Sustainable Farming Incentive

Baroness Hayman of Ullock Excerpts

Tuesday 18th March 2025 Lords Chamber

[Baroness Grender (LD)]

My Lords, I thank the Government for the Statement. They will no doubt by now be aware of the significant disappointment and dismay the sudden closure of this scheme, without consultation or warning, has caused. What analysis did the Government do before this announcement to establish the likely impact on smaller farmers such as family farmers and those on significantly less than the minimum wage? Were there impact assessments in respect of farmers losing their basic payment this year with the immediate removal of SFI, and without, as yet, any clear replacement scheme?

Can the Minister please share with us the expenditure implications? It is our understanding on these Benches that if the BPS cuts this year are taken into account, more than £400 million of the £2.5 billion farming budget will remain unspent. Given that this was a budget intended to reward farmers for nature restoration and sustainable food production, can the Minister reassure us that this will not damage both? Can she explain how the Government will ensure that key environmental work is rewarded, and carried out by farmers who can no longer get access to this funding?

Does the Minister accept that there is a danger that the larger landowners, the ones that are more corporate, are highly likely to have already taken up the SFI and be part of the 6,100 new entrants this year? What advice does she have for the smaller operators, some of Britain’s poorest farmers, who are now left behind? Is she further aware that only 40 hill farms were new entrants this year, and that the previous Government failed to provide sufficient support for hill farmers, which in turn led to an over 40% drop in hill farm incomes in just five years? Is there any plan to help the small farms, upland farmers and commoners affected by this sudden change?

Can the Minister share with the House any discussions with farming stakeholders in advance of this change? Stakeholders tell us there were none, and the NFU said that it had just 30 minutes’ notice.

Finally, will the Minister please share what steps the Government will now take to increase the farming budget to reflect the Government’s nature and climate targets? We would be very happy to share the suggestions in our own manifesto if that would be in any way helpful. These targets, we would argue, have been greatly damaged by this cut in SFI.

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

My Lords, I thank noble Lords for their interest and questions on the Statement.

Twice before, the SFI system has been paused when the funding had been used up from the applications and started up again. Although applications for the SFI 2024 scheme have closed, I want to reassure noble Lords that we plan to reopen the SFI application service once we have a reformed SFI offer in place. Ongoing ELM schemes are supporting farm businesses to remain viable as they adjust to the reduction of farm subsidies that noble Lords have referred to. The new figures published recently showed that the proportion of commercial farms with income from agri-environment schemes rose from 49% in 2021 to 70% in 2023-24. There is a success rate here.

The noble Lord, Lord Roborough, asked about funding from the delinked payments reductions. The money released from the reductions to subsidies is being reinvested through our other schemes for farmers and land managers. Every penny is staying within the sector.

Details of how the £5 billion for 2024-25 and 2025-26, which was secured in the last spending review as being spent, were published on our farming blog on 12 March, for noble Lords who are interested. This includes £1.05 billion on SFI and £350 million on other ELM schemes.

The noble Lord asked about the Countryside Stewardship higher tier. That is being rolled out in a controlled way by invitation, so that everyone will get the right level of support. Invited applicants will be asked to submit applications from this summer.

On the environment and environmental targets, which the noble Lords asked about, closing SFI for new applications will not have any impact on the environmental benefits that we are getting from the 37,000 SFI agreements that are already live, nor affect the outcomes we are getting from other agri-environment schemes. The Government are still committed to delivering on these environmental outcomes.

Some 4.3 million hectares of land are now in SFI agreements, which means that 800,000 hectares of arable land are being farmed without insecticides. We want to move further on this. This reduces harm to pollinators and improves soil health. Some 300,000 hectares of low-input grassland is being managed sustainably, which will help biodiversity and improve water quality. Some 75,000 kilometres of hedgerows are being protected and restored, and this provides essential habitats for wildlife, improves carbon storage and strengthens our natural flood defences.

Regarding the timing of the reformed SFI, we plan to reopen the online application process once we have finalised the offer. On the issue around small farms, upland farmers and commoners, we need to make it fit for purpose as it moves forward, so that we are talking to the right people and allowing the right kind of farms and communities to apply. We are considering what it needs to look like, taking those issues into consideration. Clearly, the spending review is also important. We expect to publish more information as to what it will look like and when it will come into play after that. We will work with stakeholders and farmers to review the scheme, to ensure that we are directing funding towards the actions that are most appropriate and have the strongest case for that investment.

We also want to align the SFI with our work on the land use framework and the 25-year farming road map that my colleague, the Farming Minister, is working on. We need to protect the most productive land and boost food security while we deliver for the environment and nature.

We are evolving the SFI offer and exploring ways to better target the money towards smaller farmers and the least productive land. We need to ensure that we get the outcomes that we need.

To confirm, the farming budget remains at £5 billion for this year and next year, as we previously announced. We are on track to spend all the funding that is available.

On private sector funding, which the noble Lord, Lord Roborough, asked about, the Government are committed to significantly increasing private investment in nature’s recovery. This will not only help us meet our environmental targets but will create opportunities for farmers and land managers to diversify their business revenues through the sale of services around nature and the environment. Those markets are small, but they are growing. We are going to consult on what additional action we need to take to strengthen those markets in the weeks ahead. In the recent land use framework publication, we announced a call for evidence to seek views on how we can better incentivise private investment in nature from the sectors that impact and depend on our shared natural capital. We intend to publish that later this year.

The noble Lord, Lord Roborough, asked specifically about the Woodland Carbon Code and the Peatland Code. The Government have launched a consultation on integrating greenhouse gas removals in the UK Emissions Trading Scheme—as the noble Lord knows, that was last summer. This included exploring the inclusion of the Woodland Carbon Code in the UK Emissions Trading Scheme. We are going to look at that consultation and respond in due course.

We are also exploring opportunities for expanding private investment in woodland creation. A few weeks ago, we launched the timber in construction road map, and we have an upcoming call for evidence on private investment for nature recovery. We also recently launched a tender to modernise the Woodland Carbon Code’s operations and the upcoming voluntary carbon and nature markets consultation, so there is quite a lot going on in that area.

On the water industry, we are aware of a number of water companies that are working to develop nature-based solutions and exploring actions to improve water quality and manage flooding. We are working with the industry to understand how we can promote the different benefits that come from this and to promote blended funding approaches. Through Ofwat, the Government are also supporting water companies to develop nature-based solutions—we have discussed this in other debates. It is an important focus for us. Mainstreaming nature-based solutions to deliver greater value is something we now have a grant to look at, so we can bring together multi- sectoral expertise and leadership, which is what we are going to need to facilitate and enable the proper, true transition to nature-based solutions.

