Water White Paper

Baroness Grender Excerpts

Monday 26th January 2026 Lords Chamber

[Baroness Grender (LD)]

My Lords, I thank the Minister for the Statement repeat this evening. Some proposals in this White paper are indeed most welcome, including the scrapping of Ofwat—something we have long called for—but it falls short of the fundamental reforms water customers are so desperately in need of. True reform demands root-and-branch change within the water companies themselves, because until profit is no longer their driving force, shareholder payouts will continue to be prioritised over investment and the urgent need to end the scandal of sewage in our rivers and seas. We therefore advocate a move towards mutuality, not the costly nationalisation that others propose but a shift to public benefit companies, a model that has proved so successful elsewhere, particularly in the United States.

I have a few questions. How can the Government claim there will be nowhere to hide when the White Paper rules out structural reform, including changes to ownership and profit extraction? What action is being taken to stop water companies evading the bonus ban, given evidence to the Public Accounts Committee only recently that they have reclassified such payments as “retention incentives”, even in the past year?

If this is truly the biggest overhaul since privatisation, why does it fail to confront the broken ownership model which has enabled pollution, underinvestment and profiteering for decades? Did the Government consider alternative models, such as mutuality, and, if not, why not at this stage, when the current funding system so clearly prioritises shareholders over customers, in turn using huge debts to fund dividends?

What guarantees can Ministers give that a new regulator, potentially more than a year from being operational, will be able to deliver immediate improvements, rather than the risk of extended regulatory failure? What assessment has been made of the cumulative impact of historic underinvestment and excessive dividends in today’s water bills, and how will this White Paper address that inequity? How will the Government work with farmers to tackle agricultural pollution in genuine partnership with them, rather than the slight blame culture that currently exists? Will Ministers commit to ending the sewage cover-up by requiring full publication of sewage volume data, not just the spill duration, as is the current system and the one we had under the last Government? Given record sewage dumping and rising bills, what measurable standards will define this White Paper as a success if river and coastal water quality, for instance, continues to decline?

Finally, and no great surprise from me, when will we see the necessary legislation on our precious chalk streams, which have a very welcome inclusion in this White Paper but which were promised urgent action when we were discussing the Planning and Infrastructure Bill? There continues to be a danger that it will be too late for the chalk streams.

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

My Lords, I thank noble Lords for their interest and their questions on the water White Paper, which we published and laid in Parliament on 20 January. The White Paper outlines how we will work together with water companies, investors, communities and the environment to transform our water system for good, because we need to ensure a sustainable water system for future generations.

The noble Earl, Lord Courtown, asked why it had taken so long and when we were going to see change. As noble Lords know, we have already taken action. We brought in the Water (Special Measures) Act and took action to ring-fence water company investment. The transition plan will be published later this year, which will provide a road map for implementing the changes. We will bring forward a new water reform Bill during this Parliament, alongside which we will make progress with reforms that do not require primary legislation. That will include a shift to a supervisory approach to regulation, with dedicated teams with an understanding of how each company operates. There will be the piloting of regional planning approaches across the country. The water reform Bill will be a priority for the department going forward.

The noble Earl, Lord Courtown, mentioned the extension of environmental permitting to cattle. As the White Paper sets out, we are considering extending environmental permitting beyond pig and poultry to cattle, because cattle are a significant source of water pollution. However, we are working closely with the NFU and others, because we need to take a balanced approach to that issue.

The noble Baroness, Lady Grender, and the noble Earl, Lord Courtown, mentioned Ofwat and regulation. We have already done something on this, with the Water (Special Measures) Act, which shifted the burden of proof from the regulators to the water companies in order to enable automatic fines. The new regulator that will be set up will require us to change legislation. We feel it is really important to make sure that we get this right. The existing regulators will in the interim retain the powers they have until we have the new regulator in place.

The Environment Agency is carrying out record levels of funding and inspections, and is currently on track to deliver 10,000 inspections in the year 2025-26. We are going to issue interim strategic policy statements to the regulator as part of the transition plan, which will provide legally binding instructions on what the regulator’s priorities should be and how they should act during the transition period. We will reform the approach to the strategic policy statements and issue wider strategic guidance to provide long-term direction to the entire water system, alongside specific, measurable directions to the new water regulator.

