Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

Consideration of Commons amendments
Tuesday 11th February 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That this House do not insist on its disagreement to Commons Amendment 1 on which the Commons have insisted, do not insist on its Amendment 1B to which the Commons have disagreed, and do agree with the Commons in their Amendments 1C and 1D in lieu of the words left out by Commons Amendment 1.

1C: Clause 1, page 4, line 40, at end insert—
“Financial transparency requirements
In the Water Industry Act 1991, after section 35D (inserted by section 1) insert—
“Financial transparency
35E Authority to secure publication of financial overview
(1) The purpose of this section is that members of the public should have easy access to a concise, intelligible and up-to-date overview of the financial position of each relevant undertaker.
(2) A relevant undertaker’s “financial position” includes the amount and essential characteristics of the share capital and debt used to fund the operations of the undertaker.
(3) The overview should include significant changes that—
(a) took place in the period of 12 months before the publication of the overview, or
(b) are expected to take place in the period of 12 months following that publication,
provided that the changes have been publicly announced.
(4) The Authority must from time to time decide—
(a) what information should be included in the overview, and
(b) in what format it should be published,
in order to fulfil the purpose set out in subsection (1) (as read with subsection (3)).
(5) The Authority must secure that each relevant undertaker is required to publish at least once every year, in a prominent place on its website, an up-to-date overview that accords with what the Authority has decided under (4).
(6) It must do so by—
(a) exercising its appointment powers, or
(b) issuing rules under this section.
(7) The Authority’s “appointment powers” are—
(a) its powers to impose and modify conditions of appointments under this Chapter, and
(b) anything it may do by virtue of such conditions with the result that a relevant undertaker is required to act in a certain way.
(8) Sections 35B(7) to (10), 35C and 35D apply in relation to rules under this section as they apply in relation to rules under section 35B.””

1D: Clause 15, page 21, line 24, at end insert—
“(ab) section (Financial transparency requirements) (financial transparency requirements);”

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

My Lords, in moving Motion A, I will also speak to Motion B. Before I speak to the detail of the changes made in the other place, I start by thanking all noble Lords for their continued interest in this important Bill. I give particular thanks to the noble Lord, Lord Cromwell, who is not in his place today, and the noble Lords, Lord Roborough and Lord Blencathra, for their collaboration with my officials and me over the last few weeks. It has been much appreciated.

I am pleased to say that, following constructive engagement with the noble Lord, Lord Cromwell, the Government have tabled amendments that will ensure the public have access to understandable and readily available water company financial data. While it is true that water companies are already required to report annually on their finances, as I have explained during previous debates, the Government agree that more could be done to improve the accessibility of this information. I also understand that the House feels strongly about this being required through legislation, rather than existing non-legislative processes.

The amendments tabled will therefore achieve our shared objective of improving the transparency and accessibility of reporting on key financial metrics. They will insert a new Section 35E into the Water Industry Act 1991, which makes clear that water companies should provide an intelligible overview of their financial position at least once a year. The overview should include a summary of significant changes that have taken place over the last 12 months and will cover key aspects of water companies’ financial positions, such as share capital and debt levels. In addition, this information must be made available in a prominent place on a water company’s website, ensuring accessibility for members of the public. Subsection (4) of new Section 35E also provides Ofwat with the power to determine the information that the water company must publish, as well as the ability to review requirements on financial reporting from time to time. This will ensure that reporting requirements can keep pace with changes in the expectations and needs of bill payers.

Ofwat is also provided with the necessary powers to enforce this new requirement, either through existing water company appointment conditions or through new rules. I would like to be clear, however, that the Government expect this power to be used to ensure that reporting requirements remain relevant, rather than to dilute or diminish the ambition of reporting requirements. Financial reporting will remain underpinned by existing statutory obligations and licence conditions. I am also pleased to confirm that Ofwat’s duty to issue rules relating to financial transparency will commence upon Royal Assent, in line with its duty to issue other rules under Clause 1.

I hope all noble Lords across this House will agree with the other place in its amendments to improve public access to, and understanding of, water companies’ financial information. Beyond this, I know that many noble Lords have expressed concerns around how water companies report on changes in their ownership structures. On this point, I am pleased to confirm that Ofwat will consult to require companies to present information on ownership structure clearly and prominently as part of its upcoming consultation on regulatory accounting guidelines.

I turn now to the changes made in the other place that will require Ofwat to provide a draft of its rules on remuneration and governance to the Secretary of State at least seven days before they are issued. This change was made in response to the changes made at our last debate by the noble Lord, Lord Blencathra. I emphasise that the Government acknowledge the sentiment of the noble Lord’s changes, which were to ensure that there is sufficient oversight of Ofwat’s rules. However, as I have previously outlined, we cannot countenance a provision that would both delay Ofwat’s rules coming into force and compromise the independence of Ofwat. I emphasise that the Bill already includes a requirement for Ofwat to run a statutory consultation on the rules before finalisation. This will guarantee adequate scrutiny of Ofwat’s rules. I also hope noble Lords agree that it would not be appropriate for Ofwat’s rules to be confirmed through affirmative statutory instrument.

On this basis, I hope that noble Lords agree with the other place in its amendment to require Ofwat to provide the rules to the Secretary of State. Again, I thank the noble Lords, Lord Blencathra and Lord Roborough, for working with me constructively to reach an agreed position on how we can ensure proper scrutiny of the rules. I beg to move.

[Lord Roborough (Con)]

My Lords, I begin by thanking the Minister for her constructive engagement with the Official Opposition during the progress of this Bill.

We are delighted that the Government have listened to the clear view of the House that more transparent financial disclosure of the state of water companies’ balance sheets and their capital structuring plans is urgently needed. The Government’s amendment delivers much of what the noble Lord, Lord Cromwell, who is not in his place, asked for, which we supported him in insisting on. We join other Members of the House in congratulating the noble Lord on securing this meaningful improvement to the Bill.

While the Government’s Amendment 2 does not deliver the same level of oversight of Ofwat’s rule-making power that our own amendments would have delivered, I am pleased that they have now tabled a substantive amendment in the other place. We accept this change to the Bill.

We disagree that our amendments requiring a statutory instrument would have led to material delay in the delivery of the Ofwat rules. However, we accept that our amendment was not conducive to a fully independent regulator. Given Ofwat’s clear failures over decades, it is no surprise that this House has supported our amendments on two previous occasions. We on these Benches question the merit of the regulator continuing to have its independence from government treated as sacrosanct. This Government’s intervention to encourage regulators to prioritise growth already demonstrates that this independence is illusory. We look forward to reading the findings of Sir Jon Cunliffe’s review on this matter in due course.

Even though it does not go as far as we wanted, we welcome the Government’s amendment, which will give the Secretary of State a seven-day opportunity to review the draft rules and, presumably, voice any concerns to the regulator prior to their publication. We welcome this additional accountability of the regulator to the Executive, who are, in turn, accountable to Parliament.

I note that, in the other place, members of the party sitting on the Benches to my left appeared to speak in favour of my amendment, and the amendment retabled by my noble friend Lord Blencathra. Had they seen the merits of the amendment earlier and not abstained twice in your Lordships’ House, we may have been able to achieve even more on the accountability of the regulator.

In conclusion, I thank all Members of the House for their engagement throughout the passage of the Bill. In particular, I thank the noble Lord, Lord Cromwell, my noble friend Lord Blencathra, the Minister’s Bill team and the Opposition Whips’ Office research team. We respect the fact that the Water (Special Measures) Bill was a manifesto commitment, and we are pleased that it will leave this House in a better state than when it arrived. We hope that it will continue to help the cleaning up of our rivers, lakes and beaches—the most important goal of the Bill. We await the publication of Sir Jon Cunliffe’s review and intend to continue to push His Majesty’s Government to do more, without increasing the burden on water consumers.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Lord, Lord Roborough, for his support and his kind words as to how we have reached this position. I agree with him that the Bill leaves this House, as most Bills do, in a better shape than when it arrived.

I hope that all noble Lords agree with the other place in its amendments brought forward today, which will strengthen water company reporting requirements while ensuring that Ofwat’s rules are brought forward without delay. These are important changes, which have further strengthened the Bill. I am grateful for the collaboration that took place with noble Lords across the House to arrive at this point.

I also hope that the amendments brought forward by the Government provide reassurance to all noble Lords that, where there has been strong feeling across the House on certain matters, the Government have not only listened but taken meaningful action. On this basis, I hope that all noble Lords can support Commons Amendments 1C, 1D and 2B. I once again thank all noble Lords for their time and interest in this important Bill.

Motion A agreed.

Moved by

[Baroness Hayman of Ullock]

That this House do not insist on its disagreement to Commons Amendment 2 on which the Commons have insisted, and do agree with the Commons in their Amendment 2B in lieu of the words so left out.

2B: Clause 1, page 4, line 32, at end insert—
“(5) The first rules under section 35B of the Water Industry Act 1991 (inserted by subsection (3)) may not be issued unless—
(1) the rules have been provided in draft to the Secretary of State, and
(2) the period of 7 days beginning with the day on which the draft was provided has elapsed.”

[Baroness Hayman of Ullock (Lab)]

My Lords, I have already spoken to Motion B. I beg to move.

Motion B agreed.

Water Companies: Fines

Baroness Hayman of Ullock Excerpts

Thursday 6th February 2025 Lords Chamber

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

My Lords, I am pleased to be able to respond to this Question on the fines paid by water companies. I thank the noble Baroness, Lady Grender, for raising this important matter and noble Lords for their interesting and valuable contributions and suggestions.

As we have heard in this debate, for too long water companies have discharged unacceptable levels of sewage into our rivers, lakes and seas, with 2023 seeing record levels of sewage discharges. We have been absolutely clear that we will not allow poor performance within the water companies to continue. This is why we are taking forward a substantial reform programme to deliver better results for the environment, customers and wider society.

I reassure the noble Baroness, Lady Grender, and others who have raised this that Defra is committed to the “polluter pays” principle. We have taken a number of actions already. In his first week in office, the Secretary of State secured an agreement from water companies and Ofwat to ring-fence money for vital infrastructure upgrades, so that it cannot be diverted to shareholder payouts and bonus payments. We are also placing water companies under special measures through the Water (Special Measures) Bill. I thank the noble Earl, Lord Russell, for his particular support in this debate for that work.

The right reverend Prelate the Bishop of Norwich mentioned the need for culture change, with which we absolutely agree. That is why the Bill is designed to drive meaningful improvement in the performance and culture of the water industry, as a first important step to enabling wider, transformative change right across the sector. I will not go into the detail of the Bill, as we have debated it so recently, and all noble Lords who have taken part are aware of what it includes. Collectively, its measures will provide the most significant increase in enforcement powers for the regulators in a decade. They will give them the teeth that they need to take tougher action against water companies in the next investment period as well as ensuring that they are able to recover costs for a much greater range of enforcement activities. I am afraid that I do not have the detail of those costs and fines at my fingertips.

On top of that Bill, last October, the Secretary of State, in conjunction with the Welsh Government, launched the independent commission on the water sector regulatory system, chaired by Sir Jon Cunliffe. Noble Lords also referred to that today. It is designed to be wide ranging and look at ways to fundamentally transform how our water system works and to clean up our rivers, lakes and seas for good. It is expected to be the largest review of the water industry since privatisation. It will look into many of the concerns that noble Lords have raised today, including those from the noble Earl, Lord Effingham, and my noble friend Lord Browne.