I hope I have covered most things, but I will check and get back to noble Lords if I have not.

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[Baroness Hayman of Ullock (Lab)]

As I mentioned earlier, this is not the first time that SFI has been paused. The way the scheme operates is that it opens for applications and, when the funding is used up, it is then paused until we look at the next round of SFI funding. It is difficult to judge when that is likely to come to an end. In response to the noble Lord’s final question, we are aware that the SFI scheme needs reforming, which is what we are now looking at doing. We need to get it right and we need it to work better for farmers and for the environment. That is why, as I mentioned, we will be talking to stakeholders, including those who use the scheme and those who we would like to use it but who perhaps find it difficult to apply to at the moment. I am particularly talking about smaller farms and upland farms; we need to be much more targeted on them. We are aware that we need to reform it, and we are working on that at the moment.

[The Earl of Leicester (Con)]

My Lords, I refer the House to my register of interests. It is somewhat disingenuous of the Minister to say that the SFI scheme has been paused twice. The previous two occasions were actually pilot schemes, which were then rolled forward, so I do not accept that. Following on from the question from the noble Lord, Lord Cromwell, what assessment has been made of whether Defra has sufficient resources and staff to deliver commitments across the environment and food security, and what is the Minister’s assessment of the Rural Payments Agency’s ability to handle the change?

[Baroness Hayman of Ullock (Lab)]

As I said, we need to reform the system and we are working on that; we want it to work as effectively as it possibly can, both to support farmers and to deliver the environmental targets that we need. I have visited the RPA offices in Carlisle, and the staff there work incredibly hard. We are looking at how we can improve the digital support they get, for example, because we need to ensure that the RPA is fit for the future and able to support farmers as best as it can in the way that it needs to.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank my noble friend the Minister for her Statement today. On the sustainable farming incentive, I know that she visits Northern Ireland and the other devolved nations fairly regularly, examining agricultural and environmental issues. When she next visits Northern Ireland, could she discuss with the Minister for Agriculture there the impact of the withdrawal of APR and business property relief? They were essential to sustainable farming in Northern Ireland, where an acre sells for about £25,000. The level of investment and money needs to be investigated by the Government and the Treasury again.

[Baroness Hayman of Ullock (Lab)]

I thank my noble friend for those questions. The last time I visited Northern Ireland, I went on a visit with the Ulster Farmers’ Union to a farm to look at the specific differences between farming in Northern Ireland and in England, and to listen carefully to their concerns about some of the issues that my noble friend has raised. I can confirm that I am going to Northern Ireland on Thursday. I will be spending two days there, and I have already asked for an agenda item with Minister Muir, who my noble friend referred to, to discuss exactly these issues. It is really important that Northern Ireland farmers are listened to, just as it is important for farmers in the rest of the UK.

[The Lord Bishop of Manchester]

My Lords, I do not know whether I have an interest to declare. I am not a farmer but the Church Commissioners, who pay my stipend and working costs, are one of the largest landowners of tenanted farms in the UK, so I declare that.

We have had a couple of brief references so far to food security, but might I tempt the Minister to say a little bit more on that subject, particularly given the geopolitical situation we are in at the moment? In addition, has any assessment been made of the impact that these changes and the announcement last week are likely to have on the UK’s food security?

[Baroness Hayman of Ullock (Lab)]

On food security, as I mentioned earlier, we currently have 37,000 farmers in the SFI scheme, which equates to about 50% of farmland. The purpose of that is to support them to produce food sustainably while also delivering for nature. The SFI agreements last for three years, so, although we have closed the new applications, the live agreements—the 37,000—remain unaffected and can continue to support sustainable food production.

We are committed to improving food security and are aware that SFI is a major tool that we need to use to support that. We are also looking to boost food security with other tangible measures. For example, we recently committed to ensure wherever possible that half of food supplied into the public sector is produced locally or certified to high environmental standards. We have also announced a five-year extension to the seasonal workers visa route and we are looking at reform to the planning system so that farmers can put the necessary infrastructure in place that they need in order to continue to produce food sustainably.

[Lord Bellingham (Con)]

My Lords, further to the question from the noble Lord, Lord Cromwell, is the Minister aware that, speaking in the House of Commons before the election, the then shadow Defra Minister, Danny Zeichner, said that farmers in the UK needed complete certainty and stability on the SFI? He went on to say that an incoming Labour Government would provide exactly that. Is this the Minister’s idea of complete certainty and stability?

[Baroness Hayman of Ullock (Lab)]

I completely understand that the closure so quickly and unexpectedly has caused difficulties and concern—I just want to say that. However, it is important that, looking to the 25-year farming road map that we are developing, part of the reasoning behind that is to try to give that kind of security. It is also important that, when we look at opening the SFI scheme next time, all this is taken into consideration, so that our reforms produce a more stable scheme. He is absolutely right that farmers need certainty and security, because farming is looking at long-term investments and farmers need to be able to know how to make those investments. So I take his point.

[Lord Carrington (CB)]

My Lords, I declare my farming interests are set out in the register and that I am likely to be affected by the withdrawal of SFI 24. I want to just probe a little further on the two questions that were asked by the noble Lord, Lord Cromwell, and the noble Earl, Lord Leicester. The Government claim that the promised six-week warning of closure was not given due to the potential spike in applications causing budget overspend. Surely, Defra has been monitoring this spending versus budget and advising Ministers accordingly. Please can the Minister confirm that she is satisfied with the efficacy of the Defra review process and, if so, why the Government did not take early action to avoid this serial blow to farming and the environment?

[Baroness Hayman of Ullock (Lab)]

My Lords, as I said, I am very aware that the sudden closure, when farmers were expecting more notice, has not been easy and that, for many people who were intending to put in applications, as the noble Lord said about himself, that has caused difficulties. I have friends who are in that boat, so I am very aware that difficulties were caused. I will take the concerns of the House back to the Farming Minister and explain that the unexpected pause and its impacts are felt very strongly by this House. I am happy to commit to do that, because it is important.

[The Duke of Wellington (CB)]

My Lords, I declare my agricultural interests as in the register. My noble friend Lady Batters very much wanted to be here this evening, but as a working farmer she is having to carry out TB testing today.

Following on from some of the earlier questions, can the Minister give a bit more detail of the advice that the new Ministers were given when they came into the department last July, when presumably the officials were already aware that there might be pressures on the fund? It seems astonishing to everyone in the Chamber that not even the Ministers gave any indication that the funds were running out. Can the Minister give a bit more explanation? The great concern now is that the details of the new scheme may not be announced in the very near future. Can she indicate when the new revised scheme is likely to be announced?

