Independent Water Commission

Baroness Hayman of Ullock Excerpts

Tuesday 29th October 2024 Lords Chamber

[Earl Russell (LD)]

My Lords, I declare my interests as set out in the register and thank the Minister for this Statement updating the House on the launch of the independent water commission. There is much that we on these Benches welcome, most importantly that this Government, through the Water (Special Measures) Bill presently being considered by this House and the launch of the water commission, have given a clear signal that they are determined to try to fix our broken water system. The intent is a welcome step change, and I am thankful for it.

That said, there is a time for reviews and commissions and a time for calm, direct and decisive government action to fix systems that have been broken for far too long. The Government talk proudly about their longer-term approach, when the electorate is keen for more radical and immediate action. My friendly warning to the Labour Government is that the people who voted for them did so with the expectation that real action would be taken to resolve this mess, at scale and at pace. Labour has had many years in opposition; quite frankly, we expected the Government to be better prepared and to have come up with the necessary plans and answers by now that are urgently needed to fix these problems.

The water industry is a mess, and the sewage scandal was a critical issue at the last general election. The Liberal Democrats are determined to put the protection of our precious natural environment at the heart of everything we do. In 2023, water companies dumped 54% more sewage into our lakes, rivers and coastal areas than they did in the previous year. This amounts to 464,000 incidents and 3.6 million hours of untreated sewage discharges in England alone, damaging our freshwater ecosystems. Meanwhile, water bills are set to rise by some 40%. We are clear that we would abolish Ofwat, create a new, unified and far more powerful clean water authority and replace the failed private water companies with public benefit companies.

The Government have taken a different policy direction. My worry is that the magic trick of making Ofwat fit for purpose, securing investment while keeping consumer water bills low and protecting our environment lies way beyond the measures contained in the Water (Special Measures) Bill and that, when further legislation finally arrives, it will be too late. I welcome the Minister’s engagement, but I call on the Government to work with all sides to make the measures in the Water (Special Measures) Bill more radical and robust. Our environment cannot wait while Labour decides on the real systemic reforms that are the only solutions to this crisis.

Only 14% of our rivers and streams are in good ecological health. With the commission taking at least a year to consider evidence and report back to government, and with further legislation only then to be prepared and debated in Parliament, the radical change required appears unlikely to be implemented before 2028-29 at the earliest. I hope that the Minister can acknowledge a growing sense of concern on all sides of the House that the measures in the Water (Special Measures) Bill are not enough to fix the problem and that further legislation derived from the conclusions of the water commission will just not arrive in the urgent timescales required.

The 30% by 2030 target for protection of nature is coming up urgently. How will this review help support that process? My understanding is that the water review will not report until 2025, which leaves a short timeframe for making the necessary changes and requirements to meet our targets. Further, if we find after the Water (Special Measures) Bill is passed that problems in the water industry persist and we are still in the gap before the water commission finishes its work and is ready, are the Government prepared to put forward additional urgent legislation to help fix any remaining problems?

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

My Lords, I thank both noble Lords for their questions on the Statement made in the other place recently. Both noble Lords mentioned the fact that we had been in Opposition for 14 years— I would suggest that is probably one of the reasons why the water industry is in such a mess. It is a little bit rich of the Opposition to say that we should have sorted it out when we were in Opposition.

In answer to a few questions, the review will be reporting in the first half of next year. It is not that long until next year; it is only a few months away. The idea is that the review will develop new legislation that will make water companies and our water infrastructure fit for purpose for the future.

I thank the noble Earl, Lord Russell, for his broad support. He talked about urgency. It is important to point out that we came into government at the beginning of July. On 11 July, my honourable friend the Secretary of State made a Statement to the House on the agreement he had already reached with water companies and Ofwat to ring-fence money earmarked for investment so it could not be diverted to shareholder payments. On 9 September, we introduced the Water (Special Measures) Bill that we are considering in the House. Yesterday, the review was announced—so we are pretty well cracking on with this as an urgent action going forward.

[Lord Cromwell (CB)]

Does the Minister agree with me that the failures in the UK water industry derive from extractive financial engineering, which in turn led to poor investment in infrastructure, which in turn led to the environmental failures that have become so publicly known? All these things should have been picked up by the regulators far sooner and acted on. Will the commission focus on that aspect?

[Baroness Hayman of Ullock (Lab)]

The commission will focus on regulation, among other things, and I urge noble Lords to input into that part. Clearly, regulation is an area of particular concern. We need to look at how it was possible for water companies to have managed to get into such appalling debt; the commission will want to look at that very carefully.

[The Duke of Wellington (CB)]

My Lords, I said yesterday in Committee on the Water Bill that I very much welcome this review and congratulate the Government on having instituted it. Perhaps I could probe the Minister on a particular point about the structure of regulation. In the other place last week, the Secretary of State said:

“The Commission will conduct a root-and-branch review of the water sector’s regulatory system”.—[Official Report, Commons, 23/10/24; col. 280.]


However, in the press release, among the listed objectives of the commission are:

“Better regulation: rationalising and clarifying requirements for companies … Empowered regulators: ensuring regulators are effective in holding water companies accountable”.


I hope that within the scope of the commission is the question of whether the structure of regulation is correct, in that it is divided principally between Ofwat and the Environment Agency, and whether it would not be more appropriate to have a single regulator for such an important group of monopoly companies.

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[Baroness Hayman of Ullock (Lab)]

My understanding is that the whole structure of the regulator and anything around how effectively it has been working will be open for the commission to discuss. My understanding is also that we are not committed to any particular structure going forward and that the commission will look at the whole thing right across the board.

[Baroness Young of Old Scone (Lab)]

Can the Minister reassure the House on the scope and delivery of the commission? I very much appreciate that this commission is being established and that it has got such a wide remit. It very specifically says in the account of the scope and delivery that the commission will be asked to work within the framework of the UK carbon budgets and the targets of the Climate Change Act, but it does not give a concomitant assurance that it will also have to meet the requirements of the Environment Act, including the legally binding biodiversity targets in particular. Can the noble Baroness reassure us on that matter—that it will be part of the remit?

[Baroness Hayman of Ullock (Lab)]

The noble Baroness is right that it specifically refers to the UK carbon budget framework and the Climate Change Act. We discussed this very briefly in the Water (Special Measures) Bill yesterday during the environment amendments. The biodiversity targets set within the Environment Act are certainly ways to deliver the changes that we need and I suggest that anything that is currently in law is something that the commission would be discussing.

[Baroness Parminter (LD)]

My Lords, I will pick up the point that the noble Duke, the Duke of Wellington, made about regulators. While we welcome very much the independent water commission and what it will look at in its scope, last week the Secretary of State introduced another review by Dan Corry of the Defra regulatory framework, which will report before the independent water commission. I did not want to think that that might preclude any of the broader structural issues that we know need to be addressed in the water industry. Therefore, I ask the Minister: what relationship will there be between the Dan Corry review of Defra’s regulatory framework and the independent water commission?

[Baroness Hayman of Ullock (Lab)]

That is a really good question. I have met with Dan Corry and spoken with him about this. He is doing a very broad overview of everything; it is not limited to the water industry. His review is entirely separate from any work that the commission is doing. If there is any overlap on the effectiveness of the water industry regulators, I am sure that it will be fed into the commission as part of its discussions.

[Lord Sikka (Lab)]

My Lords, the water commission’s terms of reference are full of motherhood and apple pie statements. They promise to protect customers and the environment, but matters such as flooding, agriculture, waste, the pricing formula, profiteering and the failures of privatisation are beyond the scope of the inquiry. Such constraints mean that the review will not be comprehensive. Can the Minister explain why the Government have handicapped the commission from the outset?

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[Baroness Hayman of Ullock (Lab)]

The Government have not handicapped the commission; they have given the commission a clear target, overview and scope. Where housing, planning, agriculture and drainage interlink with strategic planning for the water system, they are in scope. In some circumstances, that could include, for example, agricultural run-off or housing development—it just has to be within that scope. Having said that, just because the other areas that my noble friend referred to are not in scope of the commission, that does not mean that the Government are not taking them very seriously or not continuing to do further work on these issues.

[Baroness Falkner of Margravine (CB)]

My Lords, I welcome the review and, in particular, the appointment of Sir Jon Cunliffe, who, in his time regulating financial services at the Bank of England, proved his thorough understanding of regulatory frameworks. My point is about scope and timing. We are told that an advisory group will be established to inform him and that he will refer to, and consult with, expert stakeholders. After that, the commission will also publish a general call for evidence to bring in a broad range of other views, which I assume is the public part—I see the Minister nodding, so presumably there will be a public consultation. My question therefore is: does she sincerely believe that six months is adequate? This review is profoundly important and pulls together so many different strands, as others have mentioned, so it is more important to get it right than to get it on the record quick.

