Water Companies

Tuesday 9th June 2026 Lords Chamber

Commons Urgent Question

15:44

The following Answer to an Urgent Question was given in the House of Commons on Monday 8 June.

“I welcome this opportunity to update the House on the progress the Government have made on this important issue. In these divisive times, there are few topics that unite all of us in this House—but water does. We all agree that the status quo cannot continue. Following 14 years of Conservative failure, this Labour Government are turning it around, but there is still lots more to do.

I have been grateful to meet with many passionate campaigners and Members of this House. Recently, that included an engaging meeting with my honourable friends the Members for Norwich South, Clive Lewis, and for Shipley, Anna Dixon. Just last week I met with campaigners from Save Windermere and academics from the People’s Commission on the Water Sector.

People are right to be angry about the problems facing the water industry. Customers have been let down by rising bills, underinvestment in creaking infrastructure, supply interruptions and unacceptable levels of pollution in our rivers, lakes and seas.

That is why this Government took action on day one by updating the water companies’ articles of association—the foundational legal documents that outline their internal rules and purpose—to put customers and the environment at their heart. We also established powerful consumer panels to give customers a voice. In week six of this Government, we introduced fundamental reforms through the Water (Special Measures) Act 2025, ring-fencing customers’ money, banning unfair bonuses, introducing criminal liability for polluting water bosses and creating automatic penalties for wrongdoing. Within a year in office, this Government had changed the guaranteed standards of service, doubling compensation for customers when things go wrong. Following that, we gave the Environment Agency more money and more power to monitor water companies, enabling it to deliver a record 10,000 inspections. After that, we strengthened protections for vulnerable households by changing the reforms around WaterSure to ensure that vulnerable people did not face excessive bills.

No one solution is going to fix the whole water industry. Since I have had the honour and privilege of being in this position, my focus has been on finding the quickest and most effective way to deal with each of those structural challenges. That is exactly why this Government are delivering the once-in-a-generation reform through our clean water Bill to reset the water sector and end the cycle of decline. And because the Government believe in experts, we have also supported the Chief Medical Officer in bringing together a wider expert panel through the Public Health Water Taskforce, providing independent and technical advice on risks, alongside the fantastic work done by the Department for Environment, Food and Rural Affairs’ own scientific adviser, creating the Science Advisory Council to look at what we can do around water.

We will deliver on our promise to clean up our rivers, lakes and seas not just today, but for generations to come. These changes are designed to address the structural challenges in the sector and to deliver a cleaner, more resilient and more accountable water system for the future”.

[Lord Blencathra (Con)]

My Lords, delivery of strategic water infrastructure is crucial to tackling wider systemic issues. What assessment have the Government made of the benefits of smaller farm reservoir networks alongside large-scale water storage? That is the shortest question of the day, I dare to suggest.

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

One thing we have been doing is working with landowners on small storage areas. We know it can be very effective in things such as flooding, as well as providing water for livestock, for example. It is a very good point because, as well as building new large reservoirs to provide drinking water, we need to look at how we put less pressure on our water system. The noble Lord is absolutely right that that could be very helpful.

[Baroness Grender (LD)]

My Lords, are the rumours true that the Government will not publish the water Bill until Thames Water is resolved? The company is in breach of its licence conditions by not having held any grade credit ratings for nearly the last two years and by having failed to tell Ofwat and the Government about change of control. The only plan for the future appears again to be to leave it up to shareholders to own and pillage. Its independent expert states that the cost to the Government of special administration would be zero in the medium term, so why not get on with it?

[Baroness Hayman of Ullock (Lab)]

I am not aware of any such rumours. I do not know where they have come from, but I am not aware of them. On Thames Water, the Government are actively working very closely with Ofwat, which is evaluating the latest proposals from the consortium. Clearly, in doing that it has to take the best interests of customers and the environment into account. We are looking at all and any eventualities that may come out of those discussions with Ofwat, which includes being ready to apply for a special administration regime if necessary.

[Lord Deben (Con)]

My Lords, does the Minister accept that it has to be faced that in the east of England we spend a lot of money pumping fresh water out to sea during the winter and then do not have enough of it for agriculture, industry and homes? Nobody at this moment is looking at the specific issue of how we stop the costs of doing that and enable people in the east of England to have water supplies that at the moment they do not.

[Baroness Hayman of Ullock (Lab)]

The noble Lord makes a very good point—in fact, he made it to me yesterday. I do not blame him for repeating it, because it is critical for the east of the country. All I can say is that we are looking right across the water industry to see how we can improve it and make it operate effectively for consumers and the environment. I will absolutely reiterate to the department the points he has made.