[Baroness Hayman of Ullock (Lab)]

On the detail of the new scheme, as I mentioned earlier, we will consult with stakeholders on how it needs to be reformed to work better for farmers and the environment. We do not want a repeat of problems for farmers, so we need to get it right. We must also look at budgets through the spending review. I cannot give specifics of when it will start up again, but we will start it up again. The current system will last for three years, so we need to look at how to get the next system in place as soon as practically possible, having taken those steps.

On the six weeks’ notice, the SFI scheme was set up as a demand-led scheme. Our aim was to allow as many farmers to join as possible before it was paused. We were not able to give any advance notice of the need to close, because we were concerned that, if we said that we would be closing it, we would suddenly have a lot of extra demand without the funding to manage that demand. I know that this is not what noble Lords want to hear, but that was the reasoning behind it. We must be able to afford to give the funding to support the applications that come in, and budget constraints are very difficult at the moment.

While we aim to give notice and are clearly aware that the website mentioned six weeks, there is no requirement in the scheme to do that. I appreciate that it did say six weeks. As part of reforming it, we want there to be much more sophisticated, effective budget controls around this. As the noble Lord mentioned, farmers need certainty. To give them certainty, we need to ensure that we can assess the scheme in such a way that we can provide that.

[Baroness Hoey (Non-Afl)]

My Lords—

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[Baroness Hoey (Non-Afl)]

I thank the noble Lord for that.

No matter what is said in justification, this will still be seen as an attack on farming, particularly on small farms. Does the Minister agree that the most important job for farmers is to produce good-quality food, and that all funding going into farming should have that as the priority? Why are we allowing so many solar farms to be put on good agricultural land, with other land being used for things other than farming? Surely that must be a priority if we genuinely care about food security?

[Baroness Hayman of Ullock (Lab)]

The noble Baroness’s question references a lot of the longer-term work that Defra is doing to get these things right. Regarding solar farms, the land-use framework is designed to look at things such as where we put energy, where the best-quality agricultural land is, where we put housing and so on. The land-use framework looks to address much of that.

Regarding what farmers should be doing, whether their first priority is to produce food and so on, we are developing the food strategy and the 25-year road map for farming. Both are looking at how we address this and how we ensure that we have high-quality, sustainable food production in this country for us to become as self-sufficient as is practically possible. These are important long-term pieces of work that the department is doing. We wanted to move away from short-term decision-making that did not deliver in the long run. A big criticism of what has happened with the sustainable farming initiative is that it was too short-term. Taking that bigger picture view, to give farmers certainty for the future, is a really important piece of work that the department is doing.

[Baroness Coffey (Con)]

My Lords, I know that the Minister is a friend of farmers and recognise her experience in Cumbria and her previous time as a Member of Parliament. She will know that farmers are disappointed. The money that is available through SFI was always intended to increase over the five years of the agricultural transition, so it is no surprise that more and more farms have come in. A record 65,000 are now in agri-agreements. I am really worried in a different way about the intensification of food production, which will actually hamper the progress that had been made in getting farmers signed up to nature. Let us be candid: the ambitious but practical nature targets can be achieved only with the help of farmers and landowners across our country.

[Baroness Hayman of Ullock (Lab)]

The noble Baroness makes a really good point about the increasing intensification of farming, and that is something we do not want to see. Our focus has to be on high-quality sustainable food that we can buy locally, and on farmers being able to support the country. We said in our manifesto,

“food security is national security”

and that is very true. It is incumbent on us as the Government to look at how we deliver on that promise.

[Baroness Boycott (CB)]

My Lords, what seems to get missed in this is how little money every farmer in Britain makes out of food. In some instances, especially in dairy, they are making as little as a penny out of what we spend. Are the Government in their food strategy going to ask the supermarkets to be completely transparent about the amount of profits that they make and the supply chains that they operate? Will they ask them to start to implement much more local sourcing and a different kind of supply chain so that farmers, whom we are asking so much of, actually get paid for growing food for us?

[Baroness Hayman of Ullock (Lab)]

Fairness within the agricultural supply chain has to be a key priority for the Government, because we know that farmers have suffered under different pricing regimes, if you like, for many years. If we do not get it right, we will not be able to get the food security that we want as well, because if farmers are going to produce the food that we are asking them to produce, they have to know that they will be paid fairly for that food.

We are going to use powers in the Agriculture Act 2020 to introduce “fair dealing” regulations that will apply to businesses when purchasing agricultural products from farmers. There have also been new rules for the pig sector introduced to Parliament which ensure that contracts clearly set out expectations and that changes can be made only if agreed by all parties. This continues on from the work that the previous Government were doing, and I am sure that noble Lords opposite will be very supportive of it. Following on from that work on pigs, we are committed to bringing in regulations for eggs and fresh produce sectors, as previously proposed by the Government. If we need to intervene with other sectors, then we certainly need to look at that and see what needs to be done. As I said right at the beginning, we do recognise that this has been an issue for farmers, but we also need to look at how best we can support farmers to create that secure food sector that we so badly need as a country.

Flood Reinsurance (Amendment) Regulations 2025

Baroness Hayman of Ullock Excerpts

Monday 17th March 2025 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That the draft Regulations laid before the House on 15 January be approved.

Considered in Grand Committee on 10 March.

Motion agreed.

Biodiversity and Conservation

Baroness Hayman of Ullock Excerpts

Thursday 13th March 2025 Grand Committee

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

My Lords, as the noble Lord, Lord Roborough, just said, there have been many questions and I have only 12 minutes to respond. I shall do my best but will of course write with any outstanding remarks that I need to make. I start by thanking the noble Lord, Lord Grayling, for tabling today’s debate. It has been a very thoughtful and interesting debate, with many different contributions, all of which have huge merit as we discuss how we restore biodiversity in our country. We know it will be a challenge—we have very challenging targets—but I want to assure noble Lords that the Government are committed to protecting nature, because we rely on biodiversity for food, for regulating our climate, for pest control and for many more things that support our ecosystems.



In England, as noble Lords will know, we have committed to ambitious targets to halt the decline by 2030, to reverse the decline by 2042, to reduce the risk of species extinction by 2042, and to restore and create over 500,000 hectares of wildlife-rich habitats by 2042. We are honouring commitments to protect 30% of the UK’s land and sea by 2030—the 30 by 30 target; although it will be very challenging, it is extremely important.