[Baroness Hayman of Ullock (Lab)]

As the noble Baroness said, Sir Jon Cunliffe is an excellent choice as chair, and we are very pleased to have him. He is already looking at who could be part of the advisory group—that is taking place—and who the broader advisers will be. We want to have it open to the public and consumers, because it is important that they too have their say. Now that we have the chair appointed, we are, as a matter of urgency, getting the other members of the advisory group in place and getting the other people involved who need to be involved, including the public, as quickly as possible.

[Baroness Pinnock (LD)]

My Lords, I am sure that the Minister will agree that the pollution through sewage overflows into our waterways is abhorrent and needs to be dealt with urgently. Here is the problem: the water companies have their price review—their five-year plan, if you like—to be agreed at the end of this year for the next five years. So, unless the Government are able to influence the scope and size of the agreement of investment in our wastewater pipes and treatment works, nothing will happen—well, not enough will happen —in the next five years. The danger is that the Government are putting this off until 2030. That is not acceptable. Can the Minister reassure me and many others that this will not be the case?

[Baroness Hayman of Ullock (Lab)]

As the noble Baroness is aware, the commission will not do anything that will impact on PR24—the price review that is due to report at the end of this year. I point out that this price review is £88 billion, as Ofwat has proposed. That is the largest investment that we have ever seen going into infrastructure. The Government were very keen that we had a really good infrastructure deal for PR24 so that we can start putting right some of the things that so badly need attention at this very early stage.

[Baroness Boycott (CB)]

My Lords, like everybody, I very much welcome this report. However, point 12 says that the Government are specifically ruling out looking at agriculture at the moment. Given that the public really worry about pollution and, particularly in the west of England, that so much pollution in our rivers and reservoirs comes from agriculture, when will the Government look at this? Will any further legislation come through separately from Defra to look at the waste that comes from chicken farms that affects the River Wye?

[Baroness Hayman of Ullock (Lab)]

The situation in the River Wye is the most dreadful example of what can happen when you get too much run-off from agriculture. We are looking at what needs to be done around the River Wye in particular, but we are looking more broadly at how we manage pollution from agriculture. I met my colleague Daniel Zeichner, the Minister for Farming, only earlier today, and we discuss these issues on a regular basis. Although agriculture is in scope only where it interacts with water regulation, that does not mean that we are not serious about tackling the problem. It is a huge part of this; I think that over 40% of pollution in our rivers comes from agriculture. It is very much high on the Government’s agenda.

[Lord Cromwell (CB)]

I urge that the commission takes a serious and practical look at resourcing. The Environment Agency has had its budget halved in the last decade, and it is pointless producing complicated recommendations if they are not going to be resourced—something which we as legislators do far too often.

[Baroness Hayman of Ullock (Lab)]

The noble Lord makes an extremely good point. Resources and enforcement are a crucial part of ensuring that any legislation is delivered.

[The Earl of Devon (CB)]

My Lords, the Minister has indicated how quickly the Government have sought to address this issue, but they very quickly announced the intention to develop 1.5 million new homes across the country. We are all aware that there are development deserts across the country, particularly catchments affected by the nutrient neutrality rules on phosphates and nitrates. I have also heard that the Environment Agency has declined a number of major developments, including around Oxford and Cambridge, due to lack of available water to supply those new developments, as well as lack of suitable sewerage to remove waste. Will the commission focus, and how quickly will it be able to do so, on the limitations that the poor performance of our water companies is placing on the Government’s ambitious agenda for economic and housing development?

[Baroness Hayman of Ullock (Lab)]

As the noble Earl heard, the commission has a very wide remit. I ask him to feed in anything like this that he feels it should be giving attention to. On housing and nutrient neutrality, we have ambitious housing targets, and Defra and the MHCLG are working together on how we can protect the environment and look at what needs to be done in the area of drainage. On water shortages, one of our manifesto pledges, and something we are very keen to work on, is the introduction of new reservoirs. We have not had new reservoirs for over 40 years in this country, and it is absolutely critical that we move forward on that.

Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

Committee stage
Monday 28th October 2024 Lords Chamber

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

My Lords, I thank all noble Lords who have put forward amendments relating to the financial management of water companies. I will start with Amendment 10, tabled by the noble Lord, Lord Cromwell.

Ofwat has a core duty under Section 2 of the Water Industry Act 1991 to ensure that companies can finance the proper carrying out of their statutory obligations. Ofwat already monitors the financial position of water companies and can take action when companies need to strengthen their long-term financial resilience. However, we recognise that some companies will need to take further steps to strengthen that financial resilience. Ofwat has required further assurance from these companies about their financial resilience into 2025 to 2030 and beyond, and the annual monitoring financial resilience report is due to be published this autumn and will provide a publicly available assessment of the financial resilience of each water company. I say to the noble Lord, Lord Cromwell, that we met and discussed these concerns previously. Clearly, the commission that we have talked about a lot today will look at performance and resilience, but I am very happy to discuss this with him further as we move forward through the Bill.

Turning to Amendment 86, tabled by the noble Lord, Lord Remnant, I emphasise that there is a high bar for the introduction of a special administration regime and the Government do not expect to have to use this power. A special administration regime will be required only when there is evidence that a company is insolvent or in serious breach of its statutory duties. The noble Lord’s amendment is to Clause 10, and Clauses 10 and 11 are designed to introduce new powers for the Secretary of State and Welsh Ministers to modify water company licences to cover any shortfall that results from a SAR. Government funding may of course be required to cover the costs of a special administration, and these clauses mean that the Government will be able to recoup any taxpayer money spent during a SAR that cannot be covered upon exit from the SAR, either by rescue or by transfer. I wanted to make that clear. Of course, in the unlikely event that the power in the Bill is used, it allows the Secretary of State or Welsh Ministers to decide, subject to consultation, the rate at which the shortfall is recovered. I hope the noble Lord is therefore reassured that any intervention would be considered very seriously and as a last resort.

I turn now to Amendment 92, tabled by the noble Lord, Lord Roborough. Water companies are allowed to raise debt to fund the delivery of their services and it is for companies to decide their financial structure. At sensible levels—that is the key point—debt can be an appropriate way to fund essential investment. Sustained investment in the water industry will continue only if the shareholders of companies can expect a fair return. This amendment may therefore threaten the ability of companies to attract investment if limits on borrowing are imposed.

I reassure the noble Lord that Ofwat already has appropriate powers to prevent dividends where they would threaten financial resilience. I appreciate that the noble Lord has extensive experience in this area, but I hope he understands why we cannot accept this amendment, because it is vital that we ensure companies are able to finance their functions. If he would like to send in more information about this, I would be very happy to receive it and have a look.

Finally, I once again highlight that the new independent water commission, led by Sir Jon Cunliffe, the former Deputy Governor of the Bank of England, will review the current water industry regulatory framework to ensure that it attracts investment and supports financial resilience for water companies. I once again thank noble Lords for their suggestions and input into this discussion on the financial management of water companies.

[Lord Cromwell (CB)]

I thank everyone who has participated in this. I think we are all concerned about financial engineering of one sort or another. It is not only borrowing, but that is clearly an important part of it. I am sorry that the amendments have not passed muster, but I look forward very much to further discussions with the Minister, as she offered. I beg leave to withdraw the amendment.

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[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Baroness, Lady McIntosh of Pickering, for her amendments relating to Ofwat’s duties. I will take Amendments 11 and 12 together.

As I have previously noted, public trust in the water sector has been severely damaged, and the number of serious pollution incidents is increasing, yet companies are still paying out millions in bonuses. To rebuild public trust, we are creating a new framework to support accountability, including the new rules relating to remuneration and governance. As the independent economic regulator of the water industry, Ofwat will be responsible for developing these rules.

However, the Government are clear that environmental standards are a vital component of performance. As such, the Bill requires the forthcoming rules to include standards that relate to the environment. The noble Lord, Lord Blencathra, has mentioned the devastation that flooding can bring; I reassure him and other noble Lords that I completely understand why it is so important for us to tackle flooding. I live in a house that has been flooded—living in Cumbria, you are always aware of these issues.

With regard to the Flood and Water Management Act 2010 specifically, while the Act includes provisions relating to sustainable drainage, it does not prescribe or define any environmental standards capable of being applied in this context. It would therefore not be appropriate to include reference to standards in this legislation within Ofwat’s rules, as Ofwat does not have any functions or expertise in relation to the technical requirements prescribed under the Flood and Water Management Act 2010.

