monitoring of emergency overflows, and, although this amendment specifically relates to river health, I am sure there will be cross-party support for much of the previous group and for this amendment to ensure that water companies can be held publicly accountable for their action after emergency overflows.

I hope the Minister will take the concerns of my noble friend Lord Bethell as expressed in this amendment seriously and will consider it. Once again, we feel this is a timely opportunity to deliver a positive reform in the Bill today rather than waiting for the wider reform which the Government have proposed. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, I thank the noble Lord, Lord Bethell, for raising this important issue and tabling Amendment 52, and the noble Lord, Lord Blencathra, for moving it in his absence. I start by reassuring him that I always take the concerns expressed in this House very seriously. I think that we agree that understanding the impact of sewage discharges on the environmental health of rivers is vital.

Clause 3 requires water companies to provide information on the frequency and duration of discharges from emergency overflows. These measurements will enable regulators and the public to see, in near real time, when a discharge from an emergency overflow has occurred, and how long it lasted for. This will, in turn, enable resource to be directed to investigate the cause as well as the impact of a discharge, and will enable the regulators to take enforcement action if it is required.

However, this is just one measure that the Government will use to better understand the impact of sewage entering our waterways. New continuous water quality monitors will be installed at storm overflows from 2025 to continuously measure the impact of sewage discharges on the receiving watercourse. The information gathered from these monitors will be key in supporting fish populations. Requiring the installation of additional fish counters downstream of emergency overflows may require additional structures in the watercourse and may impose additional costs on water companies and their customers.

This does not appear to be proportionate, given that emergency overflows should be used on only very limited occasions. The Government will therefore not accept this amendment. However, I hope that I have been able to reassure the noble Lord that the Government are using this Bill to enable quicker action to be taken to investigate discharges from emergency overflows.

[Lord Blencathra (Con)]

I thank the Minister for that response. I regret that she is not accepting the amendment but, if we accept her assurances that the monitoring of overflows will be thorough, that may negate the need for further monitoring downstream. I like to think that we will check the water further downstream than just within a short distance of the storm overflows, because what happens downstream is terribly important. I recall when the creamery at Appleby burst and flooded the River Eden. The damage was considerable for a couple of miles downstream. Checking what happens right beside the factory or the storm overflow is one thing, but it is important that we check downstream when the money allows. I beg leave to withdraw the amendment.

Amendment 52 withdrawn.

Clause 3 agreed.

Amendments 53 to 56 not moved.

Amendment 57

Moved by

[Lord Roborough]

57: After Clause 3, insert the following new Clause—
“Reporting of impact on pollution(1) The Secretary of State must publish an assessment of the expected impact of the Act on the overall level of pollution caused by the activities of sewerage undertakers within 3 months of the Act coming into force.(2) The Secretary of State must publish an assessment of the actual impact of the Act on the overall level of pollution caused by the activities of sewerage undertakers within 3 years of the Act coming into force.”Member's explanatory statement
This amendment requires the Government to publish their expectations of the impact of the Act on pollution and the actual impact of the Act 3 years after it comes into force.

[Lord Roborough (Con)]

My Lords, I rise to move Amendment 57 and speak to Amendments 105 and 106 in the name of my noble friend Lord Sandhurst.

I thank His Majesty’s Government for publishing the impact assessment for this Bill. This is certainly helpful in giving the Committee a clear view of what the Government expect to achieve with these measures, but there is still no provision in the Bill for an assessment of the actual impact of the Act. Our proposal is that in three years’ time the Government should produce a report on the effects of the Bill, so that Parliament can reassess the effectiveness of these measures. Can the Minister give an assurance today that the Government are willing to undertake such an assessment, to give Parliament the opportunity to discuss the impact of this Bill once its measures have been in place long enough for their effects to be measured?

The impact assessment released highlights the need to continue with these amendments. On overall impact, it reveals that there will likely be a negative monetised impact on businesses, including the cost of regulator enforcement recovery, improved monitoring and adjusted penalty systems. These impacts may be acceptable if they drive up water company performance and result in reduced pollution, but Parliament should be given the opportunity to debate this.