Last month, leading voices from the environment, public health and investment were announced as the new advisory group to the commission. We will publish a call for evidence in the next few weeks to bring in views from all parties on how we can reform. As the noble Baroness, Lady McIntosh, said, Sir Jon has also been meeting with interested groups. As noble Lords have said, we will get a report from the commission by the end of June, which will have recommendations that we can look at how best to take forward. I intend them to form the next piece of legislation that attracts further long-term investment and cleans up our waters for good.

Agriculture, road run-off, physical modifications and chemicals also significantly impact water quality and availability. These huge challenges will require a much broader approach to water management that goes beyond addressing a single issue. The independent commission is going to examine the strategic regulatory frameworks that underpin the water system, including the water framework directive and river basin management plans.

Importantly, the commission will also look at catchment-based approaches. I do not believe that we can resolve this without looking at these approaches to address the full range of demands on the water system and at how we can resolve things in an integrated and holistic way.

The public are, of course, rightly concerned to know where the money that they pay for their water bills is actually going. In December 2024, Ofwat published its final determinations for price review 2024, which sets company expenditure and customer bills for 2025-2030. This will deliver substantial, lasting improvements for customers and the environment, and will bring an approximately £104 billion upgrade for the water sector. This investment will mean clean rivers, seas and lakes across England and Wales. It will also create more jobs and provide more investment. This increased investment will fund the improvement of river water quality by improving more than 1,700 wastewater treatment works. It will also improve or protect more than 15,000 kilometres of rivers across England and Wales. Water companies will also invest £12 billion—a record amount—into improving more than 3,000 storm overflows across England and Wales. This will reduce bills by 45% compared with 2021 levels.

Beyond these measures, since 1 January, water companies are required to publish data relating to discharges from all storm overflows within one hour of discharge. This means that all storm overflows—of which there are more than 14,000 in England—are now monitored, with discharge data being published in near real time. Importantly, this will provide the crucial information that regulators need when they are making their investigations. It will also create an unprecedented level of transparency to enable regulators and the public to see where and how often overflows are discharging, and better enable water companies to be held to account. Combined with the measures in the Water (Special Measures) Bill to require monitoring of all emergency overflows, this will meet the Government’s commitment to ensure the monitoring of every sewage outlet.

Much of the debate was around the future of the water restoration fund. I will ensure that the department is aware of the strength of noble Lords’ feelings on this issue. The noble Baroness, Lady Grender, mentioned a number of specific projects. At this point, I need to declare an interest: my husband is a trustee of West Cumbria Rivers Trust, so I am very aware of local concerns in this area. Again, it enables me to represent noble Lords’ concerns to the department.

I reassure noble Lords that Defra is currently evaluating how water company fines and penalties can be reinvested in improvements to the water environment. We will announce a final decision on this in due course. It is important that the Government do not let companies get away with any illegal activity. Where breaches are found, the Environment Agency must not hesitate to hold companies to account. The regulators, the Environment Agency and Ofwat, have launched the largest ever criminal and civil investigation into water company sewage discharges at more than 2,200 treatment works. The EA has a dedicated team of more than 30 staff working on this. Where companies fail to meet their statutory or licence obligations, Ofwat has the power to take action through an enforcement order or financial penalties of up to 10% of the company’s annual turnover. The cost burden for water company fines is borne by their shareholders, not by charging customers.

I must keep an eye on the time but, before I conclude, there are a few questions I must answer. I thank my noble friend Lord Berkeley for his question but, as he said, I do not have the answer in front of me. I will need to write to him with the detail of the specific issue that he asked about.

The noble Earl, Lord Russell, asked about chalk streams. The Government are committed to restoring chalk streams. We are continuing to invest in priority local projects to restore them—for example, through the water environment improvement fund, the Government are funding more than 45 projects during this financial year to improve chalk streams. This is worth £2.5 million of government investment, and each has an injection of private investment.

We are also committed to ending the damaging abstraction of water from rivers and groundwater wherever possible. Through the Environment Agency’s restoring sustainable abstraction programme, which was launched in 2008, so far a total of 110 licences that would affect chalk streams have been revoked.

The noble Baroness, Lady McIntosh, asked about Schedule 3. This Government are strongly committed to requiring standardised sustainable drainage systems in any new developments. I apologise to her, but I am unable to say more at this stage, other than that a final decision on whether to progress implementation of Schedule 3 at this time will be made in the coming months. I am afraid that I cannot offer any more specific information on that at the moment.

I thank the noble Baroness, Lady Grender, once again for securing this debate. The speakers were not hugely numerous, but the passion was there—it is very important to note that. It is very clear from the regular number of questions and debates that we have in this House—and, no doubt, in the other place as well—that the concerns about the water industry, and the pollution from it, must be government priorities. I assure noble Lords that the Government are absolutely and fully committed to fixing the broken water system that they inherited. I reaffirm the Government’s commitment to ensuring that the damage caused by sewage pollution is repaired.

Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

Consideration of Commons amendments
Wednesday 5th February 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That this House do agree with the Commons in their Amendment 1.

1: Clause 1, page 2, leave out lines 4 to 8

--- Later in debate ---

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

My Lords, I will also speak to the other amendments in this group and to the Motions tabled by the noble Lords, Lord Cromwell and Lord Blencathra.

I am delighted to be back in the Chamber debating this important legislation. I thank all noble Lords for their continued interest in this Bill. In recent weeks I have met noble Lords from across the House to discuss changes made to the Bill during its passage through the other place, and I am grateful for the insightful questions and views shared with me and my officials in advance of our debate today. I am also grateful to the noble Duke, the Duke of Wellington, for accompanying me on an interesting day we spent at two emergency overflows operated by Anglian Water. Although Clause 2 is no longer in scope of our discussions on the Bill, I hope the noble Duke found his visit helpful in bringing to life some of the issues we considered during previous debates.

I turn to today’s debate and to the first group of amendments that the House must consider. I thank the noble Lords, Lord Cromwell, Lord Roborough and Lord Blencathra, for the very constructive way in which they have worked with me and my officials to strengthen the Bill during its passage through this House. Although I am sure the noble Lords were somewhat disappointed to see the Commons overturn their amendments, which were voted into the Bill at Lords Report stage, I am grateful to them for meeting me over the past weeks and months to discuss the reasons why and to try to find alternative means of realising the intent behind their amendments.

I will now take some time to share the key points from these discussions with other noble Lords here today. Commons Amendment 1 removes from Clause 1 the requirement for Ofwat to set rules on the reporting of water company finances. This requirement was removed because it would duplicate existing processes and requirements set out within water company licences, which I will briefly summarise now.

Water companies are already required under their licences to publish, by a set date, financial performance metrics within their annual performance reports. These metrics include interest on their borrowings, financial flows and an analysis of their debt. Condition F requires water companies to keep appropriate accounting records, while condition P requires them to report material financial issues to Ofwat and includes restrictions on dividend payments. If water companies do not comply with these licence conditions, Ofwat can take enforcement action, including issuing fines.

I hope that noble Lords can therefore see why additional, detailed financial reporting requirements, such as those that would be introduced as a result of Motion 1A tabled by the noble Lord, Lord Cromwell, would not be a necessary addition to the Bill. However, having further discussed the intention behind the previous amendment with the noble Lord, the Government now understand that he has been seeking more transparent and accessible reporting on the key financial metrics. Indeed, I believe that this is what Amendment 1B, also tabled by the noble Lord, Lord Cromwell, seeks to do.

Ensuring that key financial information is presented in a format that is easy for the public to understand is vital, particularly if we are to rebuild public trust in the sector, and we agree with the noble Lord that there is room for improvement in making financial data more accessible. From studying a range of water company financial reports, it is evident that some water companies provide information much more clearly than others, so to achieve our shared objective to improve accessibility, in recent weeks my officials have worked closely with Ofwat and the noble Lord, Lord Cromwell, to identify the most effective way of ensuring that data on water company finances is presented in a simple format. The Government and Ofwat believe that this outcome can be achieved through the use of water company annual performance reports, which must be produced in line with Ofwat’s regulatory accounting guidelines.

As previously outlined, Ofwat requires companies to keep appropriate accounting records through licence conditions. Crucially, Ofwat can also specify how this information is presented through its regulatory accounting guidelines. Ofwat is due to consult on changes to these guidelines this year, which will provide an opportunity to update how financial information is presented in annual performance reports. These updates could include, for example, a requirement for a summary table of financial information, such as debt levels and financial restructuring, among other things, to be presented at the front of the report, all on one page.

Using Ofwat’s regulatory accounting guidelines ensures flexibility and means that requirements around data presentation can be updated to reflect changes in the public’s priorities and interests. Ofwat can also use its guidelines to help ensure consistent presentation of financial information across all water companies’ reports. Updating these guidelines would quickly and effectively achieve the objective that the noble Lord, Lord Cromwell, seeks to achieve.

I understand that other noble Lords across the House also want to see improved transparency around water company financial reporting, and I encourage noble Lords to think about how we can most effectively achieve this outcome. We believe that a dynamic approach using existing powers, rather than a non-specific legislative requirement, would be more effective because it can respond to the changing needs and expectations of the public.

If the House agrees with the Government’s proposed approach, Ofwat stands ready to consult on the necessary changes to its reporting guidelines and the change will be made in time for the 2025-26 annual performance reports to be published. However, I am not able to ask Ofwat to proceed with this approach if water companies are separately required to meet a new legislative obligation. Therefore, I kindly ask all noble Lords to carefully consider the options I have outlined here today.

I now turn to Commons Amendment 2, which removed the requirement for rules made by Ofwat under Clause 1 to be brought into force by statutory instrument and within six months of the Act coming into force. I will take this opportunity to speak to Motion 2A tabled by the noble Lord, Lord Blencathra, which does the reverse. As the noble Lord is aware, the Government understand the need to ensure that Ofwat’s rules are brought forward as soon as possible. Indeed, that is why the Government tabled Commons Amendments 5 to 7, which collectively will ensure that the duty on Ofwat in Clause 1 to make rules commences on Royal Assent.

Motion 2A would require publication of Ofwat’s rules within six months of this Act coming into force. This timing obligation is rendered unnecessary as a result of Commons Amendments 5 to 7, which amend the commencement provisions for Clause 1 so that Ofwat will now have a statutory duty to issue the rules without significant delay following Royal Assent. I hope noble Lords can understand why we believe that this aspect of Motion 2A is no longer appropriate. I am also pleased to report to the House that Ofwat has been making good progress towards developing its rules and had already completed its initial policy consultation at the end of 2024.

The other key element of Motion 2A requires that rules made by Ofwat under Clause 1 be brought into force by statutory instrument. Existing powers in the Water Industry Act 1991 for Ofwat to make rules adopt the same approach to scrutiny as in Clause 1 and do not require confirmation by statutory instrument. Further, I am concerned that the additional scrutiny process in Motion 2A would lead to a delay in bringing the rules into force. I have also previously outlined that this additional legislative process risks compromising the independence of Ofwat, which must be protected. The necessary secondary legislation would also need to be prepared by government, and therefore represents significant government interference in the independent regulatory process. This kind of interference has the potential to have adverse impacts on investor confidence and confidence in the regulatory regime.

I also note that the Delegated Powers and Regulatory Reform Committee has reviewed and reported on the appropriateness of all powers in the Bill, excluding the new clause on support schemes, and did not recommend additional parliamentary scrutiny of Ofwat’s rule-making processes. While the noble Lord, Lord Blencathra, does not necessarily agree with the Government on this point, I know we agree on the intention behind the amendment, which is to ensure that parliamentarians have sufficient oversight of Ofwat’s rules.