[Lord Sikka (Lab)]

My Lords, water companies have knowingly violated their licence conditions and have more convictions than hardened criminal gangs, yet no executive has been fined and no company forced to relinquish its licence. What will it take for the Government to recognise that privatisation has failed and that water companies ought to be returned to public ownership?

[Baroness Hayman of Ullock (Lab)]

I know the noble Lord is very keen on nationalising the water industry. It is important that we use the clean water Bill coming up later this year to make the systemic changes to the water industry that will deliver us an industry that is fit for the future and that people can rely on. That is the big problem—people cannot rely on the water industry at the moment, and we are seeing issues such as those with South East Water and Thames Water more and more frequently.

When looking at nationalisation, we consider the regulated capital value of the water sector to be the closest proximity for the total value of the sector’s debt and equity; it is currently £107 billion. This is usually used as the starting point for estimations. You can then put on a discount—for poor performance, for example—or a premium. At the moment, £82.7 billion is the cost of the outstanding debt of the water companies. We are not looking to renationalise because of the cost and because of the amount of change we are bringing in. We want to crack on. In the case of nationalisation, government would become responsible for that huge amount of money.

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank the Minister for the work that she and the department are doing in clearing up the rivers, watercourses and seas, though privatisation and EU regulations have played their part. She will be aware that the Cunliffe review referred to pollution and flooding being addressed up stream and to greater use of sustainable drains. Can she resolve her disagreement with her fellow Ministers in the Ministry of Housing to make sure that we can implement Schedule 3 to the Flood and Water Management Act 2010?

[Baroness Hayman of Ullock (Lab)]

As the noble Baroness knows, Defra is very keen to be able to implement SUDS. We know that it makes a huge difference. We know that we need to use sustainable drainage to tackle flooding, particularly given the size of the building programme and the Government’s ambitions in housing, for example. I can only assure the noble Baroness that we will continue to press the department on this.

[Lord Redwood (Con)]

We do need more capacity for reservoirs and water storage. Where have the Government and the regulator got to in granting the permits so that work can get under way to make that much-needed provision?

[Baroness Hayman of Ullock (Lab)]

The Government are very keen to press forward with new reservoirs. It is unfortunate that no new reservoirs have been built in almost 40 years. There are a number of reasons for that, and it is one of the reasons why we brought in the Planning and Infrastructure Act: to allow major projects—nationally significant infrastructure projects—to be able to move forward more quickly. We are currently working through that process.

[Lord Cromwell (CB)]

My Lords, yesterday I asked the Minister how long it takes to build a reservoir, but I am not sure I got an answer. I am told by a bit of internet research that it will take roughly 10 years to get through planning and then a further five to 10 years to build a reservoir, by which time I think most Members of this House will be either former Members or late Members. Are those the figures that the Minister is working to?

[Baroness Hayman of Ullock (Lab)]

I sincerely hope that I will see that first reservoir built and that I will not be a late Member, and I hope the same for the noble Lord. As I said, part of the reason for the Planning and Infrastructure Act was to tackle that issue of planning. It is not just reservoirs; there are many other important nationally significant infrastructure projects. Look at Hinkley Point C for nuclear, for example, and how many years that has taken. That is why we needed to change the planning system: to be able to move these projects on in good time.

[Lord Grayling (Con)]

On these issues, and further to the question asked by the noble Lord, Lord Blencathra, one thing the Government could do, which would be simple and quick, would be to give farmers and landowners permitted development rights to build small ponds and small reservoirs on their land. That would be beneficial on water and beneficial on biodiversity. It is something the Government could do now. Why will they not?

[Baroness Hayman of Ullock (Lab)]

We are not telling farmers and landowners that they cannot do that. There are ways in which we can work with farmers and landowners to allow the building of small water-holding areas. I will discuss this further with the Farming Minister, but it is something that we are already looking at.

[Baroness Coffey (Con)]

My Lords, the Minister was kind enough to reply to my Written Questions about what the Environment Agency in 2021 said was going to be its biggest ever criminal investigation. Five years on, with six charges potentially laid, there has been only one conviction so far. I encourage the Minister to work with her colleagues and fellow Ministers so that, when the water Bill does come through, a lot more power is given to the Secretary of State, as is happening with the Health Bill, so that we can get a move on with making sure that people go to jail when they need to and that we avoid this systemic failure in the first place.

[Baroness Hayman of Ullock (Lab)]

The noble Baroness raises an important point, not just on the water Bill that is coming forward but more broadly. I get very frustrated when we put in laws that should make a difference and then enforcement does not happen or things take too long. It is a really important point that the noble Baroness makes. Obviously, we will be debating the clean water Bill, and I am sure that enforcement and what we do about criminal behaviour will be part of those discussions.