The noble Baroness, Lady McIntosh, suggested that Defra should take ownership of delivering this. The issue we have is that it also impacts directly on development and developers, which is why the Government are currently working with the Ministry of Housing, Communities and Local Government to assess how best to implement their ambitions on sustainable drainage, while also being mindful of the cumulative impact of the new regulatory burdens on the development sector. At this stage, I do not want to pre-empt the outcome of that process.

On this basis, the Government do not accept either of the amendments from the noble Baroness. However, I would like to say that the noble Baroness knows that I am very sympathetic to her concerns. As she said, we have discussed this previously. If she is willing, I suggest that we look to arrange a meeting between herself, myself and MHCLG, in order to discuss this further, where she can clearly explain her concerns to both departments—Defra and MHCLG—that have responsibility for moving forward on this.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am most grateful to all who have spoken, and in particular for the support of the noble Baroness, Lady Pinnock, and, from a sedentary position, the noble Baroness, Lady Parminter, as well as my noble friend Lord Blencathra. He referred to the flooding. I was actually a candidate—at a very early age—for Workington in 1987. I went back and visited as a shadow Minister during the severe floods of 2007 and 2009, so I am well acquainted with the pressures faced by Carlisle, Keswick and Cockermouth. It was very sad to see that many of the residents felt that they could not afford to take out insurance in those floods.

I will add that it is not just flooding that concerns me; it is the surface water going into the combined sewers taking the sewage from the new developments that do not have mandatory SUDS that is causing the problem.

I would like to take up the Minister’s offer. It would be good to have the meeting before Report, because I would be prepared to come back with these amendments then. Alternatively, if the department wish to come forward with even better amendments that achieve the same end, that would be very welcome.

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[Lord Remnant (Con)]

My Lords, I am delighted that Amendment 26 in my name falls into the same grouping as those in the name of my noble friends Lord Roborough and Lord Blencathra. Although I very much regret that your Lordships’ time is having to be spent on potentially amending proposed legislation that has retrospective effect, it gives me the opportunity very much to support the arguments advanced by my noble friend Lord Roborough in support of Amendments 14 and 15.

It cannot be right retrospectively to override contract law with respect to employment contracts freely entered into by company and individual in line with relevant legislation and regulations in force at the time. Similarly, to the extent that, today, pay can be recovered from senior individuals under malus and clawback provisions in listed companies’ remuneration policies, such a draconian power can rightly be exercised only in extremely limited circumstances known in advance by the individual. The proposed exercise of the pay prohibition in the Bill retroactively goes way beyond accepted remuneration practice, and unacceptably so.

On my own amendment, I will not repeat the general arguments made by my noble friend against the principle of retroactive or retrospective legislation. I am no lawyer, so I hope that your Lordships will forgive me if I perhaps erroneously use the terms interchangeably. The offending principle, though, remains the same. The general rule in this country, and indeed in most modern legal systems, is that legislative changes apply prospectively. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow’s backward adjustment of it.

The Bill proposes that the provisions about performance-related pay apply from the financial year beginning 1 April 2024. We are currently some seven months into that financial year, and the Bill will not be enacted for some months hence. In effect we are talking about backdating the provisions for the best part of a year. The remuneration arrangements entered into between senior individuals and their employer will have been agreed under remuneration policies agreed by shareholders well before April for them to take effect from 1 April 2024. It surely cannot be right, whatever the merits of the Bill, for its provisions subsequently to alter those arrangements and the remuneration paid, or to be paid, under them.

Few things concern investors more than retrospective legislation, and listed companies will need to consult with and seek approval from shareholders on changes to remuneration policies at their AGM. Requiring retrospective changes risks companies breaching shareholder-approved remuneration policies. More fundamentally, it will undermine investor confidence at a time when they are being asked to fund a record investment programme.

My amendment would simply change the date from which the performance-related pay provisions come into effect from a historic 1 April 2024 to a mildly prospective 1 April 2025. Is that really too much to ask, to avoid breaching a fundamental legal principle? I do not think so and I hope that the Minister will agree with me.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank all noble Lords who have stuck with us this evening and carried on the debate. We know that the public have been clear that they want to see change and that where performance is poor, executives should not receive large salaries or bonuses.

I will start with Amendments 14 and 15, tabled by the noble Lord, Lord Roborough. The conditions of existing employment contracts may not align with Ofwat’s new rules. Our concern is that Amendment 14 may prevent Ofwat being able to apply its rules even when performance has not met the required standards. On Amendment 15, it is also right that where companies breach Ofwat’s rules on performance-related pay, Ofwat should be able, if it considers it appropriate, to require the company to recover any payment made in breach of the rules. Linking pay to performance should incentivise decision-making, resulting in improved outcomes for customers in the environment. I reiterate what I said earlier: should companies meet their performance expectations, executives can still be rewarded. So I hope that the noble Lord will understand why we will not accept his amendments.

I turn to Amendment 26, tabled by the noble Lord, Lord Remnant. This legislation will ensure that Ofwat is able to implement rules on performance-related pay in the current financial year. However, I listened really carefully to the speech that the noble Lord just made introducing his amendment. I would really like to understand his concerns better, so I wonder whether he would welcome further discussion on this matter so that we can look at it in more detail. I would very much appreciate it if the noble Lord was prepared to do that. But currently we are not going to accept the amendments as we feel that they would prevent meaningful implementation of the rules.

[Lord Roborough (Con)]

My Lords, I am grateful for the Minister’s reply. We respect that this is an election manifesto commitment and therefore needs to be in the Bill in some form, but my noble friend Lord Remnant and I would both like to discuss further with the Minister, if possible, how we can help to improve this part of the Bill. In the meantime, I beg leave to withdraw my amendment.

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[Baroness Hayman of Ullock (Lab)]

My Lords, how nice to have a quick last group. I thank the noble Lord, Lord Roborough, for introducing the last group of today with his Amendment 19, which seeks to specify the criteria to be covered by the rules on fitness and propriety, ensuring that senior leaders meet the public’s expectations.

I have mentioned Ofwat’s consultation on remuneration and governance before, and I would just like to confirm to the noble Lord that this consultation references similar criteria to those proposed by his amendment. Ofwat’s consultation seeks views on whether it would be appropriate to include a concept of “ability” in the new test, defined as an individual having adequate knowledge and understanding of the duties of the undertaker. Ofwat has stated its intention to design a fit and proper person test with criteria that will improve public trust and company culture in the water sector, having considered how other sectors are regulated around these same principles. I hope this captures the noble Lord’s concern that standards of fitness and propriety will need to be relevant and encompass concepts of knowledge and understanding. Of course, we feel that Ofwat’s independence is an important part of the trust that companies have in the regulatory regime.

The noble Lord asked why we felt Ofwat should be setting these criteria. We think it is right that Ofwat has the opportunity to consult on these criteria and that companies then have the opportunity to respond and perhaps propose different criteria. It needs to be a situation where Ofwat can then tailor these fitness and propriety standards to the water industry, rather than having prescriptive standards set out within the primary legislation. It is important that Ofwat’s independence is clearly upheld, because it will support its ability to hold senior officials to account for their actions.

Ofwat also notes in its consultation that the 16 largest water companies have a licence condition that requires them to meet the four objectives of its board, which are leadership, transparency and the governance principles. These objectives include the requirement for boards and board committees to have the appropriate balance of skills, experience, independence and knowledge. I hope the noble Lord is content that this is already being looked at; I hope that he will look at the consultation and therefore see that his amendment is no longer necessary.

[Lord Roborough (Con)]

My Lords, I am grateful for the Minister’s reply, and it is certainly very helpful. Perhaps something I could have brought out more in my initial comments were the concerns over accountability. When I look at the FCA’s senior manager regime, and the fit and proper tests, none of that is here—nowhere is there any accountability to Parliament. We will take the Minister’s comments away and give this further thought. I beg leave to withdraw the amendment.

Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

Committee stage
Monday 28th October 2024 Lords Chamber

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

My Lords, I thank the noble Baroness, Lady Willis of Summertown, for her interest in and general support for the Bill. I am sure that, despite missing Second Reading, she will make a very valuable contribution to Committee.

As I set out at Second Reading, the purpose of this Bill is deliberately narrow in order to improve water industry performance as an urgent priority. On her Amendment 1, I agree with the noble Baroness that addressing the wider issue of river pollution arising from water and sewerage companies’ operations is of critical importance, as of course is meeting our biodiversity targets. The noble Baroness, Lady Parminter, said that she hoped I was not going to just refer to the review, and I am sure she will be delighted to know that I am not.