The revised environmental improvement plan was mentioned. The noble Earl, Lord Russell, asked about the rapid review. In revising the plan, we aim to be clear on the role of the enablers—for example, green finance, which was mentioned by noble Lords. That needs to be implemented across government. We need to look at how enhancing nature supports the wider outcomes that the Government want, including for energy and growth. We will clarify Environment Act target delivery plans and update the interim targets to cover the five-year period from the completion of the review, in line with our statutory requirements. We will also clarify exactly how we intend to deliver the environmental improvement plan.

Local nature recovery strategies were mentioned. Those are being prepared currently and will be published. They will cover England, and the idea is to draw on the same data and principles as the land use framework, providing a key mechanism to enable progress. It is important that we join up all the different strategies and principles that we are taking forward. However, we are not waiting for the revised environmental improvement plan or the finalised land use framework to act. We have challenging targets, and we know that we need to take action on three fronts: to restore and create wildlife-rich habitats; to tackle pressures on biodiversity; and to take targeted action for specific species. Various species have been mentioned in the debate.

We know that our environmental land management schemes are crucial to enabling much of this. A number of noble Lords mentioned farming. An announcement was made this week on the SFI. A lot of questions were asked, but there will be a Statement on this issue on Tuesday and we can explore it in more detail then.

The noble Lord, Lord Grayling, asked about planning and the Nature Restoration Fund. On Tuesday, the Planning and Infrastructure Bill was introduced. The idea is that, through the Nature Restoration Fund, the Bill will provide a more efficient and effective way for obligations related to our most important sites and species to be discharged, at a scale whereby that action has the most impact. This will benefit development and nature recovery, where both are currently stalled.

I turn to fixed tariffs and the importance of developers behaving responsibly towards the environment. Developers must deliver a 10% increase in biodiversity, and the provisions are designed deliberately to discourage certain behaviours. Often with such issues, we need to see what happens in practice, but that is what the provisions are designed to do. I hope that helps reassure noble Lords.

The noble Lord asked about biodiversity net gain and the Nature Restoration Fund and how they will work together. The idea is that BNG and the Nature Restoration Fund will work in a joined-up manner, to maximise outcomes. The development section of the Nature Restoration Fund specifically addresses environmental impact and biodiversity net gain and will continue to apply. This is to ensure that developers are incentivised to reduce their biodiversity impact on site and to secure future residents’ and local people’s access to nature. That is extremely important to ensure that people do not lose that. We want to continue to seek opportunities to grow biodiversity net gain.

The noble Baroness, Lady Jones, asked about the planning Bill and the impact it will have on nature. We are absolutely committed, when it comes to that legislation, that steps will be undertaken to deliver positive environmental outcomes. I encourage the noble Baroness to read the National Planning Policy Framework, in which the environment is central.

The noble Baroness, Lady Jones, asked about the metrics around biodiversity. We have 55 individual measures comprising 29 indicators at the UK level. England and the UK biodiversity indicators are accredited official statistics and cover a wide range of species, including birds, butterflies, mammals and plants, in addition to habitats and the extent and condition of protected areas, as well as indicators for the response to pressures such as pollution and climate change. I hope that is helpful.

The water industry was mentioned by the noble Lord, Lord Roborough. I assure him that we are doing a lot of work around this. He will be aware of the work that Sir John Cunliffe is doing. We absolutely recognise the importance of salmon and of Scottish businesses in this area. Clearly, we need to work together on this.

The noble Earl, Lord Russell, mentioned pesticides. We are taking action to ensure that pesticides are used more sustainably—for example, we have committed to ending completely the use of three neonicotinoid pesticides that we know carry substantial risk to pollinators. We published a policy statement last year that sets out the next steps around pesticide commitments.

The noble Earl, Lord Caithness, asked about bracken—

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[Baroness Hayman of Ullock (Lab)]

The noble Lord, Lord Gascoigne, and others talked about beavers. I am really pleased that we have been able to set out our approach to the wild release and management of beavers in England. Beavers can bring enormous benefits, and I am pleased that we have management tools in place so that they are in the right place and can be managed properly.

The noble Lord, Lord Grayling, talked about bottom trawling, and other noble Lords asked about it, too. The noble Lord asked whether we would complete the previous Government’s work on this. At the moment, we are considering our next steps to manage bottom trawling, along with other fishing methods, where it could damage MPA features or benthic habitats, in the context of our domestic and international nature conservation obligations. We are keen to carry on working closely with fisheries and marine stakeholders, as well as environmentalists, as we develop future plans for fisheries and the marine environment.

The noble Lord, Lord Grayling, asked about the impact of the EU reset on fisheries and environmental standards. I cannot talk about what we are discussing on the EU reset, but, clearly, all these things are taken into consideration.

The noble Baroness, Lady Jones, also asked some questions around bottom trawling. The first two stages of the Marine Management Organisation’s offshore by-laws programme introduced by-laws in marine protected areas. Currently, our figures say that this protects 10.87% of English waters from bottom-towed fishing. Clearly, it is something that we need to be working on.

The noble Lord, Lord Grayling, asked about deforestation. We recognise the urgency of taking action to ensure that UK consumption of forestry commodities is not driving deforestation. I hope we will soon be setting out our approach to this.

A number of Members asked about green finance, particularly the noble Earl, Lord Courtown, and the noble Lord, Lord Roborough. We recognise the huge importance of mobilising private finance into nature’s recovery. We are doing a lot of work on this and will be grateful to work with noble Lords on suggestions for how we can move forward.

The noble Earl, Lord Courtown, mentioned the Cali Fund. We are working closely with businesses across a lot of sectors to see how we can take this forward.

There were a number of other questions, but I have only 10 seconds left. I want to say to the noble Baroness, Lady Helic, that I absolutely heard what she has been saying about hares. There needs to be consistency—we completely appreciate that.

The noble Baroness, Lady Willis, spoke about rewilding. We have our own rewilding project at home. I personally have seen the benefits that rewilding in the right place can bring. I end by saying that, two weeks ago, we found that we had curlews.

Committee adjourned at 5.02 pm.

Flood Reinsurance (Amendment) Regulations 2025

Baroness Hayman of Ullock Excerpts

Monday 10th March 2025 Grand Committee

Moved by

[Baroness Hayman of Ullock]

That the Grand Committee do consider the Flood Reinsurance (Amendment) Regulations 2025.

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

My Lords, as most noble Lords will know, Flood Re is a reinsurance scheme that provides for accessible and affordable flood insurance for eligible households. It is a joint government and industry initiative launched in 2016, designed to improve the availability and affordability of UK household flood insurance.