I will speak briefly to Amendments 105 and 106. We welcome the assessment of the impact of the justice measures that has been published in the Government’s impact assessment but share my noble friend Lord Sandhurst’s concerns about these measures, given the pressure that our prison system is currently under.

We have seen that the Bill could impose a custodial sentence on water company executives. Given the overcrowding of prisons and the recent release of thousands of violent offenders, it seems to us that the Government have got their priorities wrong. Surely the Government should seek to ensure that violent offenders, including domestic abusers, are serving their full custodial sentences before Ministers consider imprisoning water company executives. Polluting a river is of course a serious offence, but we must ensure that our prisons, which are already under strain, are not further challenged by the introduction of new custodial sentences for water company executives. I beg to move.

[Lord Sandhurst (Con)]

My Lords, my Amendments 105 and 106 were commencement blocks when laid that sought to ensure that the Government published an assessment of the justice impact of the Bill before it could come into effect. I thank the Government for publishing their impact assessment, which makes it clear that there will be a small additional burden on our already strained prison estate as a result of the custodial sentences included in the Bill. I am satisfied that the Government’s impact assessment covers the justice impacts of the Bill, so I will not press my amendments.

That said, this is a good opportunity to raise the question of the Government’s priorities. We know the burden on our prisons will be small but is it not the wrong priority to sentence water executives to up to two years’ imprisonment at a time when the Government are releasing violent criminals early? Equally, there is the question of necessity. The Government’s own impact assessment states:

“Defra assumes there could be one case every two years with the maximum sentence of a two-year imprisonment based on the fact there has been four historic cases”.


So is this provision truly necessary? I hope that the Minister will be able to respond to these concerns in her reply.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Lord, Lord Roborough, for introducing this small group of amendments, and the noble Lord, Lord Sandhurst, for his amendments on the issue of justice. I thank both noble Lords for their interest in ensuring that the Government are fully considering all the impacts of the Bill, on both the environment and the justice system.

Amendment 57, tabled by the noble Lord, Lord Roborough, relates to the reporting of impacts on environmental pollution. This Government share the noble Lord’s concerns that the number of water company pollution incidents has not reduced in the last few years. It remains unacceptably high. That is why the Bill seeks to increase accountability for water companies and their executives where they pollute the environment.

The Bill will enable automatic and severe fines for certain pollution offences, making it possible for the regulators to take swift action where it is clear that an offence has been committed. The Bill will increase transparency around pollution incidents by enabling the public and regulators to see where and how often emergency overflows are discharging and, as discussed in previous groups, by requiring water companies to publish pollution incident reduction plans on an annual basis. As I set out on our first day in Committee, the Bill provides Ofwat with legal powers to ban bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. Collectively, these measures will strengthen enforcement and disincentivise pollution incidents.

21:00

A more detailed assessment of the expected impact of these measures and wider measures in the Bill is set out in the impact assessment that was recently published, to which the noble Lord referred. Defra is committed to post-legislative scrutiny of this primary legislation. As is standard practice for all new legislation, we will work with the EFRA Committee to assess its impacts three to five years after Royal Assent.

Although we agree on the importance of understanding the impact of the Bill on environmental pollution, we believe that further reporting requirements would be duplicative. The Government will therefore not accept the amendment.

I turn to Amendments 105 and 106, tabled by the noble Lord, Lord Sandhurst, and thank him for raising the important subject of justice impact tests. The Government agree that, for all new legislation, it is essential to conduct a full and proper assessment of the potential impact on the justice system. In line with this, the Government have completed a justice impact test for the Water (Special Measures) Bill, and this has been shared with the Ministry of Justice as an internal and interdepartmental form.

It is not normal government practice to share a justice impact test publicly. However, I reassure the noble Lord that the impact of the Bill, and of Clause 4 specifically, on the justice system is expected to be minimal. The extension of the sentencing powers of the courts to include imprisonment for obstruction offences in the water industry is primarily designed to act as a deterrent. It is designed to disincentivise pollution incidents. We do not expect a significant number of people to be sentenced to imprisonment for these offences. The measures in the Bill that are designed to improve performance and culture within the water industry are expected to reduce the likelihood of offences being committed in the first place.