The noble Baroness, Lady McIntosh of Pickering, made the important point that we already have commitments in law on this; we already have targets that we need to be meeting on biodiversity and the wider environment. It is important to stress that we must have regard to the Climate Change Act in this space. The Government are already required to meet the legally binding targets under the Environment Act 2021 and the Climate Change Act 2008, and to set out their plans to adapt to the impacts of the changing climate.

As the noble Lord, Lord Blencathra, just mentioned, we are doing a rapid review of the environmental improvement plan. This is because we are serious about meeting the Environment Act’s biodiversity targets. We did not feel that it was fit for purpose to meet those targets, which is why we are doing this review—to protect and restore our natural environment and come up with a delivery focus to help meet very ambitious targets.

Ofwat—I think the noble Baroness, Lady McIntosh, mentioned this—has a core duty under Section 2A of the Water Industry Act 1991 to work towards strengthening resilience. This duty ensures that Ofwat is already required to promote long-term planning for water companies to adapt to environmental pressures, including climate change. I take on board the comments of my noble friend Lady Young of Old Scone, who felt that Ofwat at some point lost the plot. This is why we need to look at the role of regulators through the review—I am afraid I will be mentioning the review from time to time today.

I hope that the noble Baroness, Lady Willis, is reassured that the Government share her ambition to tackle the wider issues of river pollution, biodiversity and climate change. I hope she understands that, because we feel we are already acting in this space through legislation that is in place, we will not accept Amendment 1.

Amendment 91 was also tabled by the noble Baroness, Lady Willis. In addition to the duty under Section 2A, Ofwat has a core duty under the Water Industry Act to work to ensure the long-term resilience of water companies’ supply and sewerage systems. Furthermore, on 23 October the Government announced the independent commission into the water sector and its regulation. This is intended to be the largest review of the industry since it was privatised, and part of the development of further legislation, not just a review. We want it to have a positive end in tackling the problems we see in our water industry. The objectives of this independent commission will include ensuring that the water industry regulatory framework delivers long-term stability to restore our rivers, lakes and seas to good health, to meet the challenges of the future and drive economic growth.

I hope the disappointment of the noble Lord, Lord Blencathra, will be replaced with excitement when he sees that these will form the basis of this further legislation to attract long-term investment and set out recommendations to deliver a collaborative, strategic and, importantly, catchment approach to managing water, tackling pollution and restoring nature.

The noble Baroness, Lady McIntosh, made a specific point about the impact assessment. I do not have the assessment in front of me, so I am not entirely sure what section she was referring to. I hope she and I can catch up following Committee and discuss this, so I can answer her questions in more detail.

The commission’s terms of reference do include environmental aspects. The commission’s objectives include to “support best value delivery” of environmental outcomes, and to:

“Rationalise and clarify requirements on water companies”


to achieve better environmental outcomes. Furthermore, under “approach and deliverables”, it says that the chair

“will invite views from an advisory group of nominated experts, covering areas including the environment”,

and

“will also seek views from wider groups of stakeholders, including environmental campaigners”.

Therefore, we are trying to make sure that, as well as meeting the targets already in legislation, we put the environment at the heart of what we are doing.

I hope that the noble Baroness, Lady Willis, is reassured that these two new Clauses are unnecessary as they overlap with existing government requirements, Ofwat’s core duties and our ambitions for the future. I hope she will take an active part in what we are trying to achieve with the commission, and I thank noble Lords for their engagement on these important matters.

[Baroness Willis of Summertown (CB)]

I thank the Minister and everybody else who has contributed to this discussion on my amendment. I am not going to repeat the valid and important points that have been made, but I will respond to the noble Baroness, Lady McIntosh, on the term “caution on costs”. There is a lot of debate about costs, and nature-based solutions can often be much cheaper while also elevating biodiversity. For the last 20 years we have been told to be cautious about costs and on-costs, and as a result our species targets have gone down and down. The time has come to redress that balance, and I look forward to debating this another time.

On the commission, I appreciate the Minister’s comment that we already have commitments to the environment in the Environment Act and the Climate Change Act. However, I was shocked when I discovered over the weekend that, according to the list of protected species that we want to stop the decline of by 2030—not 2035—25% of plants and birds and 100% of freshwater invertebrate species rely on clean rivers. Therefore, while I am delighted about the commission and will absolutely get behind it and join in, it is going to be too slow and too late to achieve the biodiversity targets we set out in the Environment Act. I look forward to picking up this issue on Report, but for now I beg leave to withdraw the amendment.

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Once again, I thank the noble Baroness, Lady Bakewell, for leading this group, and the noble Earl, Lord Russell, for taking her place in this debate. I hope that the Minister can address noble Lords’ concerns in her response.

[Baroness Hayman of Ullock (Lab)]

My Lords, clearly, public trust in the water sector has been severely damaged and the number of serious pollution incidents is increasing, as we heard very clearly from my noble friend Lord Sikka when he introduced his amendments. At the same time, companies have been paying out millions in bonuses. To rebuild public trust, the Bill enables Ofwat to issue new rules on remuneration and governance to ensure that companies and executives are subject to robust oversight and held accountable for failure. I thank the noble Lords who have tabled amendments relating to the application of these rules.

I will start with Amendment 2, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville. I thank the noble Earl, Lord Russell, for introducing it on the noble Baroness’s behalf and wish her all the best from these Benches. I also listened with interest to the suggestions made by the noble Duke, the Duke of Wellington. Clearly, he and the noble Earl, Lord Russell, had different opinions on the wording. Our approach is intended to strike a balance between the approaches suggested by the noble Lords, to give Ofwat some flexibility while ensuring that it issues rules in relation to our priority areas.

However, I emphasise that the provisions in the Bill state that Ofwat must exercise its power to set rules in relation to performance-related pay, fitness and propriety, and customer representation. Ofwat may also make rules about other remuneration and governance arrangements at its discretion, but it must take action regarding the specific matters referred to in the Bill. We are pleased that Ofwat is already taking action to implement these rules through the publication of its consultation announced on 22 October. This was referred to by number of noble Lords, including the noble Lord, Lord Remnant. I hope the noble Earl will tell the noble Baroness that we hope that this has reassured her that her amendment is unnecessary.

I turn to Amendment 3, tabled by the noble Lord, Lord Remnant. Ofwat has a range of primary duties, including acting to protect the interests of consumers, ensuring that companies properly carry out their functions, and securing that companies are able to finance the delivery of their statutory obligations. I assure the noble Lord that Defra has worked to assure agreement with companies to update their articles of association to place customers and the environment at the heart of business decisions which impact on consumers.

The noble Lord is correct that I am going to say that Ofwat’s existing duties are already consistent with the outcomes that this amendment aims to ensure. This includes ensuring due consideration of the human and capital needs of the sector. He also raised concerns about influencing Ofwat. The current consultation that I have referred to is an initial policy consultation which has been launched with the express purpose of inviting views early. This will be followed up with further statutory consultations, which will also take into account the views shared through this initial policy consultation.

I thank the noble Lord for bringing his knowledge and experience to the development of this legislation. It is very valuable to hear his contributions. However, I hope that he is reassured that, in setting the rules about remuneration and governance, Ofwat will continue to act in accordance with its core duties and understands that it is for this reason that the Government will not accept the amendment.

Amendment 25, tabled by my noble friend Lord Sikka, and Amendment 27, tabled by the noble Lord, Lord Roborough, relate to the timing and process for setting the rules for remuneration and governance. My noble friend took the opportunity to lay out clearly the many concerns around the behaviour of water companies and the ability of regulators to hold them to account. Ofwat is required to undertake statutory consultation with the relevant persons, which includes the Secretary of State, before any rules are finalised. Allowing Ofwat to set rules in this way, rather than through legislation, will enable those standards to be more easily amended, subject to the relevant procedural requirements, where it is appropriate to do so in the future. The Government and Ofwat agree that the rules should be in place as soon as possible after Royal Assent, and Ofwat intends to implement them following its statutory consultation, which, as I previously mentioned, has already been launched. I hope the noble Lords are therefore reassured their amendments are not necessary.

Finally, Amendment 101, tabled by my noble friend Lord Sikka, relates to dividend payments. Sustained investment in the water industry will continue only if the shareholders of companies can expect a fair return. Ofwat already has the power to stop the payment of dividends if they would risk the company’s financial resilience and to take enforcement action if companies do not link dividends to performance for consumers and the environment. The amendment risks deterring much needed investment in the sector. I highlight that the Government’s new independent water commission will look at how we can improve the regulatory framework to attract investment and support financial resilience for water companies. I hope this is helpful in explaining to my noble friend why the Government will not accept his amendment.

