Water Companies: Fines

Baroness Grender Excerpts

Thursday 6th February 2025 Lords Chamber

Asked by

[Baroness Grender]

To ask His Majesty’s Government what steps they are taking to ensure that fines paid by water companies are used to repair the damage done by sewage pollution.

[Baroness Grender (LD)]

My Lords, I thank the vast number of Peers participating in this debate. Some, having discussed culture, felt a bit too squeamish to stay for this debate, which I understand.

In particular, I thank the Minister for responding, particularly given all the discussions already held in the context of the Water (Special Measures) Bill and the various attempts by others, including by Liberal Democrat colleagues, such as Tim Farron MP in the other place and my noble friends Lady Bakewell of Hardington Mandeville and Lord Russell, as well as the noble Duke, the Duke of Wellington, and the noble Baroness, Lady Jones, to put a water restoration fund in the Bill. It is the principle of ring-fenced spending of fines to clear up the mess that we will explore in this debate, while acknowledging the real progress of the Bill, which contains so many things, including, for example, the addition of an environmental duty for Ofwat.

I appreciate the Minister responding to this debate, but perhaps wonder whether she could have put her feet up and instead insisted on leaving this debate to colleagues who answer for the Treasury. If the media reports are correct, it is the Treasury that has blocked the progress of the first wave of applications for the water restoration fund and that needs to explain why that is and what the implications are for other fines and clean-up funds.

Regardless of the discussions around the Bill, there remain some central questions I would like to explore today, prompted by two articles in the Guardian by Sandra Laville, Rowena Mason and Helena Horton. In both articles, the first on 19 January, the second on 22 January, it would appear that the Treasury intends to keep all fines, rather than use them to restore our rivers, lakes and coastlines. The articles go on to reveal that the small sum of £11 million is delayed. It is a small sum but a very important one to many organisations that want to help return our polluted rivers and seas to their natural state.

No doubt, the Minister is well aware that £11 million is less than 0.1% of the much talked about £22 billion black hole. I focus on that sum, which is small for a Government but large for charities and community groups, because of what it suggests will happen next with other fines and future funding. I appreciate I am labouring the point about it being only £11 million, which, of course, is much less even than the recent £168 million in fines to Thames Water, Yorkshire Water and Northumbrian Water for pollution breaches—and doubtless it is those very large sums that have caught the eye and perhaps imagination of the Treasury.

How will the Government meet the principle that the polluter pays if the fines to water companies are not used to repair the damage done by sewage pollution? Will the fines be used for the clean up? I particularly ask the Minister to answer why the first wave of funding for the Water Restoration Fund has been delayed for six months, leaving in limbo all the small charitable and community organisations which are willing and ready to help. What are the implications for future projects such as this? I thank the Wildlife Trusts, the Rivers Trust and the Lords Library for their briefings for this debate today.

The Liberal Democrats recognise the significant sewage pollution legacy that this Government have inherited from the previous Government. I am sorry to pull us back to creative industries once again, but if anyone has seen the recent superb Channel Four docudrama “Brian and Maggie” with key long-form interviews of Prime Minister Thatcher by journalist Brian Walden, they will recall that the water companies and their current state are clearly part of the Thatcherite legacy and—for the avoidance of doubt—not in a good way. At the time of their privatisation, the water companies were debt free but 35 years later they are mired in debt with borrowing that has grown to £68 billion with scandalous payouts of dividends to shareholders of an eye-watering £78 billion—easily more than three times the Government’s current black hole—with negligible levels of investment. I look forward to the speech from the noble Baroness, Lady Jones, who will, I think, talk a bit about the current legal proceedings being taken by our colleague Charlie Maynard MP against Thames Water.

These debts and payouts have all happened while these water companies have presided over the biggest scandal of all: the often illegal and regular dumping of sewage. There were, for example, 1.5 million uses of storm overflows for a total period of over 11 million hours from 2020 and 2023. Indeed, in 2023, sewage spills into England’s rivers and seas more than doubled, leaving our natural environment and unique features such as our chalk streams struggling to survive and an Environment Agency without the financial and regulatory strength to act.

The Labour Party promised in its 2024 general election manifesto to put failing water companies under special measures to clean up water but, to do that, they surely need to use the fines and see through the applications from local communities to help. The Water Restoration Fund was set up in 2022 and Defra at the time said:

“ringfenced funds will go to Defra and will be invested directly back into environmental and water quality improvement projects”.

I refer the Minister to the letter written to the Minister, Emma Hardy MP, on 31 January by the Rivers Trust which asked why she has criticised the scheme for achieving nothing, given that this Government had not allocated the grants at that point. The trust said:

“The fact is that not a single penny of the Fund has been allocated to projects; decisions on round one funding were expected in July, but despite consistent requests for more information, the Rural Payments Agency has not been in contact with applicants for months. This is not simply a legacy of the previous Government, as decisions have remained outstanding for 6 months of the new Labour Government’s tenure”.


In Tim Farron MP’s constituency of Westmorland and Lonsdale, local charities are ready to be put to work, including the South Cumbria Rivers Trust, the Save Windermere and Clean River Kent groups, and the Eden Rivers Trust. Luke Bryant, assistant director of the West Cumbria Rivers Trust, has applied for two projects worth about £260,000. He told the Guardian that the cost to his organisation to prepare the bids had been substantial and said:

“This is a small amount of money for the Treasury. It has not been raised from taxpayers. It has come from fines for environmental damage water companies have caused, if money is not spent at local level on environmental restoration it would go against what people were led to believe was going to happen”.


Another scheme quoted in the Guardian is Supporting Wounded Veterans, which was waiting for news of two bids, for £250,000 in total, from water company fines. Both projects were due to start last summer. One of the schemes—still waiting—involves supporting six veterans who are suffering from PTSD and intend to work on a restoration project on the River Dart in Devon. The veterans have already received the training, but the whole project is now on hold. In the words of the CEO:

“There is outrage that this money could now go to the Treasury. It is a total breach of trust by the government”.


What will happen with future fines and will the polluter, in the end, pay? If the Treasury keeps these fines, the inevitable answer is surely that the polluter has been let off the hook. Local communities will not be funded, while the taxpayer and water consumers will end up either paying off government debt or having increased water bills. I have not come empty-handed but will hand over to my noble friend Lord Russell, who will lay out a possible compromise for the Minister, on what is quite a vexed and difficult issue, through the commission. I ask the Minister to strongly consider the option that he will put in front of her.

While Minister Emma Hardy has made it clear that a final decision will be made on water company fines and penalties, and water improvement, in the spending review, it is already clear that the Minister here has a great understanding of the urgency of this matter. She recognises that our polluted rivers, lakes and seas simply cannot wait. As Wildlife and Countryside Link puts it

“the restoration of Treasury control over water company fines would mark an environmental regression”.

I hope that the Minister, in her response, will be able to reassure us that, on this, the polluter in the end will pay.