I hope the noble Lord is reassured that the Government have fully assessed the potential impacts of the Bill on the justice system and understands why the Government will not be able to accept this amendment.

[Lord Roborough (Con)]

My Lords, I am grateful to the Minister for her constructive response to this debate, and I am most encouraged by her commitment to future assessment of the impact of the Bill. I beg leave to withdraw the amendment.

Amendment 57 withdrawn.

Amendments 58 and 59 not moved.

Clause 4: Impeding investigations: sentencing and liability

Amendment 60

Moved by

[Lord Sandhurst]

60: Clause 4, page 8, line 29, leave out “2 years” and insert “12 months”
Member's explanatory statement
This amendment will prevent those convicted of an offence under this section from being sentenced to a custodial sentence of more than 12 months.

[Lord Sandhurst (Con)]

My Lords, this is a group of five amendments. Amendment 60 would reduce the maximum custodial sentence to 12 months. Amendment 61 would remove the word “connivance” in respect of a possible offence. Amendment 62 would prevent liability for those purporting to be officers of water companies. Amendment 65 would prevent individuals who impede investigations receiving custodial sentences, and Amendment 66 would reduce the maximum custodial sentence to 12 months.

We on these Benches have been clear that we support tougher measures in order to hold water companies to account. However, to put water executives in prison during a time that the Government have admitted is a time of crisis for prisons because of overcrowding is to us the wrong priority. I am concerned, as I am sure so many are across the Committee, that dangerous individuals are being released from prison having served less than half their sentence. I draw attention to the fact that this Government appear more focused on putting water executives in prison than on keeping violent offenders in, and that seems to be a wrong priority.

In the latest release, 1,100 prisoners were released, and although the scheme claims that none of those offenders are guilty of serious violence, sex crimes or terrorism, this is true only of their primary conviction. An additional 1,800 were released earlier in September. Some mistakes were made, as offenders were released who were not supposed to be. That is the context.

Amendments 60 and 66 in my name seek to reduce the maximum custodial sentence that a water executive can receive from two years down to 12 months. As it stands, prison resources are seriously overstretched, and it seems to be the case that the Government in this Bill are wrongly prioritising those resources. While I do not think that custodial sentences are the right way forward, if the Government insist upon them then can they at least reduce the maximum custodial sentence to 12 months to prevent further overstretching? That would have the added advantage of ensuring that these cases would not need to be heard in the Crown Court under the new provisions, which would prevent further strain on our court backlogs.

The Government’s own impact assessment admits that this measure will put a further burden on our prison services. While it is certainly necessary to hold water executives to account, I believe my other amendments address more appropriate penalties. There is no doubt that the pollution of our rivers is a serious issue. Measures to ensure that those who break the rules are dealt with, and that those who work for water companies do so properly, are necessary. However, these measures appear to be too severe at a time when prisons cannot handle further pressure. Can the Minister set out the Government’s position on releasing domestic abusers, only to put individuals who work on the boards of water companies into the same cells?

In the same vein, Amendment 65 seeks to prevent a custodial sentence from being placed on an individual who has impeded an investigation. While that is indeed a serious issue, our prisons cannot handle further pressure.

Amendment 61 in my name seeks to remove “connivance” as an offence in the Bill. We have tabled the amendment to probe the use of the word “connivance” in this Bill specifically. We understand the use of that word, which exists in other legislation, such as the Theft Act 1968 and, more recently, the Bribery Act 2010. However, we pose the question to the Government as to why they have used it in this scenario. Under what circumstances do they envisage using it? Can they provide the Committee with real-world examples of situations where it will be used?

Amendment 62 seeks to remove the offence in respect of individuals who purport to be executives. This simple amendment would ensure that only those who were actually acting in executive roles could be held responsible for the mistakes of the water company.