A few noble Lords talked about the importance of investor confidence and the impact that we could have on this and talent in the water industry. While we believe it is right that companies and their executives are held to account for basic and fundamental performance requirements, it is important that, should companies meet their performance expectations, executives can still be rewarded. The proposed £88 billion in investment under PR24 is the largest ever in the water sector and has the potential to create up to 30,000 new jobs. It is crucial that the sector can recruit the talent it needs to deliver the PR24 proposals, because improving the performance of the water industry will help the industry attract and retain talent. Private sector investment is also at the core of how we grow the economy, and the Bill is designed to deliver a clear and consistent regulatory framework for the water industry and its investors. Noble Lords may be interested to know that on 10 September Defra and Treasury Ministers held a round table with investors where they outlined how the Government will work in partnership to attract the billions of pounds in private sector investment that are desperately needed if we are going to clean up Britain’s rivers, lakes and seas.

Finally, I assure the noble Lord, Lord Roborough, that I always try to get on well and work constructively with everybody, including Ofwat. I once again thank the noble Lords for their suggestions and input to this discussion on the general application of the rules for remuneration and governance.

[Earl Russell (LD)]

My Lords, I thank the Minister for her comments. The noble Duke, the Duke of Wellington, put forward an interesting idea on issuing guidance, and it is one that I will take back to my noble friend for further consideration. The noble Lord, Lord Remnant, talked about the lack of ability to scrutinise the rules, the need to attract talent and the carrot and stick approach. The noble Lord, Lord Sikka, talked about broken trust, the poverty of regulations and the level of convictions in the water industry. His Amendment 101 would curb excessive dividends, financial engineering practices and practices inflating the worth of companies. The noble Lord, Lord Roborough, n his amendment said that rules must be published within six months and he talked about the powers of Ofwat being unchecked.

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[Baroness Hayman of Ullock (Lab)]

I thank noble Lords for their interest in the rules relating to performance-related pay. The public have been clear that they expect to see change in the performance of the water industry and, where performance is poor, that executives should not receive bonuses.

I turn to the amendments in this group: Amendment 4 from my noble friend Lord Sikka and Amendment 18 from the noble Lord, Lord Remnant. I thank them for their introductions and their unexpected agreement. I also thank the noble Baroness, Lady Pinnock, for sharing her experience of working with Yorkshire Water; these shared experiences are important as we develop the legislation going forward.

In line with the general principles of regulatory independence, Ofwat will rightly be responsible for developing and enforcing the rules on remuneration in governance, including determining the individuals in scope. As I mentioned in the previous group, Ofwat published its policy consultation on 22 October, and this will run through to 19 November. This consultation is to design the rules that are outlined in the Bill.

In response to the noble Lord, Lord Roborough, I will say that the consultation sets out Ofwat’s intention to apply rules on performance-related pay only to executive directors who are members of the regulated company board and receive performance-related pay. Ofwat has also stated in its policy consultation that it intends for the rules relating to fitness and propriety to apply in the first instance to chief executives and individuals appointed as directors to the board, and that would include both executive and non-executive directors. But Ofwat may consider extending the rules to other senior management roles in the future.

Allowing Ofwat to set out in the rules the performance metrics to be applied will also enable those standards to be more easily amended, subject to the relevant procedural requirements, where or when it is appropriate to do so in the future. Ofwat will of course need to consult with the relevant persons, and this will include the Secretary of State, Welsh Ministers, the Consumer Council for Water and other stakeholders, before these rules are finalised.

In conclusion, the Government will therefore not be accepting these amendments, because we need to ensure that Ofwat can retain the flexibility to expand the group of persons covered by the rules in future if appropriate.

[Lord Sikka (Lab)]

My Lords, I thank all noble Lords for their contributions to this debate and I am sure that some of the issues will return. Perhaps I may just clarify a point. The Bill also holds out the possibility of criminal sanctions against directors. Are we to assume that non-executive directors will never be charged with anything? The Post Office scandal shows that non-executive directors were culpable, so there appears to be a case for including them in some of these considerations. I am sure I will read Hansard with considerable interest and possibly return next time. For the time being, I beg leave to withdraw the amendment.

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[Baroness Hayman of Ullock (Lab)]

My Lords, I am grateful to noble Lords for their suggestions regarding matters we need to be considering in the rules for performance-related pay. As I previously noted, to rebuild public trust we are creating a new framework for supporting accountability. As part of this, Ofwat will be issuing new rules on bonuses, including standards relating to environmental performance.

I turn to Amendment 5, tabled by my noble friend Lord Sikka. In recent years, public concern has been focused on water company bonuses, particularly in the instances where performance has been poor. Companies must work to regain their customers’ trust, including by holding those in senior roles accountable so that their remuneration better reflects the service that customers rightly expect. We are giving Ofwat new powers to issue rules on remuneration and governance to ensure that companies and executives are held accountable for failure and to drive improvements in performance. We are requiring Ofwat to exercise these powers to prioritise making rules to prohibit bonuses for underperforming companies.

Ofwat already sets expectations on executives’ performance-related pay. This measure will strengthen its existing powers to ensure that bonuses are not paid in any financial year in which standards are not met. Ofwat’s rules on remuneration will cover both financial bonuses and bonuses in kind, limiting any potential loopholes in the policy. We believe that performance-related pay can be an effective tool within the overall remuneration package and will incentivise leaders to focus on improvements that can transform performance. Remuneration committees for each water company independently determine the appropriate level of remuneration for their executives. We therefore do not propose to amend the requirement on Ofwat to make rules to cover total remuneration.

Amendments 6 and 28 were tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, and ably introduced by the noble Earl, Lord Russell. These relate to the consideration of environmental standards in the rules for remuneration and governance. In line with the general principles of regulatory independence, Ofwat will rightly be responsible for developing and enforcing these rules. However, the Government are clear that environmental standards are a vital component. Ofwat must, following consultation, provide that environmental standards have to be met by companies if performance-related pay is to be given to persons holding senior roles. Ofwat’s policy consultation, which we have previously discussed, proposes that bonuses will be prohibited if a company has had a serious category 1 or 2 pollution incident in the preceding calendar year.

The noble Lord, Earl Russell, asked for some figures. I can tell him that, since 2015, enforcement action by the EA and Ofwat has resulted in over £400 million in fines to water companies or money back for customers. I hope that noble Earl is therefore reassured that this new clause is unnecessary, noting that Ofwat must already include environmental criteria when designing the rules in relation to performance-related pay.

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[Lord Blencathra (Con)]

My Lords, I thank my noble friend Lady McIntosh of Pickering for moving this important amendment, which has caused a little bit of welcome excitement in the Committee. Both Amendments 7 and 8 seek to ensure that senior executives do not receive a financial penalty for failures that were not their fault or within their control, and we on these Benches feel that the noble Baroness’s amendments merit consideration by Ministers. The intervention by the noble Lord, Lord Cromwell, at the end also merits some consideration.

It is right that the Government should take steps to ensure that, when a water company fails to meet the standards set by Ofwat, the responsible executive is held to account. While it is right that company directors take responsibility for the successes and failures of a business, under the Bill, other senior officers, who may not be members of the board of directors, could be penalised under these rules. The argument that the relevant senior executive is held responsible, rather than an officer of the company who was not responsible for the decision, is a simple one. Rather than applying financial penalties to all senior executives, including those below board level, these rules should penalise only those who are responsible for the company’s conduct.

It is quite a long time since I last worked in industry, but I do not think that much has changed to this day. Who is responsible depends on the level of direct supervision by a more senior officer. At lower levels of a company, it is quite straightforward: the supervisor or the foreman has minute-by-minute relationships with the team under him or her, so they could be held responsible for faulty work or bad behaviour by their workers. But that is at the lower level. As you get higher up a company, the whole ethos changes. Executives are supposed to set objectives and delegate to their other officers how it is done. The CEO, or directors, tell officers under their command, “Here are your legal duties and these are the company objectives. Here are your own personal targets and objectives—report to me weekly, monthly or whatever on how you are progressing. Now, just get on with it”.

There is no direct day-to-day supervision, and the CEO has to trust that the senior officers below him or her obey the law, behave properly and do not cause the breaches that we are concerned about. It would be wrong to blame and reduce the pay of CEOs or directors based on a mistake by a person under him or her where they have no direct control. Of course, the exception would be in the extraordinary circumstances in which the CEO or executive director gave instructions to the worker to break the law or not to care about the rules. That would be a different matter.

Without these amendments, we are concerned that it may prove difficult to find professionals willing to take on senior roles at water companies if there is a risk they will suffer an unfair loss of performance-related earnings through no fault of their own. It is a basic principle of performance-based pay for employees below board level that it should be tied to their performance as an employee within a team. It would not be an effective incentive scheme if one individual or team were deprived of their performance-related benefits because of the behaviours of failures of another individual below board level. As we discussed at Second Reading, arbitrary punishment will not improve performance; it will only encourage people to seek employment outside the water sector.