On that basis, my officials have worked with the team of the noble Lord, Lord Blencathra, and Ofwat to find an alternative way of providing parliamentarians with the opportunity to scrutinise Ofwat’s rules. I am pleased to say that, as a result of this collaborative approach, Ofwat has offered to hold a drop-in session in Parliament where it will answer questions on its proposed rules on remuneration and governance. This session would provide all interested Peers and MPs with the opportunity to ask Ofwat questions about the rules and raise any concerns before they are finalised.

Ofwat has provided a draft of a letter stating its intention to hold this drop-in session and stands ready to finalise and issue this letter to formalise its commitment to doing so should the House be supportive of this approach. I therefore urge the noble Lord, Lord Blencathra, in light of what I have just laid out, to reconsider whether his Motion is now needed. As I am sure he would understand, Ofwat cannot reasonably be expected to offer its drop-in session if additional, legislative processes are required in this space.

I once again thank the noble Lords, Lord Cromwell, Lord Roborough and Lord Blencathra, for their continued and thoughtful scrutiny of the Bill and for drawing attention to areas where improvements could be made and on which the Government have responded, as I have laid out. I hope the noble Lords, and indeed all noble Lords across this House, will see that the alternative proposals put forward by the Government and Ofwat present a more effective means of achieving the intended outcomes. On that basis, I hope that both noble Lords feel able to not press their Motions. I beg to move.

Motion 1A (Amendment to the Motion on Amendment 1)

Moved by

--- Later in debate ---

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I am grateful for this opportunity to speak at this stage of the Bill, which is ping-pong, not Report. I was satisfied with the progress we made on the Bill while it was completing its passage in this Chamber before going off to the other place. I am naturally disappointed that the amendments we voted on were removed. However, I understand the rationale for this. I am grateful to the Minister for her time, and that of her officials, in providing a briefing ahead of ping-pong. This helped to set the scene for moving forward.

From the outset, the Government made it clear that the Water (Special Measures) Bill was the first step in a series of changes that the Government were considering to improve the water industry generally. Yesterday morning, I attended a briefing with Sir Jon Cunliffe, who is chairing the water commission, which is looking into a wide range of aspects of the water industry on behalf of the Government. The water commission will call for evidence towards the end of this month, and a period when submissions will be made and received will follow. At the right time, Sir Jon will publish his report. At that stage, there will no doubt be a series of debates and discussions around the recommendations contained in that report.

Given that the Government’s stated aim is to look at the water industry in its entirety, I believe that there is wisdom in waiting for the water commission to report, so that we can see where the Water (Special Measures) Bill fits into that scenario. We could then understand how the pieces of the jigsaw fit together and have a more complete picture of how the water industry is to be taken forward for the benefit of both the consumer and the water companies as a whole.

Turning to Motions 1A and Amendment 1B, in lieu of government Amendment 1, I understand the desire of the noble Lord, Lord Cromwell, to have transparency and clarity over the issue of water company debt. He is looking for this to be in the Bill. It is not acceptable for water companies to hide their level of debt in the depths of their financial reports, where it is unlikely that many water bill payers will be able to find it. Transparency is essential for consumers to grasp the level of debt that water companies are carrying. If the noble Lord, Lord Cromwell, is not satisfied with the Minister’s response this evening and decides to test the opinion of the House, these Benches will support him.

Motion 2A, from the noble Lord, Lord Blencathra, which seeks to amend the government Motion on Amendment 2, would require the Secretary of State to bring in regulations relating to Ofwat via statutory instrument. The use of statutory instruments to bring in legislation is a slow, cumbersome and not very transparent way of moving forward; perhaps that is the intention of the noble Lord, Lord Blencathra. These Benches did not support the noble Lord, Lord Roborough, when he moved his original amendment on Report. We welcome the Minister’s commitment that Ofwat will hold drop-in sessions, and we will not support the noble Lord, Lord Blencathra, today.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank all noble Lords for their further contributions to this debate. I am grateful to the noble Lords, Lord Cromwell and Lord Blencathra, for providing further detail around their concerns. I would like to make it clear that the Government have carefully considered all non-government amendments tabled throughout the passage of the Bill, and that, where we agree with the intent behind a given amendment, we have worked hard to find an appropriate way forward.

It is in that spirit that I reviewed Motion 1A and Amendment 1B, tabled by the noble Lord, Lord Cromwell. As previously explained, the Government agree that it is of utmost importance to ensure that members of the public can easily access and understand information on water company finances. However, I do not agree that the approach proposed by Motion 1 A and Amendment 1B is the most effective way of achieving this outcome. I am disappointed that, after considerable engagement on the Government’s alternative approach, the noble Lord, Lord Cromwell, is still dissatisfied with the suggested way forward.

The noble Lord has previously spoken to me about the need to specify how data is presented. I want to be clear that the specific metrics that he wants to see in reports are already required to be included through licence conditions. Indeed, he has pointed that out himself; the information appears in the annual Water Company Performance Report. What is missing, and what we agree with him on, is better formatting and clearer presentation with this information readily available right at the front of these reports, which is exactly what we propose can be achieved through regulatory accounting guidelines.

The noble Lord’s amendments require only that the data is presented in a format that can be “readily accessed and understood”, which is arguably open to interpretation by water companies. Having listened closely to him, we agree that data should be presented in this way, but the approach proposed by government would be more specific and could include, as I mentioned before, a summary table of financial information right at the front of the annual Water Company Performance Report. As such, while I am grateful to the noble Lord for bringing this important matter to the attention of the House, I maintain the view that primary legislation is not the most effective means by which to achieve the intended outcome. I therefore urge Members of the House to support Commons Amendment 1 and the non-legislative proposal put forward by government and Ofwat.

I am also grateful to the noble Lords, Lord Roborough and Lord Blencathra, for continuing to raise the need for sufficient parliamentary oversight of Ofwat’s rules. These rules will be central in driving improvements in the culture of water companies, which of course we all want to see. As such, it is right that we, as parliamentarians, do what we can to ensure the rules are robust, without compromising the regulatory independence of Ofwat. That is why I was pleased to receive Ofwat’s offer of a drop-in session, which would give noble Lords and MPs an opportunity to further understand and raise concerns on the rules before they are finalised. I therefore urge all members of the House to support Commons Amendment 2 and enable Ofwat to move forward with arrangements for that session.

To finish, I reiterate that the Government strongly agree with the need to ensure increased transparency and accessibility of water company data and ensure sufficient scrutiny of Ofwat’s rules on remuneration and governance. I believe that the approaches that I have outlined today demonstrate the commitment of government and Ofwat to effectively and comprehensively address the concerns raised by noble Lords on these topics. I therefore ask that all noble Lords support Commons Amendments 1 and 2 and, in conjunction, the non-legislative proposals put forward by the Government.

[Lord Cromwell (CB)]

My Lords, the hour is late. I thank the Minister for her kind, helpful and almost persuasive words. I do not think that anything that she has proposed is precluded by my amendment—in fact, it could be a way of implementing it. Had I put it down in such detail, I would have been told that it was too prescriptive. However, for the reasons I set out earlier, I am afraid that my amendment needs to be in the Bill, and I wish to test the opinion of the House.

--- Later in debate ---

Moved by

[Baroness Hayman of Ullock]

That this House do agree with the Commons in their Amendment 2.

2: Clause 1, page 4, line 33, leave out subsections (5) and (6)

--- Later in debate ---

Moved by

[Baroness Hayman of Ullock]

That this House do agree with the Commons in their Amendment 3.

3: Clause 10, page 15, leave out lines 6 and 7 and insert—
“(a) sections 205A and 205B of the Water Industry Act 1991 (pollution incident
reduction plans and implementation reports),”

[Baroness Hayman of Ullock (Lab)]

My Lords, I will speak also to Commons Amendments 4 to 9.

I will begin by speaking to Commons Amendments 5 to 7, which amend the commencement provisions for Clause 1. These amendments will see Ofwat’s duty to set rules on remuneration and governance brought into force on Royal Assent, rather than through the use of commencement regulations. This emphasises the Government’s expectation that Ofwat’s rules should be in place as soon as possible following Royal Assent, as well as providing greater certainty to Ofwat and water companies as to when Ofwat’s duty will come into force.

I know that many noble Lords—in particular the noble Lord, Lord Roborough—previously spoke to the importance of ensuring that Ofwat’s rules on remuneration and governance will be set promptly after Royal Assent. I hope that these amendments provide further reassurance that the Government expect these rules to be brought forward at pace, and I hope that the House is supportive of them.

Commons Amendment 3 is another minor and technical amendment, this time to Clause 10. It ensures that the Environment Agency and Natural Resources Wales’s cost recovery powers are broad enough to enable the recovery of costs associated with the enforcement of the requirement on water companies to produce implementation reports.

Noble Lords will recall that this requirement was added to Clause 2 on Report following calls from across this House to strengthen requirements around the implementation of measures set out in water company pollution incident reduction plans. However, an expansion in the regulators’ cost recovery powers—as set out in Clause 10—was not enabled at the same stage, which left a potential funding gap. Commons Amendment 3 addresses the gap, ensuring that the Environment Agency and Natural Resources Wales can recover all costs associated with the enforcement of the new requirements introduced by Clause 2.

Commons Amendment 3 also clarifies that cost recovery powers concerning pollution incident reduction plans and the implementation reports are available for plans covering areas that are wholly or mainly in Wales, as well as plans covering England. I again hope that noble Lords will feel able to support this amendment, which will help to ensure the regulators can carry out their enforcement duties and functions effectively.

I will speak now to Commons Amendment 4, which introduces a new clause to the Bill, and Commons Amendment 8, which is consequential to Commons Amendment 4. During the Bill’s passage through this House, many noble Lords voiced concerns about vulnerable customers and their ability to absorb forthcoming increases in their water bills. I thank all noble Lords who shared their views on this critical matter, particularly the noble Baroness, Lady Bakewell, who worked with her team to ensure that the discussion continued in the other place.

I reassure the House that the Government absolutely recognise and share these concerns. That is why the Government introduced Commons Amendments 4 and 8, which add to existing powers for water companies to provide for special charging arrangements for customers in need. This will enable water companies to provide consistent support for water consumers right across the country, replacing the current postcode lottery of existing support schemes, which vary from company to company.

The new clause will allow for the possible automatic enrolment of vulnerable customers on to future schemes, enabling them to get the full support to which they are entitled without having to proactively apply. This will be enabled through improved information sharing between public authorities and water companies.

The details of any scheme brought forward will be established through consultation, as required by the new clause and secondary legislation. In the meantime, existing schemes will continue to operate to ensure that vulnerable customers across the country are supported. Separately, we remain firm on our expectation that water companies will hold themselves to account for their public commitment to end water poverty by 2030 and will work with the sector to ensure appropriate measures are taken to deliver this. I hope that noble Lords will welcome this addition to the Bill and will support the Government in ensuring that the necessary powers are in place to enable support to be brought forward through secondary legislation.

Finally, briefly, Commons Amendment 9 was tabled simply to remove the privilege amendment made in my name in this place. Tabling such an amendment is standard practice; I therefore believe no noble Lord will oppose the Government doing so.

I again thank all noble Lords for the time and attention that they have given to the Bill. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I shall speak briefly to Amendment 4 and the consequential Amendment 8. I support the Government in this regard. I put a question or two to the Minister on the correlation between energy poverty and water poverty. Is this something that her Government will look at closely? The Minister wrote to me with the level of bad debt, which is a staggering figure: between 2019 and 2024, it cost the water sector £2.2 billion. Will this be addressed by the amendments that she has brought before the House? That would be very welcome indeed. Obviously there are those who can pay but will not pay, but there are those vulnerable customers to which she referred, and I welcome the fact that continuity of support will be secured by these amendments. Although I lend my support, I would be grateful if the Minister could address those two brief points.