[Baroness Hayman of Ullock (Lab)]

I thank the noble Lord, Lord Sandhurst, for his interest in sentencing powers for obstruction investigations and for all the suggested amendments covered in this group.

Amendments 60 and 66, tabled by the noble Lord, both look to reduce the maximum custodial sentence available for those convicted. The obstruction of investigations by the regulators is already an offence, but that has not stopped companies from blocking the regulators’ investigations. For example, in 2019 the Environment Agency prosecuted a number of individuals at Southern Water for removing evidence from the possession of officers. I am sure the noble Lord will agree that such behaviour is unacceptable.

The aim of the two-year maximum custodial sentence is to deter future obstruction. That should support more effective investigations, which should ultimately enable stronger enforcement action against both companies and individuals. I am pleased to confirm for the noble Lord that this sentence is consistent with other provisions in the Environment Act 1995 and the Environmental Permitting (England and Wales) Regulations 2016.

I highlight to the noble Lord that the two-year sentence is the maximum limit. Sentencing will ultimately be decided by the courts, factoring in the specifics of each case and the relevant sentencing guidelines. While I cannot comment on Home Office procedure on prisoner release, I would be interested if the noble Lord could provide some information as to why our prisons became so overcrowded in the first place.

Amendments 61 and 62, also in the name of the noble Lord, Lord Sandhurst, speak to senior leader liability. I hope the noble Lord will agree it is unacceptable under current law that, if water company senior leaders encourage or allow obstruction of Environment Agency or Natural Resources Wales investigations, they cannot be held liable for this wrongdoing. In contrast, senior leaders can be held liable for other environmental offences, as well as obstruction offences in other sectors: for example, the Building Safety Act 2022.

This clause will remedy this gap by bringing the offence of obstructing the Environment Agency and Natural Resources Wales in line with other environmental offences, as well as offences in other sectors. I hope the noble Lord will agree that, in doing so, it should mirror the conventions and language of existing “consent, connivance and neglect” clauses. These make connivance by senior leaders a potential ground for liability and ensure that, where a person “purports to be” a relevant officer, they should also be held liable for wrongdoing. I hope the noble Lord is therefore content that these amendments are unnecessary.

Finally, I turn to Amendment 65, also in the name of the noble Lord, Lord Sandhurst, which proposes to remove increasing the sentence for offences of impeding Drinking Water Inspectorate investigations from the scope of the Bill. As I mentioned earlier, the Yale Environmental Performance Index ranks the drinking water in England and Wales as the best in the world, alongside just 10 other countries. This is in part thanks to the effectiveness of the Drinking Water Inspectorate. To accept this amendment would be to imply that the regulations enforced by the Drinking Water Inspectorate are not as serious as those enforced by the Environment Agency and Natural Resources Wales.

This cannot be right. There are grave public health risks if the DWI does not have the power or the authority to ensure that water supplies in England and Wales are safe and of the right quality. While I accept that this may not be the intention behind the noble Lord’s amendment, it would certainly be its effect. The quality of our drinking water is one of the enduring strengths of the current model and one that the Government want to protect. I once again thank the noble Lord for his contributions and hope my response has reassured him.

[Lord Sandhurst (Con)]

I thank the Minister for her response and for the care with which she delivered it. My amendments were there to ensure that the already overburdened prison sector is not put under further pressure. I hope the Government will bear them in mind and take them on board before Report. We will seek to work with the Government to ensure that the Bill ensures appropriate punishment for water executives. I beg leave to withdraw the amendment.

Amendment 60 withdrawn.

Amendments 61 and 62 not moved.

Amendment 63

Moved by

[Lord Roborough]

63: Clause 4, page 9, line 6, at end insert—
“(5K) The water undertaker or sewerage undertaker must provide relevant officers under subsection (5J) with mandatory training on subsection (3E) and how it relates to their powers and duties described in subsection (3D).”Member’s explanatory statement
This amendment seeks to ensure that relevant officers receive training from the undertaker on the penalties for offences related to impeding investigation by environmental regulators, as well as how these offences relate to their powers and duties as undertakers.