For clarity, Flood Re Ltd is the name of the company established to administer the scheme. Since its launch in 2016, it has provided cover for flood insurance to more than 500,000 households that are at risk of flooding right across the UK. Before Flood Re, only 9% of policyholders with a prior flood claim could get flood insurance quotes from two or more insurers, and none could get quotes from five or more insurance companies. Some 99% of households at high risk of flooding can now obtain quotes from 15 or more insurers.

The Flood Re scheme has evolved since its launch back in 2016. When levy 1 was last reviewed in 2022, the regulations were changed to allow for Build Back Better to be included in the scheme, which allows for up to £10,000 to be offered as part of a post-flood claim to install flood-resilient measures at the property, helping to manage down the risk and impact of any future flooding. I am pleased that insurers representing some 77% of the UK household insurance market are now committed to offering Build Back Better to their customers, whether they are Flood Re-ceded policies or not.

The Flood Re scheme is a joint initiative between government and the insurance industry, and we are going further than the previous Administration to invest in flood defences. As part of this Government’s plan for change, a record £2.65 billion has been committed to better protect 52,000 properties by March 2026. Maintenance of existing flood defences will be prioritised, ensuring that a further 14,500 properties will have their expected level of protection maintained or restored. This means that a total of 66,500 properties will benefit from this funding, which will help to secure jobs, deliver growth and protect against economic damage.

I turn to the specifics of the statutory instrument. Flood Re Ltd regularly and continuously monitors the risk and market that it is supporting to ensure that it is in a position to continue to enable affordable flood insurance for those that need it. To do so, it is required to purchase reinsurance, which it does on a three-year basis. Taking into account changes to risk, claims profile and expected increase in the number of household flood insurance policies ceded to it, Flood Re Ltd has projected that its liabilities could increase from £2.1 billion to at least £3.2 billion over the next three years, and this is the level of cover that it now needs to purchase.

In addition, the global reinsurance market has become more challenging since Flood Re Ltd last negotiated its three-year reinsurance cover. Events around the world have impacted on the risk appetite of those providing reinsurance, meaning the market that Flood Re Ltd can purchase from is both more volatile and more expensive than previously. All those factors combined have resulted in Flood Re Ltd proposing this increase to levy 1, so that it can afford to purchase the required reinsurance and continue to provide that access to affordable insurance that we all recognise the need for.

I assure noble Lords that this proposal has been well scrutinised before reaching this Grand Committee for your Lordships’ approval, not only by policy and finance officials in Defra but by our colleagues at HMT. This scrutiny has been informed by advice from the Government Actuary’s Department, which has provided its opinion that the increase to levy 1 is necessary to ensure the viability of the scheme.

I recognise that any increase to costs is unwelcome at any time. The cost of increasing levy 1 is spread across all insurance companies that offer UK household insurance and is proportionately split based on their market share. We can be confident that Flood Re Ltd has done its due diligence in seeking this increase and reassured that it would not be being asked for if it were not needed. By using existing capital, Flood Re is keeping the increase to 18%, while the costs for reinsurance are expected to more than double. The decrease that was put in place three years ago, going from £180 million per year to £135 million per year, demonstrates, I suggest, that Flood Re Ltd is very conscious of its responsibilities in keeping the levy as low as possible.

In summary, this statutory instrument allows for a necessary change to the Flood Re scheme by amending Regulation 8(2)(a) of the Flood Reinsurance (Scheme Funding and Administration) Regulations 2015 to increase the levy 1 placed on UK household insurance providers from £135 million to £160 million from 1 April 2025. I emphasise that the measure in this instrument is necessary to ensure the effectiveness and continuation of the Flood Re scheme and its ability to provide affordable flood cover for the increasing number of homes that are at risk of flooding in the UK. I beg to move.

--- Later in debate ---

[Lord Roborough (Con)]

My Lords, I, too, thank the Minister for introducing this statutory instrument to ensure that flood reinsurance can continue to operate effectively. For that reason, His Majesty’s most loyal Opposition are pleased to support it. Although the measures are necessary, they raise several questions about the future of the Flood Re scheme and the Government’s broader approach to flood risk and resilience.

The flood reinsurance scheme established under the Water Act 2014 was designed to provide much-needed reinsurance for household insurers facing flood risk, ensuring the availability and affordability of flood insurance for properties at risk of flooding. This initiative, introduced by the previous Conservative Government, remains a crucial safety net for many home owners across the country. It has offered vital support as we face increasing flood events that threaten the stability and safety of homes across Britain.

However, we must recognise that the scale of flooding is rapidly increasing. Recent assessments by the Environment Agency indicate that approximately 6.3 million properties in England are at risk of flooding from rivers, seas or surface water. This is projected to increase to 8 million properties by 2050, reflecting the escalating threat posed by climate change and extreme weather events. This highlights the importance of ensuring that the Flood Re scheme is sufficiently robust to support the growing number of home owners at risk.

The statutory instrument proposes an increase in the total levy from £135 million to £160 million. The Government’s assessment indicates that this rise will likely be passed on to consumers, resulting in an estimated increase of £1.60 per household insurance policy. Although this increase may seem modest on an individual basis, it raises concerns about the cumulative effect on policyholders, especially those already facing higher premiums due to rising costs in other areas. This adjustment reflects the growing challenges the scheme faces in a world where extreme weather events are becoming more frequent and severe.

His Majesty’s Official Opposition acknowledge the necessity of this adjustment, given the financial pressures on reinsurers, driven by factors such as inflation, global natural catastrophe claims and the need to preserve the scheme’s financial resilience. If the rate and risk of household flooding continue to rise, can the British people reasonably expect these annual increases in insurance premiums to become the norm?

I have several other key questions for the Minister today. First, can she confirm whether the Government have consulted with industry stakeholders about the feasibility of expanding the Flood Re insurance scheme, particularly in high-risk areas and to houses built after 2009?

I am most interested in the Minister’s response to my noble friend’s question regarding farmhouses and buildings. Although these are likely to have been sited in less flood-prone locations, the Government have made significant commitments to building 1.5 million new homes in the coming years, a substantial increase on the recent rate of building completions. As my noble friend Lady McIntosh of Pickering highlights, how does the Minister intend to protect these new homes from flood risk, particularly those in high-risk areas? Will the Government commit to ensuring that all new developments are designed with flood resilience in mind?

Could the Minister confirm and explain the role she sees for nature-based solutions in the management of floods at a catchment level in future? Here, I declare my interest, as set out in the register, as the owner of land in a number of river catchments.