The noble Earl asked when we are going to make appointments to the regulator and when it will be set up. We intend to make formal appointments to the board of the new water regulator at the earliest opportunity. We believe that providing early leadership will help the new regulator begin to develop its internal strategy, to build a new culture, which is very important, and to deliver the industry-wide approach from the start. As I said, during that transition the existing regulators will retain their full powers and responsibilities. We are considering the funding arrangements that will be needed. The new regulator will have the power to deliver its responsibilities in full and will balance the interests of customers, investors and the environment.

The noble Earl asked about accountability. Clear oversight and accountability will be an important design principle of the new regulator, and we anticipate that the regulator will be accountable to Ministers, and by extension to Parliament, in the way that it carries out its functions. We will consider how parliamentary accountability is handled through the legislation, any sponsorship arrangements and the framework agreement. We recognise the importance of appropriate independence, particularly for economic regulation, in supporting the credibility of the new regime and investor confidence, so we will ensure that there are mechanisms in place, including within the legislation itself, to protect regulatory independence. We will look at other relevant public bodies as we draw that up.

The noble Earl asked specifically about the water restoration fund. We are doubling our funding for catchment partnerships in order to bring together farmers and stakeholders to tackle agricultural problems. I am not in a position yet to say whether we will be continuing with the water restoration fund.

The noble Baroness, Lady Grender, asked about bonuses, which I think everyone feels strongly about, particularly in the light of what has been happening recently with South East Water. We introduced criminality for water bosses who cover up illegal sewage spills and the power to ban unfair bonuses. Some £4 million in bonuses for 10 water bosses was blocked last summer. We absolutely expect water companies to follow both the letter and the spirit of the law, and Ofwat is considering what further action can be taken to ensure that companies are held to account. The water White Paper goes further in order to ensure that water companies have nowhere to hide on poor performance. That includes a new supervisory scheme, which will ensure that the regulator has a stronger grip on exactly what is going on in each company.

The noble Baroness, Lady Grender, asked about mutuality and models of ownership. Mutual or co-operative ownership is not something that we are opposed to in principle. The White Paper says that, if a company’s owners propose changes to the ownership model, the new regulator will assess any proposals carefully against transparent criteria. But to take a company into mutual or co-operative ownership, either the current owners would need to propose this or the company would need to be bought first. We would therefore need to think carefully about how that transition would actually take place. We are not opposed to it in principle, but any mandatory changes in ownership would be costly and complicated, and would not deliver the material benefit. That is why it is important that it is the company’s owners who are proposing any such changes.

The noble Baroness also asked how the White Paper was addressing pollution; we talked about a number of issues there. As we have set out in the White Paper, there are several measures that we are taking to tackle pollution. Importantly, we are looking to strengthen collaboration in planning at catchment and regional level. This will help to identify lower-cost, higher-impact solutions to tackle pollution and include opportunities for farmers—which the noble Earl, Lord Courtown, was asking about—water companies and other stakeholders to work in partnership to ensure that the action taken is effective. We are also developing a new and strengthened approach to monitoring, because we do not want companies marking their own homework, as they have been doing for years. We are looking at how we can strengthen that.

We are shifting the emphasis towards tackling the root causes of sewage pollution by reducing the volume of rainwater and pollutants that enter the sewerage system in the first place and freeing up sewerage capacity for development and growth. I will give some examples of how we are doing that. We are building on the ban on wet wipes, which contain plastic, to stop sewers from getting clogged up so much. We have introduced a national standard for sustainable drainage systems which will help to improve drainage quality. That will be a requirement for all new developments and will have drainage implications beyond that through the National Planning Policy Framework. We are also committed to ensuring that funding looks at how to improve nature and the environment more broadly. This was mentioned when we talked about the PIB.

Overall, we need to improve transparency and ensure that the public can see what is happening in their local waters. That is important if we are to get back consumer confidence and boost protection for customers. We want people to see that this is serious action that we are taking to improve the water systems.