If we are to deliver the improvements to the water sector that the British people rightly expect, we must attract more talent to the sector through a fair incentives and penalties regime. The Bill is a bit too broad and could permit rules to be applied to the sector by Ofwat that are unfair and ineffective. Furthermore, when a current bonus scheme, or contractual bonus, provides for the bonus to be payable on the achievement of certain performance conditions, and the performance conditions have been met, an employer is, in effect, obliged to award the bonus. In cases where an employer may grant discretionary bonuses, employers are required to exercise this discretion honestly and in good faith, not to exercise it in an arbitrary, capricious or irrational way, and not to breach the implied term of trust and confidence.

It concerns me that, should the Government choose not to include these amendments in the Bill, and individuals’ performance-related pay was docked for actions or responsibilities beyond their control or remit, it would put the employer in a position of complying with the requirements of rules created by Ofwat under this Bill but then acting contrary to these common-law and contractual requirements. That leads to a concern that this scenario could result in costly and time-consuming litigation, thus diverting funds which would otherwise be better spent improving our water and sewage systems. Therefore, I encourage the Government to accept these amendments so that, should a water company fail to meet the standards set by Ofwat, only the relevant executives are held responsible. However, if the Government are unwilling to put this on a statutory footing, we hope that Ofwat would be willing to enact these principles under its rules, which could be overseen by the House under Amendment 27 as an affirmative instrument.

I want to comment on the points made by my noble friend Lady McIntosh of Pickering on surface water. I put it this way: if we were starting again from scratch a couple of hundred years ago, we would have designed a system whereby we never had rainwater from gutters or car parks running off into Mr Bazalgette’s sewage system—but we are where we are now. In an ideal world, two pipes would come into every house and, as the noble Lord suggested earlier, one would have clean water for drinking and the other water for flushing the toilet or for hose pipes. We cannot go back and do that now—but what we can do is look at new developments, and I hope that the Government will consider the suggestion from the noble Lord, Lord Cromwell, in that regard.

I understood that it is possible if one is building a car park, before one puts in the hardcore, to lay a whole series of ooze pipes and then collect all the rainwater run-off, so it replenishes the underground stream by putting the water back into the subsoil. That should be possible. Whatever it is, we need to look at new developments to ensure that surface water is not unnecessarily going into our sewage system. I hope that the Minister will carefully consider what my noble friend Lady McIntosh of Pickering has said.

[Baroness Hayman of Ullock (Lab)]

My Lords, through provisions introduced by Clause 1, Ofwat will be able to issue new rules on remuneration and governance to ensure that companies and executives are subject to robust oversight and held accountable for failure. Among other things, these rules will ensure that executives will no longer be able to take bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability.

Amendments 7 and 8, introduced by the noble Baroness, Lady McIntosh of Pickering, seek to ensure that these rules apply only in instances where the failure to meet the required standards is due to a failing by that individual and not another person. I start by reassuring the noble Baroness that, should companies meet their performance expectations, executives will rightly be rewarded. However, the changes proposed through Amendment 7, in particular, would make it more difficult for Ofwat to implement the rules on remuneration and governance in a meaningful way. This is because it would introduce an additional test to be met before the bonus ban could be applied, where a link between the specific actions of an individual senior leader and the performance failings of a company as a whole might be difficult to demonstrate.

Senior executives are also collectively responsible for the actions of the company and therefore should be held responsible for poor performance. However, having said that, Ofwat has stated, in the policy consultation it published last week, that, while it intends for the rules to apply to most performance-related pay decisions by water companies,

“there may be … exceptional circumstances where a payment should not be prohibited”.

For example, if an incident leading to a rule breach was clearly and demonstrably beyond the control of the company, this could be grounds for an exemption from the ban.

Considering the changes proposed by Amendment 8, we also consider it unlikely that individuals in senior roles will fail to meet Ofwat’s future standards of “fitness and propriety” due to a failing on the part of another person. The potential criteria proposed by Ofwat in its consultation to measure “fitness and propriety” include character, previous conduct, and knowledge. These criteria are specific to the individual, rather than the performance of the company, and do not obviously relate to acts by other persons.

I just want to mention an issue that the debate moved on to, around drainage and SUDS. We are going to be discussing SUDS further in group 8, so we shall talk about that then, but I want to assure the noble Baroness that we are engaging with officials in MHCLG, because it is really important that we have a proper discussion around planning and drainage as we move forward with development. I am very aware of the problems that surface water can cause in new development if it is not thought through properly.

The noble Lord, Lord Cromwell, drew the Committee’s notice to the commission and asked whether it would be discussed there. I will draw the Committee’s attention, for interest, to part of the scope of the commission:

“Where housing, planning, agriculture and drainage interlink with strategic planning for the water system, these are in scope. ... The commission should have regard to how the water sector regulatory system provides the certainty around the provision of water infrastructure needed to underpin development plans, housing growth and sustainable development, while strategically protecting and enhancing the environment. This should include how regulation and planning for water infrastructure and for residential and commercial development can work together more effectively to anticipate and invest to provide for future growth, to quickly resolve and prevent issues where water and wastewater capacity constraints may otherwise inhibit necessary development (such as through their impact on requirements for water and nutrient neutrality)”.


So, although it is not entirely dealing with the issue around SUDS, I think it is something we need to explore further with the housing department, for example, and with local government. There is an opportunity to look at development and water within the scope of the commission. I hope that is helpful for noble Lords to understand.

I hope I have reassured the noble Baroness that the rules will be applied to individuals in a proportionate manner, and made clear why the Government consider these amendments to be unnecessary.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am grateful for the opportunity to debate in some depth these two amendments. I just clarify that the automatic right to connect is very different from SUDS and I do not think the noble Baroness addressed that point. I still have reservations, because I believe it is inappropriate in terms of Clause 2 to speak about pollution incident reduction plans when so many of the sewage discharges can self-evidently be found not to be the responsibility of water companies at all. As the noble Lord, Lord Cromwell, so eloquently and appropriately recorded, these incidents are only going to increase as we see the number of major new developments of four-bedroom and five-bedroom houses increase.

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[Lord Roborough (Con)]

My Lords, I thank the noble Earl, Lord Russell, for moving the amendment. I want to speak in support of Amendment 22, from my noble friend Lord Remnant, as well as Amendments 21 and 23 tabled by the noble Duke, the Duke of Wellington.

My noble friend is right to note that the decision whether to be on a board, panel or committee is the job of the company rather than any kind of external regulator. By allowing the company to make that decision, it can decide based on its own business needs. If this was left to Ofwat, not only could it lead to a situation where the board, panel or committee did not fit well into the company structure but it might harm relationships between those forums and the board of the company.

It seems unlikely that a regulator would ever have access to all the information needed to make decisions on how a company’s decision-making systems should be structured, and it is surely the responsibility of the company itself to ensure that it has the right processes in place to make the correct decisions according to its needs. Indeed, as we have heard from many noble Lords, it is clear that the regulator has failed to get important decisions right in the past, to the detriment not only of companies but of the environment. Yes, of course, the regulator should have its role in holding companies to account for their decisions, but the moment regulators are involved in decision-making, it surely takes some responsibility for those choices too.

We are concerned that having consumer representatives on the board or their being involved in any decision-making within the company creates a blurring of responsibility. There is already the risk of some confusion, given the role of regulators, but they are at least experts in the industry and well informed about their roles, acting within well-defined parameters.

I agree with the noble Duke, the Duke of Wellington, on sectional interests and the effective working of a board. Consumer representatives on a board lay themselves open to the responsibilities of being a company director and in some cases a director of a listed company. Do the Government really want such consumer directors to be open to fines or prosecution for failing to deliver accounts on time, trading while insolvent or even insider dealing? It is not clear to me as the Bill is drafted that those consumer representatives could not also be subject to fines or prosecution by the regulator. If a consumer representative proposed an action that led to penalties from the regulator, how could they not be responsible?

Turning this around to the perspective of the existing board and management, if consumers are part of decision-making, then it is conceivable that they could cause or prevent an action by the company that created regulatory breaches and punitive action. How would this coexist with the responsibilities and liabilities of professional managers and board directors? How could this not create liability for the consumer representative?

My comments about consumer representation apply equally, if not more, to the environmental experts proposed in Amendment 9 by the noble Earl, Lord Russell. I understand and applaud the sentiment behind the amendment, of environmental representatives representing the stakeholder that has no natural voice, the environment. However, environmental campaigners already have a strong voice. There are obligations already present for companies, and others may be imposed through amendments to the Bill. I also agree with the noble Duke, the Duke of Wellington, that environmental representatives, alongside consumer representatives, should be limited to panels.