Finally, can the Minister inform us what progress is being made in the transition from Flood Re to risk-reflective pricing for household flood insurance when Flood Re expires in 2039? We are approaching midway in the life of Flood Re and it would be desirable to see some progress.

These are questions that go to the heart of the Government’s approach to flood risk, resilience and insurance. While we understand that the increase in the levy is a pragmatic measure in the light of global challenges, we must not overlook the broader implications of a changing climate and the evolving risks that flood-prone households face. With that, I look forward to hearing the Minister’s response to these questions.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank noble Lords who have taken part in this debate today. Personally, I was very pleased when Flood Re came in; I thought it was incredibly important legislation. Anyone who has lived in a house that has flooded, like I have, and in communities that flood, will know how very important it was that we had this insurance scheme come into place. I therefore thank noble Lords who have supported this small but extremely important SI today; it is important that the scheme stays viable and continues.

I would like to try to cover most of the questions that have been asked. There has been a desire for government to look at whether the scheme can be extended; that came across clearly from all who took part. Before I go into the particular individual responses and specifics, let me say that although we have no plans to make changes right now, we are continuously keeping all our policies under review, including those relating to flooding insurance. It is important that we discuss, debate and listen to others as we move forward in how we make those decisions around policy changes. If we make any changes to the scheme in future, it would be important that we secure the appropriate reinsurance for that, which would be challenging in the current market. To put it into context, this would mean that the levy we are talking about today would then need to be increased even further.

I know that noble Lords are aware that, currently, leasehold properties with three or fewer units, where the freeholder is living in one of those units, qualify for Flood Re building insurance. The problem with larger blocks not being eligible is that they are considered to be commercial businesses, and that is why they fall outside of the scope of Flood Re.

The Flood Re scheme as it is set up at the moment, and as it will continue to be set up through the statutory instrument in front of us, is funded by the providers of household insurance, not those who underwrite commercial policies. Buildings insurance is the responsibility of the freeholder and kept separate. However, I recognise that there is a problem.

When Main Street in Cockermouth flooded, for the second time in only six years, I held meetings with business insurance companies and high street businesses to look at ways we could move forward, because there are still alternative things that we can do and that the Government can look to support.

Having said all that, and with properties built after 2009 having been referred to—the noble Baroness knows that that is something that I was concerned with—we are planning to explore this further. Minister Hardy, who is the Minister responsible for this area, has asked Flood Re to look into the matter to understand the scale of concern and how industry might respond, to ensure that those living in properties that currently do not come under the scheme could be provided with appropriate insurance cover. Although it is not in front of us today and not something we are actively looking at, we have asked for this to be considered further. In the meantime, contents insurance policies can be applicable, so there is that potential as well.

[Baroness McIntosh of Pickering (Con)]

The Minister may be coming on to this, in which case I apologise, but do we know what the policy would cost? I visited Cockermouth and Keswick after the floods in 2009—I have suddenly had a nightmare that I did not tell whoever the MP was that I was there, but we will gloss over that. Many of those people could not afford contents insurance, yet they were clearly at risk of flooding. Does the Minister have a figure, or could she provide one in writing?

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

I do not have the figure at my fingertips. This is something we are looking at. We have asked business insurance companies and the scheme itself to look at what those costs are, because if we are to consider broadening it then we need to understand the costs. I cannot provide that figure to the noble Baroness today, but it is something that we are considering.

I will move on to some other areas that were mentioned. Planning and the Government’s housebuilding programme was referred to. As noble Lords know, we have committed to building a large number of high-quality, sustainable homes. If noble Lords have not read the National Planning Policy Framework, I strongly urge them to do so. Flooding and the environment are very much part of that document. When I read it, I was pleased that the concerns that Defra had raised had been taken account of and included in the document.

Flood risk is an important consideration in the planning system. The NPPF is clear that:

“Inappropriate development in areas at risk of flooding should be avoided by directing development away from areas at highest risk”—


and that includes flood plains. Where development needs to be in locations where there is a risk of flooding, as alternative sites are not available, local planning authorities and developers should ensure that development is appropriately flood-resilient and resistant and is safe for its users for the development’s lifetime, and will not increase flood risk overall—a really important point that the noble Baroness knows I have talked about quite a lot previously.

On the point made by the noble Lord, Lord Roborough, about nature-based solutions, we are committed to that.

The noble Baroness, Lady McIntosh, asked about farms. We know that agricultural land and businesses can be seriously affected by flooding and coastal erosion; we have seen it too often in recent years. There are two points here: getting your land insured and managing your land—and managing it in order to reduce the risk of flooding and coastal erosion. Farmland has a really important part to play in that aspect.

In the floods investment programme, the amount of funding a project can attract depends on the damages it will avoid and the benefits it will deliver. Agricultural land is an important part of calculating that, and we hope that farmers will take up those opportunities.

An additional financial report will be provided to rural communities to recognise the significant impact of flooding on farms. We are monitoring closely the impacts of flooding caused by storms on the agricultural sector; that work is going on at the moment with the Environment Agency.

High Seas Treaty

Baroness Hayman of Ullock Excerpts

Monday 10th March 2025 Lords Chamber

[Baroness Boycott]

To ask His Majesty’s Government what plans they have to introduce further measures to protect 30 per cent of oceans by 2030, and to ratify the High Seas Treaty agreed by the Intergovernmental Conference on Marine Biodiversity of Areas Beyond National Jurisdiction.

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

My Lords, the Government have created a network of marine protected areas covering 40% of English waters, including the first three highly protected marine areas, which were designated in 2023. They are now focusing their efforts on ensuring that these areas are effectively conserved and managed. We have limited the use of damaging fishing gear in 60% of English MPAs and are now considering the next steps to manage bottom trawling. Legislation to implement the biodiversity beyond national jurisdiction agreement, sometimes referred to as the high seas treaty, will be introduced as soon as the legislative timetable allows.

--- Later in debate ---

[Baroness Coffey (Con)]

My Lords, as Environment Secretary, I visited several marine protected areas in 2023. I accompanied my noble friend Lord Ahmad when the United Kingdom signed the agreement in New York. I am really concerned, given that officials had shared with MPs and Peers last year that a Bill would be ready by the end of 2024. I am sure that there is sufficient agreement on both sides of the House to get this legislation through in time for the conference to which the noble Baroness, Lady Boycott, referred. It would be really embarrassing for the United Kingdom not to be a full member of the first UN ocean COP in June.