[Lord Roborough (Con)]

My Lords, in moving Amendment 63 in the name of my noble friend Lord Bethell I will speak also to Amendment 64. As we have discussed in the previous group, many within the water industry will now be captured by statutory responsibilities and be subject to custodial sentences if they make wrong decisions. This is a considerable liability and the goal of this Bill must be in part that no one goes to jail or is fined because no criminal or civil act has been performed.

There are similar responsibilities on all investment professionals within the financial services industry and for that reason annual training on anti-money laundering law and market manipulation and insider trading law is compulsory. Having left the industry over two and a half years ago, I am still completely aware of that law and my responsibilities under it. The main reason for this is to prevent a breach of the law, but subsidiary reasons are to rule out that non-compliance with this law is due to ignorance and is either negligence or criminality. That helps to protect both individuals and firms.

The amendments in the name of my noble friend Lord Bethell are intended to ensure that this annual training must take place to avoid or minimise any impedance of investigations by the regulators. It should also make clear the powers that the regulators and authority have to those employees to avoid any doubt. If we are to ensure that this remains an industry that the 100,000 employed within it want to build their careers and advance in, it is unhelpful if those towards the top of the organisation are locked up while claiming they had no knowledge of the law.

The Minister may offer that, rather than putting this into legislation, it can be dealt with by rules from the authority or the regulator. As we have discussed in earlier groups, confidence in those bodies is not as high as desired. I believe it is critically important that we also offer what protection we can to employees within this legislation. I beg to move.

21:15

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Lord, Lord Roborough, for speaking to the amendments proposed by the noble Lord, Lord Bethell, in his absence. Amendments 63 and 64 relate to guidance and mandatory training for water company employees on obstruction offences.

One thing that it is important to emphasise on this matter is that Clause 4 amends only existing offences. It does not create any new obligations on companies, so employees should already have some understanding of that in the first place. To be clear, the existing offences are obstruction of investigations of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. Prosecutions have already been brought against companies and individuals under Section 110 of the Environment Act 1995. On that basis, we believe that companies should already be very well aware of their obligations under that section of the 1995 Act, and of the obligations to their staff to ensure that they are properly trained to engage in this area.

I reassure the noble Lord that the obligations of companies are set out as well in the Environment Agency’s enforcement and sanctions policy, so it should be very clear. I hope he understands why we do not think it proportionate to put this into legislation.

[Lord Roborough (Con)]

My Lords, I am most grateful for the reply from the Minister. I am not sure that I am necessarily entirely satisfied with it, but—as I have not yet had a chance to say it today—I am most grateful to the Minister for the constructive engagement that she has had with us, as well as all parties in this House. That will continue and perhaps we can discuss it then. I beg leave to withdraw the amendment.

Amendment 63 withdrawn.

Amendments 64 to 66 not moved.

Clause 4 agreed.

Clause 5: Civil penalties: modification of standard of proof

Amendment 67

Moved by

[Lord Sandhurst]

67: Clause 5, page 9, line 43, at end insert—
“(4A) Where the relevant offence is—(a) triable summarily (whether or not it is also triable on indictment), and(b) punishable on summary conviction by a fine (whether or not it is also punishable by a term of imprisonment),the amount of the variable monetary penalty may not exceed the maximum amount of that fine.”Member's explanatory statement
This amendment would limit the level of any fine under this section to the levels set out in the 2008 Act.

[Lord Sandhurst (Con)]

My Lords, in moving Amendment 67 I will speak against the question that Clause 5 stand part of the Bill. I will also speak to Amendment 72.

My Amendment 67 would limit the maximum fine under the Bill to the level set out in the Regulatory Enforcement and Sanctions Act 2008. This Bill seeks to amend the 2008 Act to impose fines that will be set by regulations. The Government are asking Parliament to grant them these powers without clarity or definition on the level at which the fines will be set. All we know is that the Government’s impact assessment states that this penalty cap will be consulted on during the Bill’s passage, before it is set out in secondary legislation. I am pleased that the Government have committed to consultation but, regardless of any consultation, under the Bill as drafted the Government may vary the cap by statutory instrument. I respect and trust the Minister, who has acted in good faith throughout the passage of the Bill, but what is to stop a future Government misusing this power?