--- Later in debate ---

[Lord Blencathra (Con)]

My Lords, I begin by saying to the noble Baroness, Lady Bakewell of Hardington Mandeville, in the nicest possible way, that I feel she did me a disservice in her remarks in the previous debate when she suggested that our support for a statutory instrument was to slow things down. Our support for the statutory instrument was to get better parliamentary scrutiny. As a former chairman of the Delegated Powers Committee, I am well aware of the speed at which the Government can go at times, and making statutory instruments is not a slowing down measure.

However, I officially rose to speak to the government amendments in this group which were made in the other place. The principal, substantive amendment relates to the special provision in water company charging schemes and will help the Government to ensure that water companies take a consistent approach when supporting vulnerable customers. We are firmly in favour of protecting consumers from unaffordable increases in their bills, and we are disappointed that the Government rejected our amendment to protect consumers from higher water bills at Report.

The other government amendments largely relate to the commencement of the Bill, and we will not oppose those changes at this stage.

[Baroness Hayman of Ullock (Lab)]

I thank noble Lords for their contributions to this short debate. I thank the noble Baroness, Lady Bakewell, for her support and the noble Lord, Lord Blencathra, for not voting against anything that we are proposing.

On the questions put forward by the noble Baroness, Lady McIntosh of Pickering, obviously, money owed by customers is bad debt and anything that we do to address the amount of money that is owed for vulnerable customers will clearly have an impact, so these amendments will affect the issue that she raised. I appreciate the point she makes on energy costs and water poverty. Poverty needs to be addressed in all sorts of ways. I am pleased that I am a member of the Government’s child poverty task force; these are the kinds of issues that it is looking at and considering how best to address, because there is no point looking at the issue in just one place. You have to look at it right across the piece. That is what we hope to address in this case. With no further ado, I thank noble Lords very much for their time on the Bill so far.

Motion on Amendment 3 agreed.

Moved by

[Baroness Hayman of Ullock]

That this House do agree with the Commons in their Amendments 4 to 9.

4: After Clause 11, insert the following Clause—
“Consumer charges
Special provision in charges schemes
(1) The Water Industry Act 1991 is amended as set out in subsections (2) and (3).
(2) In section 143A(3)(b), after “regulations” insert “or, in the case of regulations made by the Secretary of State (rather than the Welsh Ministers), by which that entitlement is otherwise to be established”.
After section 143A insert—
“143AA Special provision under section 143A: financial arrangements
(1) Subsection (2) applies if regulations under section 143A impose on relevant undertakers whose areas are wholly or mainly in England requirements of the sort described in subsection (2)(d) of that section.
(2) The Secretary of State may by regulations establish a scheme for the purpose of distributing among the relevant undertakers that are subject to the requirements all or part of the costs incurred by them in complying with the requirements (with the distribution to be on such basis as is provided for in the regulations).
(3)The scheme may operate by way of—
(a) direct payments between relevant undertakers, or
(b) payments into and out of a fund established and maintained under the regulations.
(4) Subsections (5) and (6) apply if a scheme is established under subsection (2).
(5) If the Secretary of State or the Authority makes price control provision, they must design the provision with a view to not preventing the passing-on of costs as described in subsection (7).
(6) The Secretary of State may by regulations—
(a) make provision about how the Authority is to comply with subsection (5);
(b) modify the effect of any price control provision made by the Authority with a view to enabling the passing-on of costs as described in subsection (7).
(7) The passing-on of costs occurs when a relevant undertaker is able to recoup its relevant net costs by charging additional amounts under section 142(1).
(8) An undertaker’s relevant net costs are the total of its costs incurred in—
(a) complying with the requirements referred to in subsection (1), and
(b) complying with the requirements of the scheme, less any payments it receives under the scheme.
(9) In this section, “price control provision” means provision made by or under—
(a) regulations under section 143A,
(b) rules under section 143B, or
(c) a condition of a relevant undertaker’s appointment under Chapter 1 of Part 2, that restricts the amount that may be charged by a relevant undertaker under section 142(1).
(10) Where a determination within section 12(3) (determination by CMA provided for by undertaker’s appointment) involves the making of price control provision, subsections (5) and (6) apply in relation to the CMA as they apply in relation to the Authority.
143AB Special provision under section 143A: consultation
(1) This section applies to—
(a) regulations under section 143A that, in relation to relevant undertakers whose areas are wholly or mainly in England, make provision of the sort described in subsection (2)(d) of that section, and
(b) regulations under section 143AA.
(2) Before making regulations to which this section applies, the Secretary of State must (subject to subsection (3)) consult—
(a) the Authority,
(b) the relevant undertakers to which the regulations would apply, and
(c) such other persons as the Secretary of State considers appropriate.
(3) But the Secretary of State does not have to consult if— (a) the regulations only amend earlier regulations, and
(b) the Secretary of State considers that the amendments are sufficiently minor that consultation is unnecessary.”
(4) The Digital Economy Act 2017 is amended as set out in subsections (5) and (6).
(5) In section 38 (disclosure of information to water and sewerage undertakers)—
(a) in subsection (2), for “people living in water poverty” substitute “eligible people”;
(b) after subsection (9) insert—
“(9A) A person is “eligible” for the purposes of this section and section 39—
(a) if the person is living in water poverty, or
(b) in the application of the sections to a water or sewerage undertaker for an area which is wholly or mainly in England, if the person is among those for whom special provision is required to be made by regulations within subsection (3)(a).”
(6) In section 39 (disclosure of information by water and sewerage undertakers), in subsection (2), for “people living in water poverty” substitute “eligible people (see section 38(9A))”.”

Separation of Waste (England) Regulations 2025

Baroness Hayman of Ullock Excerpts

Wednesday 5th February 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That the draft Regulations laid before the House on 3 December 2024 be approved.

Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 3 February.

Motion agreed.

Avian Influenza

Baroness Hayman of Ullock Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord Blencathra (Con)]

My Lords, as the shadow Secretary of State said in the other place on Thursday, this is a very difficult time for bird-keepers and farmers, particularly those whose birds have died or been culled, and all those who have had to upend their flocks and move them inside, given the impact that doing so can have on the mental and economic resilience of individuals. Will the Government commit to looking to remove the restrictions as soon as it is safe to do so and also consider the possibility of vaccinations?

While avian flu has been financially devastating for farmers, the last outbreak was devastating and disastrous for wild bird flocks. Will the Government therefore continue monitoring seabirds, including using citizen science, which delivers much of the monitoring, and commit to funding for research to secure best practice and understand the transfer of avian influenza and other diseases between wild and captive birds, including sub-lethal effects?

[Baroness Hayman of Ullock (Lab)]

My Lords, we are clearly very concerned about avian influenza. The noble Lord asked about the removal of restrictions. Of course, we want to lift restrictions as soon as we can, but only when we are absolutely certain that it is safe from a biosecurity perspective. He also asked specifically about seabirds, which is important because we know that there was a huge impact on seabirds in the last, very serious, outbreak. We are committed to continuing our work to monitor the impact of avian influenza on wild birds, together with other threats to their populations. This work is progressing through the English seabird conservation and recovery pathway through Natural England. The noble Lord may be interested to know that we have recently held a workshop with stakeholders to discuss how we can work together to take the key actions from the report forward. I also reiterate that members of the public are encouraged to report any findings of dead wild birds.

--- Later in debate ---

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, avian flu is becoming a yearly occurrence. In the run-up to Christmas 2022, special measures had to be taken to ensure that the supply of turkeys was secured. Currently, free range chickens are kept in barns. What reassurances can the Minister provide that, following her department’s call for free range birds to be required to be kept indoors, their welfare will be protected in these confined conditions? What plans do the Government have to support farmers to train staff to prepare for future outbreaks?

[Baroness Hayman of Ullock (Lab)]

I am sure that the noble Baroness is aware that we recently brought in a statutory instrument in order that owners of poultry that are free range do not lose that designation while there is an outbreak going forward. Clearly, it is really important that farmers and poultry and egg producers have support during influenza outbreaks. We have compensation in, and we are looking at labelling changes; we do not want to put extra costs on to farmers and egg producers during an outbreak, and we are working very hard to ensure that that does not happen.

[Lord Lennie (Lab)]

My Lords, with apologies to the Liberal Democrats, following on from the Minister’s opening remarks, could she say what assessment has been made about the effects on the north-east tourism industry following the avian flu outbreak, which closed visits to the Farne Islands and other islands off the north-east coast? Could she say whether she thinks that Newcastle United’s success in the Carabao Cup against Arsenal can provide some compensation towards this loss?

[Baroness Hayman of Ullock (Lab)]

Well, in Defra, we work actively with all areas that are affected by avian influenza, including the areas that my noble friend refers to. All I can say is that Newcastle United appear to be having a better season than Leicester City.

[Baroness McIntosh of Pickering (Con)]

My Lords, will the noble Baroness share sympathy with producers of poultry and eggs, who are deeply worried at this time? My noble friend asked from the Front Bench about the status of vaccination. Is she able to say what that status is, at this time, for domestic production?

[Baroness Hayman of Ullock (Lab)]

Yes. The vaccination of poultry and captive birds—clearly, we are not talking about wild birds—is not currently permitted. Avian influenza vaccination is not considered to be a viable option for this season. We have a cross-government and industry task force exploring the potential for vaccination to be used as a preventive measure in the future. In spring this year, we expect the task force to publish its initial report and there will be a statement on that. We realise this is something we need to work on.

[The Lord Bishop of St Albans]

My Lords, research is absolutely fundamental at this point as we monitor what is going on and its very worrying effects. What are His Majesty’s Government doing to support centres such as the Animal and Plant Health Agency in New Haw, which is trying to work on this and desperately needs to redevelop its facilities?

[Baroness Hayman of Ullock (Lab)]

We work very closely with APHA—the Animal and Plant Health Agency—and are very pleased that we have secured funding for the continued upgrading at Weybridge. We also work with the other sites in order to ensure that we have the best research possible to deal with our ongoing biosecurity and disease risks, of which there are, unfortunately, so many these days.

[Lord Bellingham (Con)]

My Lords, I pay tribute to various poultry farmers across Norfolk and, in particular, in my former constituency of North West Norfolk, who set the highest possible standards of biosecurity and animal welfare. Can the Minister say something about what HMG are doing to co-ordinate action across the devolved Administrations? Can she confirm to the House that her department is firmly in control and that there is one unified policy?

[Baroness Hayman of Ullock (Lab)]

I can absolutely reassure the noble Lord on that. I speak very regularly with my devolved Administration counterparts and, obviously, we discuss issues such as avian influenza. My officials work constantly with the devolved Administration officials as well when we have an outbreak such as this.

[Lord Elliott of Ballinamallard (UUP)]

My Lords, noble Lords will be aware that Northern Ireland comes under the European regulations for organic egg production, not the UK ones. Because of the impact of avian influenza on free range eggs, which is an impact on organic egg production in the UK, would the Minister consider a lobby to bring Northern Ireland under UK organic egg regulations, as opposed to EU regulations?

[Baroness Hayman of Ullock (Lab)]

The noble Lord is absolutely right and, again, this is why I regularly meet with both the Permanent Secretary and the Minister at DAERA to discuss exactly these sorts of issues. We do not want any part of the UK to be at an unnecessary disadvantage. It is really important that we support egg producers and poultry producers in whichever part of the UK they are. I am certainly happy to discuss his suggestion with officials.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I am sure the Minister is aware of the disturbing outbreak of H5N9 in the US where, for the first time, this variant of avian influenza has proved to be highly pathogenic. As a result, some 119,000 ducks have been killed on one farm. Given that H5N1 is also circulating extremely widely in the US—clearly out of control in animals, and with some human cases—are the Government working with and speaking to the US Government? No one is safe until everyone is safe, and the current situation with highly pathogenic avian flu in the US is deeply concerning.