Allowing the company to decide the forum in which such representatives take part would benefit both sides of the agreement. If the company has taken this decision, then it becomes clear that the company, its managers and employees remain jointly responsible for decisions. I am not clear from the Bill exactly how the Government intend that its proposals should work. Both my noble friend Lord Remnant’s Amendment 22 and Amendments 21 and 23 from the noble Duke, the Duke of Wellington, have considerable merit. While there is a contradiction inherent between them, both are good solutions to creating the involvement of consumers that the Government want.

I thank all noble Lords for their involvement in this spirited debate. I ask the Minister to explain exactly how she sees consumer involvement working in practice under the Bill. I also ask that she give serious thought before Report to the amendments that I have addressed.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank noble Lords who have taken part in this debate. It has come across clearly that there is no agreement about who should sit on the boards. We want to rebuild trust in the water sector, and to do that we are giving Ofwat new powers to issue new rules on remuneration and governance.

I turn first to Amendment 9 in the name of the noble Earl, Lord Russell, and Amendment 21 in the name of the noble Duke, the Duke of Wellington. The powers on remuneration and governance outline a requirement for Ofwat to set rules on companies for including consumers in decision-making. We feel that it is appropriate for Ofwat, as the independent regulator, to determine how this is implemented. Water companies have a range of legal environmental obligations that they are required to meet, and actions related to these obligations will already be informed by specialists in the company.

We believe that introducing requirements to include environmental experts on company boards would take the focus away from involving consumers in water company decisions, which do not have the same level of legal requirements as the environment does. Environmental issues should already be a key consideration in water company decision-making. Importantly, my officials in Defra have worked to secure agreement with companies to update their articles of association, to place both customers and the environment at the heart of business decisions. I hope that this clarifies to noble Lords that the Bill ensures the prioritisation of consumer representation on company boards and that they feel able not to press their amendments.

Waste: Incineration

Baroness Hayman of Ullock Excerpts

Tuesday 22nd October 2024 Lords Chamber

[Baroness Jones of Moulsecoomb]

To ask His Majesty’s Government whether they plan to implement the Climate Change Committee’s recommendation to pause permission for new incineration plants to allow for a review of the treatment of residual waste.

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

My Lords, the Government are committed to transitioning to a circular economy. We are considering the role of energy from waste in the context of circularity, economic growth and reaching net zero. As part of this, we are giving consideration to the Climate Change Committee’s recommendation. This year, Defra will publish an analysis of energy-from-waste capacity in England to inform future policy. We continue work to implement packaging reforms, drive up recycling rates and take material out of incineration.

[Baroness Jones of Moulsecoomb (GP)]

I thank the Minister, but I am deeply dissatisfied. This Government, in whom I had a lot of trust, have made the deeply irresponsible decision to allow the Portland incinerator to go ahead. I declare an interest as a resident of Dorset, although nowhere near Portland. Incineration and energy from waste is not a practical way forward; it is very damaging both in terms of public health and environmentally. I beg the Minister to speak to her department and suggest getting better advice on energy?

[Baroness Hayman of Ullock (Lab)]

My Lords, it does say in the Companion that you should not thank a noble Member for their Question—so, on this occasion, I will not. The environmental permitting regulations prevent the incineration of separately collected paper, metal, glass or plastic waste, unless it has gone through some sort of treatment process first. Following that treatment, incineration is seen to be the best environmental outcome. We know that the recycling rate is too low, that we burn too much waste and that, for too long, recycling rates in England have plateaued. The way forward is to look at the whole big picture and our circular economy ambitions are designed to address this.

[Baroness McIntosh of Pickering (Con)]

Will the noble Baroness commit to looking not just at incinerators but at anaerobic digesters and accept that they have a powerful role to play not just in getting rid of residual waste, particularly household waste, which is a very vexatious challenge, but in heating people’s homes at a reduced rate? Will the Government keep an open mind on energy from waste, including anaerobic digestion?

[Baroness Hayman of Ullock (Lab)]

As I just mentioned, we are looking to do a review right across the piece on this, so anaerobic waste will certainly be part of that.

[Lord Krebs (CB)]

My Lords, it is all very well to incinerate waste, but does the Minister agree that a real priority should be to reduce the amount of waste that we produce as a country? The real way to deal with this problem is just to produce less waste.

[Baroness Hayman of Ullock (Lab)]

It is a really important point that the noble Lord makes. If we are moving to a more circular economy, as this Government want, we have to see less residual waste being generated —in fact, less waste as a whole. There is a statutory target to effectively halve residual waste by 2042 from 2019 levels, but there still will be an estimated 17.6 million tonnes of residual waste to manage in 2042. Therefore, we have to look at the bigger picture. How do we actually reduce waste overall?

[Lord Lilley (Con)]

My Lords, is not the biggest incinerator in the country the Drax power station? It receives eye-watering subsidies for burning wood that has been transported across the oceans, creating emissions, which has had to be dried and cut into chips, also making emissions, and which emits, on being burned, more CO₂ than coal. This is justified on the grounds that, over the next half-century to a century, trees replanted in those forests will absorb CO₂. If we can take this leisurely approach to reducing CO₂, is there really a climate emergency?

[Baroness Hayman of Ullock (Lab)]

I do not consider the Government to be taking a leisurely approach on this aspect. What is really important is that we look at how we decarbonise our energy from waste facilities going forward. We have consulted on expanding the UK Emissions Trading Scheme to waste incineration and energy from waste, and we are taking on board the responses to that and will bring forward detailed final policy in due course. We plan to include energy from waste under decarbonisation readiness requirements.

[Baroness Boycott (CB)]

Currently, we are incinerating over a million tonnes of food waste a year, as well as 64,000 tonnes of potentially edible food that gets sent to anaerobic digesters; the latter in particular is a clear violation of the WRAP food hierarchy. What will the Government do to re-energise the WRAP campaign around food waste, which, for a while, seemed to work really well but now is very much on the back burner, and food waste is going up. As a redistribution charity, we could really do with that food.

[Baroness Hayman of Ullock (Lab)]

The noble Baroness makes a very good point around food waste: it is a real challenge. I know from talking to my counterparts in the department that, as part of our review of how we manage waste going forward, looking at food waste is critical, because there are so many different complex aspects to it, such as what is included, what is not included, and how we work with supermarkets and with local government. She is absolutely right to raise that issue and I will be discussing it further with my department.

[Lord Roborough (Con)]

My Lords, in line with the Government’s climate commitments and, given energy from incineration is now our most CO₂-intensive generation, will the Government consider prioritising incineration plants for their £21.7 billion package of carbon capture and storage funding? Is it not better to fix an existing problem than create new problems around hydrogen production to fix?

[Baroness Hayman of Ullock (Lab)]

Obviously, the noble Lord knows that we have the new CCS—carbon capture and storage—facilities open. We see that as a critical funding decision that we need to be working on to move forward in this area. It is also important to think about how we regulate in this area going forward and how we recover the energy from this. It a very big picture that DESNZ is working on to ensure that we have sufficient energy capacity in the future, particularly around industry, and that that energy capacity is produced in a way that fits in with the circular economy and decarbonisation, so that we can meet our climate change targets.

[Baroness Humphreys (LD)]

My Lords, when Conwy County Borough Council in North Wales switched to four-weekly collections of residual waste, this led to an 11% spike in the tonnage of recyclables collected and a reduction of 12% of residual waste. The council’s cabinet member put this down to residents being incredibly motivated to recycle and understanding the local and global benefits of recycling. How are the Government working with local authorities to improve awareness of personal responsibility in this area?

[Baroness Hayman of Ullock (Lab)]

We are working very closely with local authorities but also with devolved Administrations. One thing we see as a high priority is building constructive working relationships with the devolved Administrations and different tiers of government. It is only by working together and sharing best practice that you achieve the kind of results that the noble Baroness is talking about.

[Lord Grade of Yarmouth (Non-Afl)]

My Lords, I draw attention to my registered interests. In the race to net zero, and given the importance of reducing carbon footprints, how excited are this Government about our world-leading advances in small modular reactors—SMR nuclear?

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

This Government, as I am sure the noble Lord is aware, have pledged great support for nuclear energy going forward. We need it as part of our future energy security, and small modular reactors are clearly a part of that nuclear journey.

[Baroness Meacher (CB)]

My Lords, plastic waste is a major problem for the planet, yet plastic is eminently reusable. What action are the Government taking to improve and increase the level of reuse of plastic?