I propose to set the maximum cap at the level established in the Regulatory Enforcement and Sanctions Act 2008, which was passed under the previous Labour Government. When what became the 2008 Act was being debated, the Minister who took it through the other place was the now Chancellor of the Duchy of Lancaster, the right honourable Pat McFadden MP. He wisely argued then that the 2008 Bill would

“guarantee more consistent regulatory treatment of businesses”.—[Official Report, Commons, 21/5/08; col. 329]

Indeed, the 2008 Act built on the Hampton report, which recommended

“a comprehensive review of regulators’ penalty regimes, with the aim of making them more consistent”—

and I stress the word “consistent”.

Does the Minister agree with her colleague that we need more consistent regulatory treatment of business? If she does not, can she explain why the Government are seeking in this Bill to depart from the Labour Party’s previous reforms by giving the Executive the power to set variable monetary penalties by statutory instrument in this case? Is this the first of many reversals of Labour’s previous policy? Can I mark this down as yet another entry on my list of Labour U-turns?

I will now speak against Clause 5 standing part of the Bill. My concern is that the modification of the standard of proof in this case is dangerous and unjust. Water companies, no matter how poorly they may perform, deserve to be treated equally under the law with other regulated companies. When preparing for this debate, I once again found myself reading the Chancellor of the Duchy of Lancaster’s words from May 2008, when the 2008 Act was going through the other place. On the issue of the criminal burden of proof, Mr McFadden said:

“The Bill contains a number of essential safeguards. It makes it clear that a Minister can confer powers on regulators only if the Minister is satisfied that they are capable of exercising those powers in compliance with better regulation principles. Before regulators can impose monetary penalties or discretionary requirements, they must be satisfied beyond reasonable doubt that an offence has been committed. Businesses can make representations and objections before sanctions can be imposed, and, most importantly, there is a right of appeal to an independent and expert tribunal.”—[Official Report, Commons, 21/5/08; col. 332.]


This was an essential safeguard in 2008. I ask the Minister: have our standards of justice changed since then?

Amendment 72 speaks to the need for wider reform within the water industry. While His Majesty’s Government may not see fit to introduce a water restoration fund in this Bill, on these Benches we would welcome the Government taking the opportunity to implement wider reforms sooner rather than later. Can the Minister explain why the Government are resisting opportunities to deliver further positive reforms to the water sector in this Bill while we still have the chance?

The previous Conservative Government implemented the water restoration fund. That means that all environmental fines and penalties imposed since April 2022 have been ring-fenced to directly improve the water environment. Does the Minister agree that a water restoration fund for spending on freshwater recovery would improve the quality of water in the United Kingdom, and therefore would she welcome the introduction of one?

[Earl Russell (LD)]

My Lords, I will speak to Amendment 72 in the name of my noble friend Lady Bakewell and signed by myself. I am grateful for the support of the noble Baroness, Lady Jones, although I note that she is not in her place.

This amendment would require all funds from the fining of water companies for environmental offences to be ring-fenced for the water restoration fund and spent on freshwater recovery. We on these Benches have tabled Amendment 72 because it is unclear that fines imposed on water companies for breaches of their licences will bring any improvement to the water industry itself.

At Second Reading, a number of noble Lords suggested that the Bill could be used to bolster the water restitution fund—the pot set up by the previous Administration to channel environmental fines and penalties into projects that improve the water environment. The idea of this amendment is to achieve just that.

The Government have indicated that the Environment Agency will act as an enforcer to ensure that water companies adhere to the terms of their licences, monitor sewage overflows effectively, take steps to prevent this from happening in the future and make sewage reduction plans work. As has been raised many times during debates on the environment and water quality, the Environment Agency is chronically underfunded. Indeed, it has lost almost half of its funding in recent years. This lack of investment in the Environment Agency has led to what was once an effective organisation that could be relied on becoming weakened and less able to fulfil its statutory obligations effectively.