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

Yes, we of course work internationally on issues such as this and we are currently monitoring the situation in the USA. It is important to point out that the influenza of avian origin in the USA is a single genotype—B3.13—of highly pathogenic avian influenza. It has been identified in lactating cattle, as the noble Baroness pointed out, and we are trying to understand the virus strain associated with those cases. We have published a case definition to allow us to monitor, triage and, if necessary, test any reported cases so that we can focus any resources appropriately. But it is important to stress that this does not change the risk level for mammalian livestock in the UK, which is currently very low. We have no reason to suspect that the virus is circulating in our cattle, and nor is the virus strain circulating in Europe.

[Lord Lansley (Con)]

My Lords, while I entirely agree with the Minister that the risk to humans is very low, none the less, more than once in the past we have used H5N1 as a basis for potential pandemic preparedness. Would this not be a wise moment to re-enter the question of pandemic preparedness, with a training exercise looking at the risks associated with the mutation of this virus, so that it is transmissible between humans?

[Baroness Hayman of Ullock (Lab)]

Of course, it is critical that we are on top of the issues that the noble Lord raises, because I think we all agree that there is likely to be another pandemic on the horizon at some point in the future. We need to ensure that we look at all areas where we could potentially have problems. We are looking closely at what has happened where there has been transmission from birds to humans. At the moment, it is clear that this happens only when poultry owners spend a lot of time handling infected birds, so it is not a general concern for human contamination— but we absolutely have to be prepared for the next pandemic.

Separation of Waste (England) Regulations 2024

Baroness Hayman of Ullock Excerpts

Monday 3rd February 2025 Grand Committee

Moved by

[Baroness Hayman of Ullock]

That the Grand Committee do consider the Separation of Waste (England) Regulations 2024.

Relevant document: 12th Report from the Secondary Legislation Scrutiny Committee

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

My Lords, these regulations were laid in draft before the House on 3 December 2024 and confirm the final policy position for simpler recycling in England. For too long, households in England have been presented with a muddled and confusing patchwork of approaches to bin collections. The Government’s simpler recycling reforms will ensure that across England people will be able to recycle the same materials, whether at home, work or school, putting an end to confusion over what can and cannot be recycled in different parts of the country.

We are all responsible for addressing our country’s waste problem, and we know that citizens want to play their part and recycle as much as possible but that they are frustrated by the limited and confusing recycling services. Through these reforms, we are empowering citizens to turn their good intentions into simple, effective actions. Simpler recycling is one of the three core pillars of the Government’s ambitious collection and packaging reforms, alongside the forthcoming deposit return scheme and the extended producer responsibility scheme for packaging. Together, we estimate that the collection and packaging reforms will support 21,000 jobs in our nations and regions and stimulate more than £10 billion of investment in recycling capability over the next decade. The reforms are also estimated to deliver carbon savings of more than 46 million tonnes of carbon dioxide equivalent by 2035, valued at over £10 billion in carbon benefits.

Since 2015, household recycling rates in England have plateaued at around 45%, decreasing to 43% in 2022, so we urgently need to take steps to improve the nation’s recycling performance. Simpler recycling will end the postcode lottery of bin collections in England by ensuring that all households and workplaces can recycle the same core waste streams: plastic, metal, glass, paper and card, and food waste, with garden waste for households upon request. Simpler recycling will improve services for householders by introducing weekly food collections for all households in England and kerbside plastic film collections. This will make a significant contribution towards meeting our ambition to recycle 65% of municipal waste by 2035 and our target to reduce residual waste generated per capita by 50% by 2042 compared with 2019 levels. Furthermore, these changes represent a critical first step towards meeting the commitment in our manifesto to transition to a resource-resilient, productive circular economy which delivers long-term, sustainable growth.

I draw noble Lords’ attention to the exemptions introduced by the instrument. The legislation to implement the core legislative requirements for simpler recycling was introduced by the previous Government through the Environment Act 2021. This legislation has already come into force; in practice, this means that simpler recycling will automatically come into effect, beginning in March 2025 for workplaces and March 2026 for households.

Sections 45A, 45AZA and 45AZB of the Environmental Protection Act 1990, as amended by the Environment Act 2021, require that the six recyclable waste streams—plastic, glass, metal, paper and card, food waste, and garden waste—are collected separately, alongside residual waste. The legislation states that local authorities and other waste collectors can make use of an exception to collect these recyclable materials together, if it is not technically nor economically practicable to collect them separately or if there is no significant environmental benefit from doing so. However, if using an exception, waste collectors must produce a written assessment to record the justification.

This instrument sets sensible exemptions from this condition, allowing any combination of the recyclable waste streams of metal, glass and plastic to be collected together, at all times. This exemption applies to collections from both households and workplaces. It also allows food waste and garden waste to be collected together from households, at all times. Waste collectors will not have to justify co-collection of any of these materials, as they would have to under the primary legislation as it stands.

We have taken this decision because the Secretary of State has determined, based on the evidence, that co-collection of those materials does not affect the potential for those materials to be recycled. We will not include paper and card in the exemption. This must, by default, be collected separately from the other dry recyclable waste streams. This applies to collections from both households and workplaces. This is because paper and card are particularly vulnerable to cross-contamination from food and liquid commonly found on other recycling materials, which could significantly reduce the potential for collected material to be recycled.

However, we want to provide flexibility for local councils and other waste collectors. Where waste collectors consider that it is not technically or economically practicable to collect paper and card separately, or where there is no significant environmental benefit from doing so, they may collect paper and card together with other dry recycling, if they provide a written assessment to document the justification.

Waste collectors will decide where an exception applies. There is no need to request permission from Defra or the Environment Agency to co-collect paper and card where an exception applies. We have published guidance for local councils and other waste collectors to support their decision-making regarding the co-collection of paper and card with other dry recyclable materials, where appropriate. All exemptions will be automatic and local councils and other waste collectors will not need to apply for them. They will need to produce only a written assessment to co-collect paper and card with other recyclable materials. To reiterate, without this instrument, they would have had to produce written assessments to co-collect any combination of recyclable materials.

These exemptions mean that the new default requirement for most households will be four containers: for food waste, mixed with garden waste if appropriate; paper and card; all other dry recyclable materials, these being plastic, metal and glass; and non-recyclable waste. As we are maintaining flexibility, councils and other waste collectors may choose to separate materials further if this suits local need. We believe that this is a sensible, straightforward approach to the collection of recycling for every household and workplace in England.

This instrument will also mean that micro-firms—workplaces with fewer than 10 full-time equivalent employees—will not need to arrange for the recycling of the core recyclable waste streams, as required by the Environmental Protection Act 1990, until 31 March 2027. Without this exemption, under the primary legislation, micro-firms would have had to meet the simpler recycling requirements at the same time as all other businesses—by 31 March 2025. We recognise that micro-firms, of which there are an estimated 1.8 million, may face more challenges introducing the changes, so this phase-in period provides additional time for them to prepare.

These are substantial reforms. We will support local councils and workplaces to deliver these new requirements in the most cost-efficient way. Right now, we are focused on raising awareness and providing guidance, including webinars and toolkits, for both local councils and workplaces on how to deliver efficient services. For local councils, we are working to distribute funding for food waste collections as soon as possible; we have already provided £258 million of capital funding, and we will also provide resource and ongoing funding. We will continue to engage with stakeholders in order to understand the challenges that they are facing and to ensure the successful delivery of simpler recycling.

In conclusion, the need for simpler recycling has never been clearer. By simplifying what households and workplaces across England can recycle, these long-awaited reforms will jump-start England’s faltering recycling rate, maximising environmental benefits, ensuring that we keep our precious resources in use for longer, and unleashing investment and economic opportunities. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Minister on introducing the regulations before us, which I broadly support. I will direct my questions to two specific areas.

The Minister mentioned that guidance will be given to councils on the separate collections. My concern is around what guidance will be given by councils to households in particular. I remember chairing the Environment, Food and Rural Affairs Select Committee at the time of the “horsegate” scandal, where people found that they were eating prepared foods—usually lasagne—made from horsemeat, not beef. It ended, I think, a lot of people’s desire to carry on eating these pre-prepared, highly expensive, undernutritious, highly salted foods. However, if you are a householder and you have one of these trays in front of you, it normally goes, I assume, in your food waste because it is highly contaminated—or the packet that the lasagne I have eaten was in will have to be rinsed sufficiently to ensure that it is not contaminated.

Who is going to guide households on what to do with such prepared food, where it is difficult to get rid of the residual food waste? How does the Minister intend to ensure that, if it goes into the paper recycling, which will now be a separate collection, this will not lead to greater contamination? How will guidance be given to households to ensure that there is no cross-contamination? How does the Minister plan to ensure that there will be no increase in cross-contamination because of the contaminated stuff going into the wrong recycling bin or plastic bag—whatever it is called—that we are going to be issued with?

I would also like to press the Minister on ensuring that a strong message will go out from the Government to councils that there will continue to be a mandatory weekly food waste collection. Anything less frequent than that will lead to vermin and a lot of highly undesirable threats to households, through no fault of their own.

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I am grateful that the Government have brought forward these regulations, I look forward to clarification on some of the concerns raised by noble Lords and me, and I look forward to seeing the regulation implemented in due course.

[Baroness Hayman of Ullock (Lab)]

My Lord, I thank all noble Lords for their valuable contributions to this debate today and for their support for this statutory instrument. I particularly welcome the noble Baroness, Lady Coffey, to Defra debates in this House. She brings huge knowledge and experience, and I look forward to working with her.

In response to the last question, I will start with cross-contamination because all noble Lords mentioned it in relation to the exemptions impacting material quality. To reiterate, the Secretary of State is satisfied that the impact of contamination is not significant in terms of the overall impact on the ability of materials to be recycled when co-collecting plastic, metal and glass. As I said, separate collection of paper and card will be required by default due to the potential impact of co-collection on material quality. Waste collectors will be able to co-collect paper and card with other materials, where justified on technical, economic or environmental grounds. We are going for an evidence-based pragmatic approach to ensure a suitable balance to support environmental outcomes, while providing local flexibility and convenience for households while at the same time looking to increase recycling rates.

Where waste has been separately collected, Regulation 14 of the Waste (England and Wales) Regulations 2011 requires waste collectors to ensure that it is not then mixed with other materials with different properties unless certain exemptions apply; for example, if doing so would not damage material quality. This will ensure that contamination of paper and card is minimal once it has been collected.

The number of councils likely to use an exemption to co-collect paper and card was mentioned. We recognise that there are various technical, economic and environmental circumstances in which separate collection is not practical. In such cases, waste collectors will retain flexibility to co-collect paper and card with other dry recyclable materials but must produce a written assessment to record this justification, as I mentioned earlier.

The noble Baroness, Lady Coffey, asked what evidence there is to support the paper and card decision. We reviewed extensive stakeholder feedback and evidence about plans for collection of dry materials and the Secretary of State concluded that there is some evidence to indicate that simplifying the number of bins can help participation in recycling. But evidence also suggests that systems with one mixed dry recycling bin have the highest levels of contamination, which would affect the recycling rate. Contaminated materials may be rejected after collection if it is not economically viable to reprocess them. As has been mentioned, paper and card are particularly vulnerable to cross-contamination from food and liquid, commonly found in other recycling materials. We do not want that to happen because it significantly reduces the quality of collected materials. That is how that decision was taken.