[Baroness Hayman of Ullock (Lab)]

Let me confirm that the Government are completely committed to ratification of the BBNJ agreement, in line with our determination to re-invigorate the UK’s wider international leadership on climate and nature. We are working on the measures needed to implement the detailed and very complex provisions of the agreement before we can formally ratify.

[Lord Teverson (LD)]

My Lords, it is great news that we have the high seas treaty in what is otherwise a lawless area of our oceans. However, treaties are no good if they are not enforced, and this treaty does not say how it will be implemented. How does the United Kingdom feel that it can be enforced? Will it lead in that process internationally given its experience of the Blue Belt programme around our overseas territories?

[Baroness Hayman of Ullock (Lab)]

The BBNJ agreement establishes the mechanism to designate marine protected areas and other areas-based management tools in areas that are beyond national jurisdiction. We have commissioned research to develop a shortlist of the potential area-based management tools that we could develop to use in future proposals once the BBNJ agreement comes into force. We believe this will help to ensure that this agreement supports the achievements that are required by the Kunming-Montreal global biodiversity framework target.

[The Earl of Devon (CB)]

My Lords, last year I chaired the Westminster conference on marine natural capital. I learned there that while there has been considerable success in designating marine protected areas in recent years, both Defra and the MMO sadly lack the resources, technology and capacity to map, evaluate and patrol the areas that have been designated. If we are to introduce increased designations as well as a policy of marine net gain, how will we ever enforce it if we cannot even audit and protect the areas already designated?

[Baroness Hayman of Ullock (Lab)]

The noble Earl makes a very good point. No law or agreement is worth anything unless we enforce it. That is why we are determined to do all that we can to achieve our 30 by 30 commitments at sea. These are challenging targets—it is important that we acknowledge that. Minister Hardy, who is responsible for this area in Defra, has confirmed her intention to continue working on this and push forward. Enforcement and ensuring that it happens are part of that important work.

[Baroness McIntosh of Pickering (Con)]

My Lords, does the Minister share my concern at the intense pressure that our fishing grounds are coming under with a spatial squeeze from marine conservation and 10% of fishing grounds removed through the GB Energy Act? Will she look carefully at this to see that our fishing grounds and future fishers’ livelihoods are ensured?

[Baroness Hayman of Ullock (Lab)]

Supporting our fisheries is an important part of the work that Defra does. We must ensure that when we work on areas of conservation those who fish are also talked to and understand the implications—and that we understand the impact that any decision has on our fishing fleet. My honourable friend Daniel Zeichner MP, the Fisheries Minister, speaks regularly to those who fish so that we hear their voices as loudly as we hear others.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I am sure that the Minister is well aware that of our marine protected areas only 5% are protected from bottom trawling. Does the high seas treaty mean that when some of our allies, such as Denmark or France, assert that they are okay to bottom trawl in our MPAs, we can stop them?

[Baroness Hayman of Ullock (Lab)]

The key thing that we are doing around bottom trawling is looking specifically at the areas that are most important and need conserving the most. When we look at making agreements with other countries, that is clearly an important consideration, because there is no point in designating somewhere a marine protected area if we do not look carefully at which parts need protecting the most and ensure that damage does not take place. It is good that we have 60% of our MPAs protected, but, clearly, we need to move forward and do more.

[Lord Roborough]

My Lords, I am sure all noble Lords have seen the potentially tragic news of a serious shipping accident off the Yorkshire coast this morning. I know I speak for all noble Lords in expressing our sympathies and support for the crew, the emergency services and their families. Can the Minister share with the House the nature of the product being carried on the tanker, what risks this poses to the public and the marine environment, and what steps the Government are taking?

[Baroness Hayman of Ullock (Lab)]

I thank the noble Lord for raising this issue. I am sure that we were all extremely shocked and concerned on hearing about the collision that has just taken place in the North Sea. It is an emerging picture; we are still hearing more evidence as to exactly what has happened. I assure the House that we are speaking closely in Defra to the Department for Transport and the Maritime and Coastguard Agency, which are leading on the government response. They are assessing the situation, as it has only just happened. I assure the noble Lord and the House that Defra’s agencies including the Environment Agency are engaging on any clean-up that is needed and assessing any pollution. We are not sure at the moment exactly what the situation is. There has been a fire, which makes it much more difficult to look at the extent of damage and pollution. We will keep the House updated as we hear further information.

[Baroness Sheehan (LD)]

My Lords, can I press the Minister a little further on the ratification process for the high seas treaty? Can she confirm that ratification needs to take place before June 2025 if we are to have a voice at the COP process that will take place on the treaty later this year?

[Baroness Hayman of Ullock (Lab)]

To confirm, the UN ocean conference is a separate meeting. Therefore, it is not a deadline for ratification of the treaty, but we are committed to the ratification.

[Lord Hannay of Chiswick (CB)]

My Lords, does the Minister not recognise that with areas such as this in which the United States is not participating, it is even more important that we ratify promptly and show that such international arrangements can be made to work even without the United States?

[Baroness Hayman of Ullock (Lab)]

I can only reiterate our commitment to ratifying the treaty.

[Lord Lucas (Con)]

My Lords, I am grateful to the noble Baroness for her warm words, but are they not somewhat at odds with the Government’s wish to turn over the Blue Belt round the Chagos Islands to the Chinese fishing fleet?

[Baroness Hayman of Ullock (Lab)]

I have been talking about the marine protected areas. I do not see that our complete commitment to supporting our blue environment will be at odds with that.

Beaver: Reintroduction in England

Baroness Hayman of Ullock Excerpts

Thursday 27th February 2025 Lords Chamber

[Baroness Bennett of Manor Castle]

To ask His Majesty’s Government what plans they have to reintroduce the beaver in England.

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

My Lords, the Government recognise that beavers can benefit biodiversity, improve water quality and reduce flooding, among other things. However, beavers can also potentially cause damage to property and infrastructure through flooding and foraging. This means that reintroductions must balance the benefits and the risks, and be carefully considered and planned. Defra continues to work with Natural England to develop our approach to beaver reintroductions and management.

[Baroness Bennett of Manor Castle (GP)]

I thank the Minister for her Answer, although it is disappointing, given that the benefits of beavers in the UK are already very evident. I wonder if she is aware of the case in the Brdy protected landscape area in the Czech Republic, where beavers demonstrably saved the local government €1 million by putting a dam exactly where it needed to be to prevent flooding. Could not so many communities in England now be benefiting from that kind of protection at no cost?