The case for this regulation is strong, as the water restoration fund is without legal foundation. The fund is not receiving all the fines. This is a direct consequence of the fund’s non-statutory character. In the continual absence of a legal imperative, revenue from fines can continue ending up in alternate destinations. The Government’s answer to make the regulator effective is for it to have the power to levy fines on operators that breach their licence conditions and break the law in other ways. These fines will then go back to the Environment Agency to recompense it for its work. As this is retrospective, it begs a question about what section of its current work programme the Environment Agency will have to put to one side while it is dealing with bringing the water industry into line.

There is also an issue around transparency. Customers know their bills will be going up—Ofwat agreed this in the latest review. They also know that the water companies have received fines in the past, but customers are unclear about what happens to those fines. Is it to be assumed that they have just gone towards the funding of Ofwat? In future, if the Bill is enacted, a lot more fines will be imposed. Bill-paying customers and the public in general expect to be able to trace what has happened to those fines.

Amendment 72 introduces new clauses to establish a water restoration fund. This fund will receive and hold all the fines and monetary penalties that are imposed on water companies for illegal activities and breaches of their licence conditions. The fund will then use the money recovered to invest in schemes to promote fresh-water recovery. It is only by improving the quality of fresh-water resources that we can begin to see an increase in the biodiversity of species that rely on the water they live in and around being fresh, unpolluted and free of sewage. As sewage discharges reduce, the quality of our fresh water will increase, and customers’ bills will need to be increased to deal with the chronic underfunding of the past. We will ideally reach a stage where the polluter does indeed pay for the damage they have done, as set out in the Environment Act.

We realise that this amendment leaves the Government with a conundrum as to how to fund the Environment Agency to carry out its work as a regulator, imposing fines and penalties on retrograde water companies. Our solution, of course, is to implement Amendment 80 and set up the clean water authority—but I do not want to rerun arguments that we have already heard. By accepting this amendment, the Government can future-proof the water restoration fund and ensure that one of the legacies of the Bill is a legally secure guarantee that sanctions for water pollution will always be used to help repair the damage caused and begin to restore the natural environment. I look forward to the Minister’s response.

[Baroness Hayman of Ullock (Lab)]

I thank noble Lords for their contributions on this aspect of the Bill on fines and penalties. Amendment 67 was tabled by the noble Lord, Lord Sandhurst, whom I thank for his points on variable monetary penalties. Currently, there is no limit on the maximum variable penalty for water industry offences, whether the case is tried summarily in the magistrates’ courts or in the Crown Court. This amendment would not provide additional protection or assurance. However, we recognise that there are concerns about ensuring that there are robust protections for civil sanctions. So the Government will consult on the offences for which the civil standard of proof may be used and on the cap for new civil standard variable monetary penalties. This cap will not be limited to offences triable only in a particular court—we believe this is a proportionate safeguard. The House will also have the opportunity to debate and vote on secondary legislation containing the cap before any changes are finally made.

I reiterate that unlimited penalties issued to the criminal standard will still be available to the Environment Agency, along with all its other existing enforcement tools. Existing legal protections, including the right to appeal, will also be maintained. There are proportionate safeguards and legal protections for the use of those penalties, which will strengthen the enforcement of minor to moderate offences. Therefore, we do not believe this amendment to be necessary, and I hope that the noble Lord agrees.

21:30

Clause 5 allows Ministers, when making secondary legislation, to interpret existing powers to impose monetary penalties so the civil standard of proof can be used. Regulators can currently impose civil penalties when they are satisfied “beyond reasonable doubt” that an offence has been committed. These civil penalties are imposed by the regulators, rather than through the courts. The criminal standard of proof is appropriate for severe offences—for example, when there is a major impact on human health, quality of life or the environment. The high investigatory burden is not proportionate for minor to moderate offences, which have a far lower impact. Clause 5 will allow these offences to be enforced more quickly, cost-effectively and proportionately by enabling penalties to be imposed using the civil standard of proof. This is in line with penalties available to other sectors that apply the civil standard of proof. The Environment Agency already has civil standard penalty powers for other enforcement regimes such as climate change.