On monitoring and evaluating, we are committed to monitoring the success of the simpler recycling project and have commissioned Ipsos, in partnership with Ricardo and Technopolis, to carry out an evaluation of Defra’s resources and waste policy programme, including simpler recycling, over a five-year period that started in February 2022.

The noble Lord, Lord Blencathra, asked about micro-firms and whether the two-year delay would affect recycling rates. We are proceeding with the exemption to allow micro-firms until 31 March 2027, as I mentioned, but also to allow them to implement in the most sustainable and cost-efficient way. Including micro-firms in scope of this policy is estimated to increase the non-household municipal recycling rate by 9.3 percentage points, as micro-firms are responsible for around 30% of that waste.

The noble Lord also asked about support for micro-firms. We are working with WRAP and representative voices from each sector to develop sector-specific guidance for the Business of Recycling website. It is designed to support businesses as they transition to compliant waste collection services. Four sector-specific guides—on retail and wholesale, hospitality, health and social care, and offices—have been published so far. Three more—on food manufacturing, education, and transport and storage—will be published shortly. We are also working to develop guidance on how to optimise waste services to minimise the cost burden where possible and, in some cases, to maximise any potential cost savings.

Noble Lords asked about local authorities and their preparedness. Councils have been planning to implement simpler recycling since the legislation was passed back in 2021 with the Environment Act. We have already provided £258 million of capital funding to support this and will shortly confirm resource funding for the 2024-25 financial year.

Thames, Yorkshire and Northumbrian Water: Ofwat Proposed Fines

Baroness Hayman of Ullock Excerpts

Wednesday 29th January 2025 Lords Chamber

[Lord Sikka]

To ask His Majesty’s Government how many of the £168 million fines proposed by Ofwat on 6 August 2024 against Thames Water, Yorkshire Water, and Northumbrian Water have been collected.

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

My Lords, it is important to make clear when answering this Question that we are talking about proposed fines, and legislation specifies the process that Ofwat must follow before it can impose the fines or an enforcement order. Ofwat has the option of accepting regulatory settlement in lieu of imposing an enforcement order and/or fine. If Ofwat decides to impose a fine, it will issue a notice to the company specifying the date of payment. This must be after 42 days from the date that notice is served on the company.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for that reply. We seem now to have a category of fines which are not really fines. A £168 million fine for past sewage dumping was announced nearly six months ago but has still not been agreed and collected. The normal practice is that habitual criminals are not permitted to negotiate the extent and timing of fines with judges or anybody else. These three water companies between them have over 400 criminal convictions, but they are being allowed to negotiate the amount and timing of their fines. Why does the Minister think that this is a good and moral practice?

[Baroness Hayman of Ullock (Lab)]

It is important to be clear that Ofwat has to act within existing legislation. It is also important to point out that the Government are absolutely clear in wanting to clean up the water industry, which is why we have set up the commission. Since 2015, the Environment Agency has concluded 66 prosecutions against water companies, which has secured record fines of over £150 million. Meanwhile, in the last five years, Ofwat has secured a total of around £38 million in rebates to customers, in addition to another £150 million in other undertakings, as a result of its enforcement action.

[Baroness McIntosh of Pickering (Con)]

My Lords, the noble Baroness will be aware that a number of applications were attracted for the Water Restoration Fund, including by a number of farmers from Yorkshire, in July last year, since when they have heard nothing. When does the noble Baroness think these applications will be successful?

[Baroness Hayman of Ullock (Lab)]

Defra is evaluating how water company fines and penalties can best be reinvested into improvements to the water environment, which includes looking at the Water Restoration Fund. We hope to make a final decision on that some time this year.

[Lord Tyrie (Non-Afl)]

By any standards, Ofwat’s performance has been shocking, and over a good number of years—in fact, the worst regulatory failure we have had since the regulators who supervised banking throughout the banking crisis. Jon Cunliffe was asked to investigate this last October, and we are told that he will take at least a year to report, but he has only just started to take evidence. Can we at least have an interim report to get some early progress on reform of the water industry and better performance out of Ofwat?

[Baroness Hayman of Ullock (Lab)]

The advisory board that is going to be working with Sir Jon Cunliffe has been appointed and set up, and my understanding is that the intention is that there will be a first report in the spring of this year.

[Lord Woodley (Lab)]

In December 2024, Ofwat announced that it would fine Thames Water £18 million for paying unjustified dividends of nearly £38 million; that has now risen to £158 million, according to Ofwat. Can the Minister explain whether the penalty is being enforced and how much of the fine has actually been paid? Does she agree that this is indeed the unacceptable face of capitalism?

[Baroness Hayman of Ullock (Lab)]

On 19 December last year, Ofwat published its consultation notice, which set out the provisional decision to impose the financial penalty on Thames Water, as my noble friend laid out. As I explained earlier, there is a legal process that Ofwat has to go through. That consultation closed on 16 January—so, very recently—and Ofwat is now looking at those responses.

[The Earl of Effingham (Con)]

My Lords, at Report stage of the Water (Special Measures) Bill, my noble friend Lord Cromwell successfully secured the overwhelming support of your Lordships’ House for his amendment on financial reporting by water companies. Given that many water companies are overleveraged, it is crucial that we have a laser focus on managing debt in the water sector, and the Government have indeed recognised the importance of water companies’ financial resilience. Can the Minister therefore please explain why the Government have removed my noble friend’s amendment from the Bill in the other place?

[Baroness Hayman of Ullock (Lab)]

The noble Earl is correct that tackling financial leverage and debt in water companies is important, and it is a priority for this Government. We are currently in discussions with the noble Lord, Lord Cromwell, regarding his amendment.

[Baroness Pinnock (LD)]

My Lords, the annual water bill is about £473, although some people, especially in households with disabled people, may pay £700 a year, so support and help for those families is really important. What can Ofwat and the Government do together to provide major support—not just social tariffs, but other major help—for families such as those in paying for the essential service these water companies provide?

[Baroness Hayman of Ullock (Lab)]

Clearly, it is really important that we support all vulnerable customers regarding their bills and their ability to pay them. During the passage of the Water (Special Measures) Bill in the other place, the Government passed an amendment on how we need to support vulnerable customers. That will of course come back, and I will be talking about that when we get to ping-pong next week.

[Baroness Meacher (CB)]

My Lords, I greatly respect the Minister, but I just wondered whether she would consider replacing the leaders of the water companies.

[Baroness Hayman of Ullock (Lab)]

My Lords, that needs to be part of the review that Jon Cunliffe is undertaking with the water companies. One of the purposes of that commission is to see if the way the water companies are operating and are regulated is fit for purpose.

[Baroness Blower (Lab)]

My Lords, during the passage of the Water (Special Measures) Bill, the Secretary of State said that the Government will ban bonuses if company executives fail to meet high standards. Good. Last week, Thames Water said that it will circumvent any such ban by increasing basic executive pay. Speaking as a Thames Water customer, I ask my noble friend: what is the Government’s response to that, and how do we imagine the ban can be enforced?

[Baroness Hayman of Ullock (Lab)]

The Government have been clear that we urgently need to restore public trust in the water sector, and the bonuses issue is an important part of that. We have been completely clear that, where company performance is poor, executives should not be receiving large bonuses, which is why we are giving Ofwat the power to prohibit bonuses where performance is poor. Like my noble friend and other noble Lords, I have read the reports that Thames Water is saying that it would put up executive pay if this came to pass. We are bitterly disappointed that a water company would react like that. It should be taking responsibility for its behaviour and the standard it sets, so we will be taking this extremely seriously and looking at how we can manage such situations.

[Lord Cromwell (CB)]

My Lords, I am even gladder than usual that I came in, only to find my previous amendment being debated without any advance notice to me. I say to those who have raised it that I am in fruitful discussions with the Minister, but I am certainly not ruling out bringing that amendment back again, when the House will have its chance to express its views.

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[Baroness Hayman of Ullock (Lab)]

I thank the noble Lord for that clarification.

[Lord Hodgson of Astley Abbotts (Con)]

Is the Minster aware that limited liability is a privilege, not a right? If the ordinary shareholders of the water companies are choosing to overleverage the companies with a view to making a profit out of their ordinary shares, because interest is deductible and dividends are not, would it not be a good idea to consider whether limited liability is the right form for shareholders of these companies?

[Baroness Hayman of Ullock (Lab)]

There are some good points being made around the financial management of water companies at the moment, and I hope that, as we get further into the commission being led by Sir Jon Cunliffe, we can really dig down into this area. The fact that he was part of the Bank of England should help in looking at how we tackle these financial mismanagements.

Official Controls (Amendment) Regulations 2024

Baroness Hayman of Ullock Excerpts

Wednesday 29th January 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That the draft Regulations laid before the House on 19 November 2024 be approved.

Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).

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

My Lords, this SI is required as part of the implementation of the border target operating model, which aims to deliver a streamlined approach to imports that protects public, plant and animal health and minimises friction at the border. The instrument uses powers conferred by the Retained EU Law (Revocation and Reform) Act 2023, also known as the REUL Act. The changes it implements fall into three main categories.

The first category of measures provides a long-term legislative framework for sanitary and phytosanitary controls that have already introduced, but takes this beyond the reliance on temporary powers such as the transitional staging period. I will give some examples of how the instrument does this. It amends the definition of an official certificate to include digital documents, which will facilitate fully electronic and digital import documentation. It expands the definition of a documentary check to include remote examination or by automated means. We are also making it possible to remove the requirement to carry out documentary checks on all imports, so that checks can be made based on risk. The instrument also provides the power to allow for inland border control posts for reasons other than geographical constraints, and gives government the power to determine whether to designate allowing greater control to place border control facilities and resources with biosecurity, trade and food security priorities.

The second category of measures allows for a response to risk so that conditions governing the import of animals and animal products can be updated administratively. This will uphold our obligations to protect biosecurity and public health while facilitating trade, and will mean that competent authorities, devolved Governments, the Food Standards Agency and Defra will be able to amend and manage biosecurity controls in response to changing risks. Additionally, animals and animal products can be categorised based on risk, including the ability to exempt low-risk categories from unnecessary checks, which will align our animal control measures with plants and plant products.

The third category of measures allows policies to reduce burdens and allows the extension of policies to non-EU goods. Implementation of these future policies would require further legislative change, but we propose to have the powers in place now in order to provide for future flexibility so that we can respond quickly to risk.

However, there are two policies that have impact from the date this instrument will come into force. First, it allows diagnostic testing of plants and plant products to be undertaken at a border control post, instead of such tests needing to take place at official laboratories. This will significantly reduce the time that certain perishable goods will be held.

The second is the use of enhanced enforcement powers to require and pursue full cost recovery of the common user charge for goods entering through government-run border control posts. This is vital to ensure full cost recovery of the operating costs and ensure that businesses pay charges for their import activity.

These changes will have no impact on the Windsor Framework and do not bring in additional checks on the west coast of Great Britain. The Scottish and Welsh Governments has consented to these amendments.

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[Lord Caine (Con)]

My Lords, I too am very grateful to the Minister for setting out the main provisions of the instrument before us this evening, and to the noble Baroness, Lady Hoey, for bringing the debate to the Chamber this evening. I also thank all other noble Lords for contributing to a debate which has, somewhat unsurprisingly, covered much familiar territory regarding the position of Northern Ireland following the United Kingdom’s decision to depart from the European Union.