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

My Lords, as I said, we recognise the benefits that beavers can bring. Although reintroduction worked extremely well in that particular case, they have to be released into the right place at the right time with proper management. That is what this Government are working towards.

[Lord Forsyth of Drumlean (Con)]

My Lords, I congratulate the Minister on identifying the damage that beavers do. I declare an interest: illegally introduced beavers have destroyed the willow trees at the bottom of my garden. They are ringing trees on the River Tay that are more than 100 years old, undermining the banking. Although there may be a case for introducing beavers in some places, it should be done very carefully, and those who do it illegally should be held to account.

[Baroness Hayman of Ullock (Lab)]

The noble Lord is right to say that we need to manage beaver release correctly. A licence is, of course, required to release beavers in England and these are available only for release into enclosures. The licensing scheme, which is managed by Natural England, creates controls so that any potential damage is minimised.

[Baroness Young of Old Scone (Lab)]

My Lords, though I sympathise with the noble Lord, Lord Forsyth, about his willows, does my noble friend the Minister agree that where beavers are allowed to flourish they help other species to flourish too? That is a fine thing for one of the most nature-depleted countries in the world.

[Baroness Hayman of Ullock (Lab)]

A 2020 evidence review by Natural England found that beaver reintroductions can bring benefits through the restoration of lost natural ecosystems, including boosting biodiversity and increasing other species. I am sure noble Lords listen to “The Archers”, as I do, on which there was a story around beavers this week. What we will have learned from that regarding species is that where you see beavers you will also find tits.

[Baroness Bakewell of Hardington Mandeville (LD)]

On Tuesday, I visited the South Downs National Park, which has introduced a pair of beavers. Their introduction can have benefits for other animals. They are large animals that are not aggressive to other species such as the mink, but they appear to act as a deterrent for the mink. Where water voles have been reintroduced alongside beavers, volunteers have noticed the benefit that the number of mink has reduced and thus the water voles thrive. Are the Government considering the reintroduction of both species in areas where they used to be abundant?

[Baroness Hayman of Ullock (Lab)]

The Government’s approach to reintroductions more widely needs to be considered on a case-by-case basis. We are committed to providing opportunities for the reintroduction of formerly native species where the benefits for the environment, such as the noble Baroness has demonstrated, are clear, but any reintroductions of any species must follow the published Reintroductions and conservation translocations: code and guidance for England.

[Baroness Boycott (CB)]

My Lords, I completely support the Government’s view on beavers and what the noble Baroness said about them bringing other species, but I will put in a plea for another wild species, which is the hare. At the moment, you can hunt and shoot hares 24/7, all through the year. We need to introduce a time, when hares are pregnant and breeding, when they are off the cards for people to shoot. This is really important, as the population of this majestic animal is dwindling rapidly. People in China are betting on hare coursing in Norfolk and places such as that, and they put cameras on the dogs to watch them tear the hares apart. This is truly shocking. It is an amazing, wonderful, beautiful animal.

[Baroness Hayman of Ullock (Lab)]

Of course, hare coursing is not allowed in this country. I congratulate the previous Government on tightening up the rules around this, which was really important. The particular issue around the shooting of hares is that there is not a closed season, which there is for other species. This is an anomaly, and we should look at it very carefully.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Minister on the stand that this Government have taken. If beavers are to be introduced in areas where they are currently not found, to what extent will farmers, drainage boards and others in the catchment area be consulted?

[Baroness Hayman of Ullock (Lab)]

I can be very brief and clear: we intend to do full consultation with stakeholders and work closely with them around any introduction.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, may I take my noble friend back to her previous answer on the reintroduction of other wild species? I am very glad to find that she is a fellow fan of “The Archers”. She will be aware that there were recently some very serious illegal releases in Scotland, which resulted in not only the use of precious resources but the death of at least one of the animals. Can she say what sanctions are available to be brought to bear against people who do that? Whether their intentions are good or ill, they are not doing anybody any favours.

[Baroness Hayman of Ullock (Lab)]

I completely agree with my noble friend. The Government condemn any illegal release of beavers. They not only are unlawful but, as she said, can lead to damage and conflict, and they undermine legitimate releases. Just to confirm, it is an offence in England under Section 14 of the Wildlife and Countryside Act 1981 to release a beaver into an enclosure or the wild, except under the authority of a licence from Natural England. Regarding penalties, doing so without a licence carries a penalty of either an unlimited fine or up to six months in prison.

[Lord Roborough (Con)]

My Lords, I refer the House to my entry in the register of interests, in particular as a host to an illegally released beaver—not by me. As the Minister pointed out, the reintroduction of beavers to the UK may well have a role to play in managing waterways and reducing the risk of flooding. We have discussed nature-based solutions in this House before on the then Water (Special Measures) Bill, and I would be most grateful to the Minister for an update on progress on nature-based solutions within the water sector.

[Baroness Hayman of Ullock (Lab)]

The noble Lord is absolutely right. The Government are very serious about this. Nature-based solutions will be incredibly important if we are to get the outcomes and results that we want. We are continuing to make progress, and I am happy to keep the noble Lord updated as that progress continues.

[Lord Inglewood (Non-Afl)]

My Lords, bearing in mind the experience of the introduction of the grey squirrel in this country and that beavers have been introduced into Scotland, is there not every likelihood that it is only a matter of time before the beavers establish themselves in England—with or without consent from Natural England?

[Baroness Hayman of Ullock (Lab)]

As I have said, any introductions are being very carefully managed and licensed. We have a five-step management approach to beavers, which can also come in if there are illegal releases or releases that have spread into areas that are less appropriate. That five-step approach has a number of actions to cope with beaver numbers as we move forward with this programme.

[Lord Douglas-Miller (Con)]

My Lords, it is often the unplanned and unbudgeted aspects of species reintroduction that cause the conflict. In Scotland—where, like my noble friend Lord Forsyth, I live—the original beaver reintroduction study concluded that there was little impact on agriculture. Beavers were released, legally and illegally, and given full protection. The study, although technically correct, failed to mention that the reason for the small impact on agriculture was largely due to the fact that there was very little agriculture in the study area. The subsequent expansion of beaver numbers has caused conflict as they go into agricultural areas. Can the Minister ensure that any study or consultation prior to a reintroduction is comprehensive, includes a plan for problem areas and has a financial contingency?

[Baroness Hayman of Ullock (Lab)]

I reassure the noble Lord that there will be proper consultation and thorough consideration of any aspects of reports or information before any releases take place. I finish by stressing the fact that beavers bring huge benefits as well as potential risks.

Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

Consideration of Commons amendments and / or reasons
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 and / or reasons
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.