These penalties will be in addition to existing enforcement options that can only be imposed using the criminal standard of proof, including prosecution and, I stress, unlimited, uncapped variable monetary penalties, which will remain unchanged. The Government will consult on the offences for which the civil standard of proof may be used, and on the cap for the additional new lower standard of proof variable monetary penalties. There are no plans to remove unlimited penalties for severe offences. Parliament will then debate and vote on the secondary legislation before we make any changes. Clause 5 will strengthen the powers of water industry regulators and help to drive improved performance in the sector.

I turn to Amendment 72, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, and introduced by the noble Earl, Lord Russell. In his introduction to this amendment, the noble Earl made some really important points about fresh water and maintaining quality and improvements through the Bill. On his questions about the water restoration fund, it was launched in April 2024 to use money from water company fines and penalties for environmental improvements. Applications for funding are being reviewed. Clearly, we have been waiting for the spending review before moving forward with this, but we now have the headline figures agreed, which means we can now work through the exact details. We will be able to provide more information once that work has been finalised, but at least now we can start to move forward.

[Lord Sandhurst (Con)]

I thank the Minister for her reply. I am grateful to the Government for the consideration they have given to these amendments. I shall continue to make the case for changes to the Bill along the lines I proposed. It is important to note that the Bill as drafted may result in companies being treated unfairly, and that it is a departure from the Labour Party’s previously stated policy. I am grateful that there will be consultation on offences and penalties and that we are apparently to have the opportunity to debate and vote on the regulations, but we would like to see all that in the Bill. However, I beg leave to withdraw the amendment.

Amendment 67 withdrawn.

Amendment 68

Moved by

[Baroness Hayman of Ullock]

68: Clause 5, page 10, line 4, at end insert—
“(6) But an offence is to be regarded for the purposes of this section as committed by a water supply licensee or sewerage licensee only if it is committed by such a licensee in the course of the activities to which its licence relates.”Member’s explanatory statement
This amendment provides that Clause 5 applies to water supply and sewerage licensees only in relation to their licensed activities.

[Baroness Hayman of Ullock (Lab)]

My Lords, I turn now to the amendments that we are making to Clauses 5 to 8. Government Amendments 68, 71, 76, 77 and 83 are minor and technical amendments to clarify who is within scope of the measures in Clauses 5 to 8. The inclusion of water and sewerage undertakers remains unchanged by these amendments.

Ofwat issues water supply and sewerage licences, which give the holder rights to provide water or sewerage retail services—for example, billing—or certain services using the public water and wastewater networks. In this remit, businesses are operating as water companies. The amendments make it clear that the measures relating to penalties and the recovery of enforcement costs apply to licensees only in relation to their water supply and sewerage licensed activities. This clarification means that companies can be subject to these measures where this is relevant to their licensed activity.

As businesses with these licences often operate in other sectors alongside the water industry, wider business activities unrelated to the licensing regime should not be brought within scope of Clauses 5 to 8. These amendments ensure that this is the case. For example, a food manufacturer may hold a water supply licence that is issued by Ofwat and permits them to provide billing and metering water services only. Unrelated permitted or licensed activity, regulated by the Environment Agency and undertaken by this business, such as abstraction of water for food manufacturing, would not be in scope of the Bill measures. This is because these activities, which are already regulated and enforced, are not relevant to the company’s operations as a water company.

These amendments minimise impacts on wider businesses and their regulation and ensure that enforcement regimes are consistent within sectors, while still ensuring that water companies are better held to account where they have failed to deliver for the environment. I commend these amendments to the House.

[Lord Roborough (Con)]

My Lords, I thank the Minister for introducing this group. It is essential that the way that this Bill applies to the activities of licensees is clearly laid out, and we are satisfied that the amendments brought by the Minister are necessary to achieve this.

[Baroness Hayman of Ullock (Lab)]

I thank the noble Lord for his support.

Amendment 68 agreed.

Clause 5, as amended, agreed.

House resumed.

House adjourned at 9.38 pm.