As the noble Lord, Lord Dodds of Duncairn, made clear in his contribution, the statutory instrument before your Lordships this evening is very technical. If noble Lords will forgive me, given the lateness of the hour, I will not follow noble Lords into those weeds, if I can put it like that. Rather, I will turn briefly to the regret amendment in the name of the noble Baroness, Lady Hoey, whose criticisms, along with those of other noble Lords, I fully appreciate apply as much to the Government in which I and my noble friend Lord Frost served at various junctures as they do to the current Administration.

I do not intend to engage in a detailed defence of all that we did in government, but I hope that the noble Baroness and others who have spoken will accept that I genuinely respect the views that they have put forward this evening. I know they are deeply and sincerely held and reflect the views of a great number of people in Northern Ireland itself. It is therefore important that both the Government and the Opposition continue to listen to those concerns and, wherever possible, seek to address them. If that is the approach to be taken by the Government, they will certainly have our backing in doing so.

As a Minister, I was very clear that the Windsor Framework and the Command Paper Safeguarding the Union, which was published a year ago this Friday, represented considerable improvements on the original flawed protocol, and indeed the 2017 joint report, which, I am afraid to say, is the root of so many of the problems that we have faced, as the noble Lord, Lord Bew, has consistently pointed out. I also spoke on this before I became a Minister, when I was a member of the same committee as the noble Lord, Lord Dodds. It was very flawed.

As the House knows, I spent a great deal of time from the other side of the Dispatch Box implementing many of the provisions of the framework and the Command Paper, which in my view aimed to strengthen and future-proof Northern Ireland’s place within the United Kingdom and to protect the integrity of the UK internal market for the long term. But I never for one moment suggested that the framework or the Command Paper were in any way perfect, or necessarily the last word. Indeed, I remember that, when I took the Stormont brake regulations through your Lordships’ House, in my closing section I had a sentence in which I said that the framework was not the perfect agreement. It will not surprise some noble Lords to learn that my officials wanted me to strike out that sentence, and I had to reinsert it when I got to my feet in the House. So, I have never thought that the provisions that we brought forward in government were beyond any improvement.

It was and remains my view that, where there is evidence of disadvantage to Northern Ireland as a result of current arrangements, any Government have a duty to listen and to act, using the provisions and bodies that are in place to resolve problems, or indeed to bring forward proposals for more substantive change. We have heard this evening a number of suggestions from noble Lords across the House and the Opposition, under new leadership and new management, will look with an open mind at practical and workable solutions that are put forward to us. Of course, we also look forward to the conclusions of, and hope to participate in, the review being carried out by the noble Lord, Lord Murphy of Torfaen, along, in due course, with the Government’s response.

We should at all times in this House be guided by what is in the interests of the United Kingdom as a whole, and that must include an enduring commitment to delivering the best outcomes for our fellow citizens in Northern Ireland. I look forward to the noble Baroness’s reply.

[Baroness Hayman of Ullock (Lab)]

My Lords, I start by saying that I am very grateful to all noble Lords who have taken an interest in this instrument and for all contributions. I also thank the noble Baroness, Lady Hoey, for bringing her regret amendment before the House and enabling us to debate it in some detail. I am pleased to hear and welcome that she at least applauds the mechanisms contained in the regulations.

There have been many thoughtful and constructive points raised, and I think this reflects the importance with which noble Lords take our biosecurity. We have to maintain our biosecurity, but at the same time deliver the streamlined approach for imports that is needed to minimise friction at the border and at the same time protect our animal, plant and public health.

As I mentioned in my introduction, the instrument delivers measures to provide a long-term basis for the border target operating model beyond reliance on the temporary measures. It allows for border controls to be updated in response to risk and delivers powers to allow for certain policies to reduce burdens that will need to be delivered in the future.

I will, however, do my best to respond to the points that noble Lords have raised during this debate. First, I repeat, as I have done in previous debates, that I take very seriously the concerns raised by noble Lords regarding certain legislation that has been implemented following Brexit. I think we would all agree that such legislation is not exactly perfect. On that note, I very much welcome the noble Lord, Lord Murphy, who will be carrying out the independent review into post-Brexit trading arrangements with Northern Ireland. This has been welcomed by other noble Lords, including the noble Lord, Lord Dodds, and the noble Baroness, Lady Suttie. As the noble Baroness also said, we have a new Northern Ireland committee. That is a really important step because, we hope, it will have the opportunity to look in more detail at some of the wider concerns that are regularly being raised by noble Lords.

A number of comments were made and questions asked around whether members of the public in Northern Ireland will be left unprotected because the SPS controls apply just to goods entering GB. I reiterate at this point, as the Minister with responsibility for biosecurity, that it is a real responsibility. I take it very, very seriously, and I reassure noble Lords that, whatever current legislation means that I can or cannot do, biosecurity is right at the top of my list to protect this country. If we do not, the implications are just too appalling.

We are utterly committed as part of that to protect the biosecurity of the island of Ireland, which is and remains a long-standing single epidemiological unit. Northern Ireland continues to be protected under the biosecurity regime of the EU, in line with the Windsor Framework. Under this regime, Northern Ireland implements official controls and additional protections in response to risks, such as measures related to pest-free areas, traceability and additional notification requirements for the highest-risk goods to maintain the biosecurity of the island of Ireland. Again, I stress that I and the department, Defra, work extremely closely with DAERA; I am in regular contact with the Minister and senior officials there. We must have a robust biosecurity regime, we have to have high standards and those high standards must be for now and protected into the future.

Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2024

Baroness Hayman of Ullock Excerpts

Tuesday 21st January 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That the draft Regulations laid before the House on 25 November 2024 be approved.

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument). Considered in Grand Committee on 20 January.

Motion agreed.

Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2024

Baroness Hayman of Ullock Excerpts

Monday 20th January 2025 Grand Committee

Moved by

[Baroness Hayman of Ullock]

That the Grand Committee do consider the Deposit Scheme for Drinks Containers (England and Northern Ireland) Regulations 2024.

Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee. (special attention drawn to the instrument).

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

My Lords, the Government are committed to transitioning the UK to a circular economy. We want to finally move away from the linear “take, make, throw” model, which we know causes harm to our environment and our society, and towards an economy that keeps our valuable resources in use for longer. A deposit return scheme for drinks containers is a strong example of the circular economy in action. It is a critical first step.

Deposit return schemes are a well-established and proven method and over 50 schemes are already in place, including in Germany, Sweden and the Republic of Ireland. A DRS incentivises consumers to return and recycle their drinks containers and means that valuable materials are collected, recycled and made back into new drinks containers—a truly circular loop.

The deposit return scheme is one of the three core pillars of the packaging reforms, alongside the extended producer responsibility for packaging and the simpler recycling programme for England. Together, it is estimated that these packaging reforms will support 21,000 jobs in our nations and regions and help stimulate more than £10 billion of investment in recycling capability over the next decade. They are also estimated to deliver carbon savings of over 46 million tonnes of carbon dioxide equivalent by 2035—valued at more than £10 billion in carbon benefits.

At its heart, the deposit return scheme is a key environmental policy that will tackle the scourge of littered drinks containers, protect our beaches and countryside, preserve our wildlife and restore pride in our local communities. The benefits of the DRS in reducing littering cannot be overstated. Each year in the UK, approximately 4 billion plastic bottles and 2.5 billion metal drinks containers are not recycled. Instead, they are disposed of in general waste or littered.

We are all familiar with the destructive impact of litter. In recent years, we have seen littered drinks containers blight our marine environment, but it does not stop there. According to a recent report from Keep Britain Tidy, littered drinks bottles and cans along our roadsides are killing millions of our native mammals every year. This is devastating our rarest and most important small mammals such as shrews, bank voles and wood mice. We must act to protect our natural environment.

A deposit return scheme established under this instrument will also promote a fairer society. Obligations will be placed on drinks producers to ensure that containers are collected and recycled. This is consistent with the well-established “polluter pays” principle. We have set an ambitious target for the scheme to collect 90% of in-scope containers by the third year of operation.

Laid in draft before the House on 25 November 2024, this instrument establishes, in England and Northern Ireland, a deposit return scheme for drinks containers. Under a deposit return scheme, a person who is supplied with a drink in a container that is in scope of the instrument pays a deposit that can be redeemed when it is returned for recycling. The scheme design in this instrument is informed by well-established international examples and extensive industry experience. Many of our industry partners have shared their experiences delivering these schemes across the world. The scheme will be centrally managed by an industry-led, not-for-profit organisation called the deposit management organisation.

This instrument applies to England and Northern Ireland, but my officials have worked closely with the Scottish Government, who are amending their existing legislation to launch simultaneously across England, Northern Ireland and Scotland in October 2027. The Welsh Government have withdrawn from the four-nation DRS approach. However, we remain in close working partnership with them as they make decisions regarding a DRS in Wales. We are keen to keep the door open to provide as much interoperability of schemes across the UK as possible.

Before I turn to the detail of the instrument, I acknowledge the work of the Secondary Legislation Scrutiny Committee, which draws this instrument to the special attention of the House on the grounds that it is politically or legally important and gives rise to issues of public policy likely to be of interest to the House. The committee highlighted questions on the scheme’s application in Scotland and Wales; the exclusion of glass; the deposit level; interactions with the extended producer responsibility for packaging scheme; and the set-up of the deposit management organisation. The committee also highlighted correspondence received from the Wildlife and Countryside Link, which is supportive of the legislation in principle but raised questions about ensuring a comprehensive return point network; the exclusion of glass; monitoring and review mechanisms; and enabling reuse.

I now draw Members’ attention to the obligations introduced by this instrument. It sets out the scope of the scheme and places obligations on drinks producers, importers and retailers. Producers of drinks in plastic and metal containers from 150 millilitres to 3 litres will be obliged to label products and charge a deposit when supplying the drink into England and Northern Ireland. They must also pay the deposit to the deposit management organisation, along with the producer fees to fund the scheme. Retailers across England and Northern Ireland will be obliged to participate in the scheme by charging a deposit on plastic and metal drinks containers then taking the containers back and refunding the deposit. They are also required to pass the collected containers to the deposit management organisation for recycling and to display information to consumers so that they understand how the scheme works. These obligations on producers and retailers across England and Northern Ireland will start from October 2027, when the scheme is launched.

To administer the scheme, this instrument requires the appointment of the deposit management organisation. It allows for certain provisions to come into force on the day after the instrument is made. These are necessary for the appointment of the deposit management organisation and the establishment of the administrative arrangements in advance of the scheme launching. The deposit management organisation, which will be appointed in April 2025, will be obliged to meet collection targets, pay return point operators for collecting the containers, recycle the collected containers and pay national enforcement authorities.

The instrument provides powers for the deposit management organisation to set deposit levels, prescribe labelling, interact with other schemes, set producer fees, calculate handling fees for return points and exempt some retailers from hosting a return point. Under the “polluter pays” principle, it is the responsibility of businesses to bear the costs of managing the packaging that they place on the market. Through specific return point exemptions based on store size, proximity to another return point and suitable premises grounds, this instrument also protects small businesses across England and Northern Ireland, which are vital to our high streets and are the backbone of our economy.

Finally, this instrument makes provision for monitoring and enforcement activities by the Environment Agency and local authority trading standards to ensure that mandated businesses and the deposit management organisation are compliant.

In conclusion, the need for a deposit return scheme is plain to see. This scheme will not only improve recycling rates and provide better-quality material for recycling but make a difference to people’s daily lives. It will encourage people to see waste as a valuable resource and, by reducing litter, it will improve local communities. With this scheme, we can turn back the plastic tide. I beg to move.

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In conclusion, I hope that the Government will stick to the October 2027 launch date, which will probably be just a few months this side of a general election. There is nothing like antagonising and confusing a few million electors to get out the votes for the other party.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank all noble Lords who have made valuable contributions and asked extensive questions in this debate today. I will do my best to address as many questions as I am able.

First, the noble Lord, Lord Blencathra, asked a large number of questions. I shall start with his question on why we need a scheme to take back empty drinks containers to the shops, when it will be easier for us just to carry on doing it at home. I shall explain the rationale for introducing a DRS alongside existing recycling collections. In the UK, despite having kerbside recycling systems that collect plastic and metal drinks containers, recycling rates for these materials have stagnated at around 70%, and they continue to represent a high proportion of litter by volume, at 55%. By introducing a DRS, we create a separate waste stream which can improve the quality of drinks containers collected for recycling by collecting them separately from other recyclable materials. Comparable international examples have shown that alongside kerbside recycling systems, a DRS can offer unique benefits to recycling rates and quality, and to littering, by offering a true circularity of the material, meaning that used bottles and cans will be made directly into new products.

The noble Lord, Lord Blencathra, and the noble Baroness, Lady Bakewell, asked about Germany. We believe that the German scheme is a good example of a DRS which has scaled up and matured since it was implemented in 2003. We can learn from an awful lot from the experiences in scaling up a scheme such as Germany’s, but there is also a lot we can learn from deposit return schemes launching more recently, which offer more up-to-date learnings in how you can successfully implement a DRS from scratch in today’s world. This has included engagement with other recently launched schemes in the Republic of Ireland and Slovakia, while drawing on direct experience across many of the European schemes—those in Latvia and Sweden, as well as Germany. As was said, the deposit return scheme in England, Northern Ireland and Scotland will launch in October 2027 and we do not intend to deviate from that, because we want to see the environmental benefits being made.

A number of noble Lords asked specifically about Wales and the interoperability of the four UK schemes. We recognise that this is a challenge and that industry has specific concerns. We are working through the detail with industry, including through facilitating meetings across our devolved nations to understand potential solutions. We are listening to industry’s views to see where we can support and ensure that DRS is successful across England, Northern Ireland and Scotland. But in practical terms, the regulations also allow the deposit management organisation to work in an interoperable way with any other deposit return schemes, so when Wales proceeds with setting up a DRS, the deposit management organisation can work alongside a Welsh scheme administrator. How a scheme works in Wales will of course be for the Welsh Government to determine, but we want to continue to work with Wales and industry as we progress our DRS.

There is currently nothing that prevents DRS items produced in England, Northern Ireland and Scotland being sold in Wales, including those items labelled as part of a DRS. Businesses will need to take this into account when considering how this works for their product lines and supply chains. Any labelling requirements will be a matter for the DMO to provide detail and guidance on.

The pEPR regulations include an exemption for plastic and metal drinks containers across the UK as these materials are going to be captured through the DRS in England, Scotland and Northern Ireland when it goes live in 2027. Glass drinks containers across the UK will, as we have heard, be subject to the pEPR fees from January 2025. Because the future scope of the Welsh scheme is not yet confirmed, we want to work closely with the Welsh Government to ensure that the DRS and pEPR work effectively right across the four nations. Once we have the detail of the Welsh scheme confirmed, we can consider whether any further amendments to the pEPR regulations will be required.

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[Baroness McIntosh of Pickering (Con)]

Could I add a rider? Will there not be a de minimis rule? I asked about the size of stores; surely there will be a de minimis rule below which stores will not be required to participate.

[Baroness Hayman of Ullock (Lab)]

I have further information around size, which I will come to. The noble Lord, Lord Blencathra, referred to all the shops selling drinks containers in the Westminster area being bigger than 100 square metres. The regulations set out that supermarkets and convenience stores will be required to host a return point unless they are subject to an exemption, which would be given if they did not meet that size and had applied for that exemption—that is how it is set up—or they could opt in. So takeaways are not included, but they could opt in, as the idea is to have a bit of flexibility in the regulations. I think that is correct.

[Lord Blencathra (Con)]

The takeaway joints—the Prets and Leons of this world—do not sell groceries, but people buy cans of drink from them to take away. Irrespective of size, are they included or are they not grocery retailers?

[Baroness Hayman of Ullock (Lab)]

No—as I said, takeaways such as those will not be required to host a deposit return point, but they can opt in if they choose to do so. Automatic exemptions also do not currently apply to rural stores, as we need to ensure that there is sufficient return point coverage for all consumers, regardless of where they live. However, rural businesses are still able to apply to the deposit management organisation for a return point exemption, based on store size, proximity to another return point and suitable premises—for example, if they cannot adapt their premises to host a return point. There are grounds around what premises look like that permit them to apply for an exemption. I hope that has helped to clarify that point.

It is critical that we have sufficient return points such that consumers can take things back to get their deposits back. We also need to minimise the demands placed on businesses wherever possible, particularly on the local businesses that are essential to rural communities. Return point obligations will be kept under review as the scheme becomes more established, because this is clearly complicated, so we need to watch it as it is implemented. We need to ensure that the network is appropriate, is accessible and does not overly burden rural businesses. Coming back to the noble Lord’s final remarks, the DMO, with due regard to work already conducted by the ONS, will help retailers determine whether they are in an urban or rural area. They will not just have to read the regulations, as he pointed out.

I was asked whether hospitality venues, airports and railway stations can host voluntary return points. Under the regulations, other types of organisations that sell in-scope drinks containers, including hospitality venues, food-to-go stores, schools, hospitals, gyms, sports centres and community centres, will not be mandated to host a return point, although all could operate one voluntarily if they wanted to. Grocery retailers in locations such as airports and railway stations will be obliged to host return points in the same way that any other grocery retailer would be. In practice, we expect these businesses to be pragmatic when considering how to host a return point, which may be best achieved by having a centralised return point that operates on behalf of all the retailers in that area. The regulations contain provisions for exemptions and strategic mapping of return points to ensure that the deposit management organisation can work with businesses in high-footfall areas to deliver appropriate return point accessibility.

The noble Lord, Lord Blencathra, asked how the Government define “same” in the definition of low-volume products and how we police the potential for cheating, as he put it. The deposit management organisation will work with producers to help them determine whether a product should be regarded as a low-volume drink. The producer will need to clearly demonstrate how the product constitutes a new product line, with relevant branding and labelling for the drink. The low-volume exemption is designed to support the smallest producers and, due to the cost of labelling production processes, it is highly unlikely that larger producers will be able to take advantage of this measure through the creation of multiple product lines.

I was asked about consumer research on how well a varied deposit would be received by consumers. There was a consultation in 2021; this included consideration of a variable and fixed deposit level, with many respondents agreeing that the DMO should be responsible for determining whether to adopt fixed or variable deposits. It also discussed how it could be varied with respect to many elements, such as material or container size. Our consumer research suggested a preference for simplicity in introducing a DRS, but recently the Republic of Ireland successfully launched a DRS with a variable deposit, based on the size of the container.

The noble Baroness, Lady McIntosh, asked how a deposit level is set appropriately. The deposit management organisation, as I said before, will be responsible for setting that level. It is incentivised to balance the need to ensure that returns are at the targeted level with the need to ensure that products remain affordable. We have commissioned research that showed that an effective deposit level is typically around 15p to 25p. This aligns with international precedents. For example, the DRS that launched in Ireland last year has a 15 cent and 25 cent variable deposit level based on volume. We are confident that the risks of a deposit level being too high or low are being managed, and we have sufficient levers in place to mitigate it being set at a level which impacts consumer affordability. But, as a last resort, Ministers also retain the power to remove the deposit management organisation and take control of the scheme under certain conditions.

I was asked who keeps the deposit if I buy a drink from a shop but recycle it at home. Consumers must return the container to a return point to redeem the deposit. Any financial surplus made by the scheme, for example through unredeemed deposits, will be reinvested into the scheme to fund the overall running costs. Again, this is in line with international schemes. I hope that answers my noble friend Lady Ritchie’s question about where the money goes.

However, for material which is recycled in kerbside collection, we anticipate that the deposit management organisation will work closely with local authorities to ensure that as much material as possible is returned via return points, and to help meet collection targets and keep material within the closed-loop model of the DRS. Local authorities and, where relevant, waste operators will be able to separate out containers and redeem the deposit on them, provided they meet the criteria for return.

Noble Lords asked specifically about Tetra Paks. The deposit return scheme focuses on containers made wholly or mainly from PET, aluminium or steel. This material can easily be recycled through the closed-loop system and reused by producers to make new containers. Unlike PET, aluminium and steel, which are collected from all local authority kerbside collections, just 64% of local authorities in 2022 collected beverage cartons. As the noble Lord said, that does not happen in our area. But with the introduction of simpler recycling, beverage cartons will be collected from all kerbsides. Therefore, Tetra Paks and other material combinations which are harder to recycle will be captured by the pEPR legislation and associated fees.

A number of noble Lords asked about the exclusion of glass. As was rightly pointed out, England, Northern Ireland and Scotland will not be including glass when the DRS is introduced. The Government’s position is that glass would add considerable upfront cost and create complex challenges to the delivery of DRS, particularly for the hospitality and retail sectors, as well as disproportionately impact small breweries, and be inconvenient for consumers due to its weight and potential for breakage in transit to a return point. Glass drinks containers across the UK are included in the scope of the extended producer responsibility for packaging scheme to make sure that they are appropriately and efficiently recycled. Additionally, the glass recycling targets within the packaging scheme have been increased from 83% to 85%, but we are also considering how reuse systems could be developed in the future.

--- Later in debate ---

[Baroness McIntosh of Pickering (Con)]

I asked specifically about the Minister’s point on monitoring and enforcement by local authorities. Will they have the resources to do that going forward?

[Baroness Hayman of Ullock (Lab)]

We want, as we bring the scheme in, to work closely with local authorities to be aware of any impacts on them and to ensure that they have the resources they need to manage the scheme effectively. I shall move on because I have been speaking for a long time.

Implementation timelines came up. The Government are not faffing around. Some people think that we are moving too quickly while others think that we are moving too slowly, but there is a scale to this challenge and a lot of effort from industry will be required to deliver the DRS. We believe that our timeline will provide the industry with the amount of time that it needs to implement the scheme properly. It assumes 12 months for the DMO to scale up, to make key decisions and to make the relevant appointments in its delivery partners, then 18 months of practical implementation time. That is why this timeline, which was agreed with industry and represents international best practice, has come in.

The noble Lord, Lord Blencathra, asked about costs of set-up and implementation. Following an impact assessment last year, we updated the previous figures, but it is important to consider that some costs will be compensated through the retailer handling fee, paid by the DMO. There are also benefits from increased footfall. Obviously, some costs could be passed on to consumers, but international evidence suggests that this would be relatively minor and well within the scope of the normal cost variations in the sector.

The noble Lord, Lord Hayward, and the noble Baroness, Lady Bakewell, asked about the impact on small businesses. There are exemptions for small retailers, as I mentioned earlier. The DMO will be required to consult with businesses of all sizes before it makes any of the key scheme decisions, such as on fees.

My noble friend Lady Ritchie asked about Northern Ireland. The Environment Act, under which this statutory instrument is established, provides powers for the Secretary of State to legislate on behalf of Wales and Northern Ireland, with their consent. On Northern Ireland, DAERA asked Defra to legislate on its behalf, which is why we are including Northern Ireland in the legislation.

I have been talking for some time. I hope that I have covered most of the questions asked by noble Lords; a lot of questions were asked. I assure the noble Baroness, Lady Bakewell, that Defra is determined to make this work; I thank her for her support for these regulations. I hope that I have answered most of the questions asked and trust that noble Lords accept the need for this instrument.

Motion agreed.