[Baroness Hayman of Ullock (Lab)]

That is a very good point: we talk about recycling a lot but we do not talk enough about reuse. That has to be a critical part of reducing the amount of waste that we have as a country. This is very much part of the discussions with local authorities, because they have a key role to play in this. Also, encouraging people on behaviour change is difficult and the Government definitely have a role to play in that.

[Lord Kamall (Con)]

My Lords, considering that we are being nerdy, I wonder whether the Minister can share with the House the technologies that are being looked at to clean up the emissions from waste incineration plants.

[Baroness Hayman of Ullock (Lab)]

Unfortunately, I am not nerdy, so I am unable to answer the noble Lord’s question, but I am sure that we can get back to him in writing.

[Lord Watts (Lab)]

My Lords, some people do not like nuclear power and will not support it, and some do not seem to like any sort of generated energy proposals. But, after 13 years of neglect, it is right that the Government take a view that they will look to reduce pollution in the environment but also keep the lights on.

[Baroness Hayman of Ullock (Lab)]

My noble friend is absolutely right. It is critical that we drive forward our energy policy as a matter of urgency. The last thing we want is not only to have power cuts and insufficient energy but to become too reliant on other countries for our energy all the time. We need to manage our own energy in this country, build the kinds of energy plants we want, work on CCC and nuclear and invest in the future for our long-term energy security.

Environmental Targets (Public Authorities) Bill [HL]

Baroness Hayman of Ullock Excerpts

2nd reading
Friday 18th October 2024 Lords Chamber

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

My Lords, I thank the noble Lord, Lord Krebs, and congratulate him on securing this debate on his Private Member’s Bill this afternoon. I thank all Members who have stayed behind on a Friday afternoon to take part. It has been important to continue to highlight the intertwined issues of environmental decline and climate change. There are, of course, vital issues which this House must continue to highlight and help find solutions to.

The intention of the Bill to drive and strengthen local and other public authority action towards meeting national environmental and climate targets and objectives is important. Indeed, the noble Lord and I have discussed the need to ensure that such action is appropriately and proportionately considered, supported and delivered. This is clear from the Government’s commitment to the 13 legally binding environmental targets set out under the Environment Act, which have been discussed during this debate. These include targets on water, biodiversity, resource efficiency, and tree and woodland cover. We intend to share more delivery information about this in the future to help ensure that we get on track to meet these statutory targets.

The Government have wasted no time—it was one of the Secretary of State’s first actions—in announcing a rapid review of the statutory environmental improvement plan, the EIP, to make sure that it is fit for purpose. After our rapid review of the EIP, we will publish a revised version. This revised plan will focus on cleaning up our waterways, reducing waste across the economy, looking at the numbers of trees we will need to plant, improving air quality and, importantly, halting the decline in species by 2030. Ensuring nature’s recovery is a key priority and is fundamental to the Government’s approach to economic growth. We will develop the new plan working closely with representatives of the public, private and third sectors, and I would hope that that would include noble Members of this House.

Throughout this time, action to deliver against existing commitments will continue at pace. This includes action on regulatory and policy measures intended to deliver the kinds of action that this Bill sets out to ensure, notably those under the Climate Change Act 2008, including our targets in the net zero strategy to reduce direct emissions from public sector buildings by 75% by 2037, and the Environment Act 2021. The noble Baroness, Lady Bennett, asked about the land use framework. I said in a debate earlier this week that we were looking to publish a Green Paper by the end of the year. This will be for consultation as part of the development of the framework as we go forward.

I want to mention local nature recovery strategies. They are an important tool that we can use while we take action to deliver against our existing commitments. They will set the strategic priorities for nature recovery in a particular area and identify the best locations for land management actions to deliver these priorities. Forty-eight responsible authorities across the country are currently preparing nature recovery strategies for their area and we expect to see publication from March next year. They will be delivered through a combination of funding streams, such as biodiversity net gain, other green finance initiatives and public funding pots and, crucially, through an Environment Act requirement for public authorities to have regard to carrying out these activities.

This requirement, which is the biodiversity duty under Section 40 of the Natural Environment and Rural Communities Act, was strengthened through the Environment Act. Noble Lords who took part in that will remember our debates on this. It came into force in January of last year. Under the duty, all public authorities must consider the actions they can take to conserve and enhance biodiversity in England and, where actions are identified, set policies and objectives as soon as practicable to deliver actions and then take that action. In making their considerations and taking such action, all public authorities must have regard to any relevant LNRSs as well as to any relevant species conservation strategies or protected sites strategies prepared by Natural England.

Local authorities and local planning authorities must also publish five-yearly reports setting out the action they have taken under the duty. The first reports have to be published by 1 January 2026. We expect this strengthened duty to ensure that public authorities make the conservation and enhancement of biodiversity a core part of the delivery of their functions.

I want to make it very clear that this Government are fully committed to protecting 30% of land and sea for nature by 2030. We intend to take immediate action to realise the urgent step change needed to deliver 30 by 30 on land. We are currently in the process of reviewing our approach, and later this year we hope to confirm the criteria for land counting towards 30 by 30 in England. This will set a clear, ambitious standard to ensure that only areas that are effectively conserved and managed can contribute towards this commitment.

The noble Baroness, Lady Willis, the noble Earl, Lord Russell, and the noble Lord, Lord Blencathra, all mentioned protected landscapes. As the noble Lord, Lord Blencathra, said, we both understand the challenges that the Lake District National Park particularly faces. The Government are actively considering further options to ensure that our protected landscapes have the tools and powers they need to deliver for people and nature, including through regulation and guidance. Relevant authorities must now seek to further the purposes of protected landscapes to deliver better outcomes for nature, people, climate and place. The noble Baroness, Lady Willis, also asked about marine protected environments. The Government have taken significant steps to protect this environment. At the moment, there are 181 NPAs, including three highly protected marine areas. They cover about 38% of UK seas. Our priority now is to ensure that those areas are properly protected.

The Bill from the noble Lord, Lord Krebs, rightly recognises the crucial role for climate adaptation. England’s third national adaptation programme summarises the collective actions that the UK Government are taking to address risks and opportunities from climate change and to ensure that adaptation is incorporated into government programmes. As the noble Lord, Lord Krebs, said in his introduction, this is a legal requirement under the Climate Change Act 2008 and government departments are required to respond to the risks and opportunities raised in the most recent climate change risk assessment report.

The Climate Change Committee monitors and evaluates the performance of governmental organisations that have actions to address climate risks, as set out in this national adaptation programme. It publishes its findings in a biannual progress report on climate adaptation. The last report was published in March 2023; the next will be in 2025. We will then review the CCC’s recommendations from that report.

I recognise the importance of the proposed Bill’s ambition and principles. However, there are measures in place seeking to realise this ambition. Some, I know, will need time to take form, but we are fully committed to this and are closely monitoring progress. Furthermore, the review and revision of our environmental improvement plan provides the ideal vehicle to consider the Bill’s principles and their practical implications, in the manner they deserve and in collaboration across society.

I turn briefly to the question of access, which was mentioned by the noble Earl, Lord Russell. This is part of my portfolio and something that I am keen to work on in a proactive way. I am currently looking at our existing access to blue and green spaces, so that we can build on our manifesto commitment to create new river walks, and further access, going forward.

I finish by saying that, although time is not on nature’s side—the noble Baroness, Lady Bennett, made that very clear—by working hand in hand across sectors on these vital issues, I am confident that we can use the opportunity of the Bill in front of us today to discuss and collectively agree on a way to deliver what sits at the heart of the vision of the noble Lord, Lord Krebs: to reduce and adapt to the impacts of climate change and restore and improve our natural environment.

I thank the noble Lord again for bringing this Bill to the House and enabling this debate. I have been very pleased to have discussions on this with him and with other noble Lords. I look forward to working with him and other noble Lords who take a keen interest in this area as we review and revise our environmental improvement plan. I assure noble Lords that this Government are firmly committed to working collaboratively as we move forward to improve the natural environment.

Rural Communities

Baroness Hayman of Ullock Excerpts

Tuesday 15th October 2024 Lords Chamber

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

My Lords, I start by congratulating the noble Baroness, Lady McIntosh of Pickering, on securing this debate. It has been an important discussion and I welcome the opportunity to respond. I also congratulate the noble Lord, Lord Elliott, on his maiden speech and give him a warm welcome to this House. I very much look forward to working with him as we go forward on these issues.

I just want to look at the actual Question, which was:

“To ask His Majesty’s Government what are their priorities for rural communities over the next two years”.


I think this debate has gone much more broadly than that. Many of the issues that we have discussed are going to take more than two years to resolve, so I think much of what I am going to be talking about is also going to be long term as well as short term.

The Government are committed to improving the quality of life for people living and working in rural areas, so that the full potential of rural businesses and communities can be realised. To do this, we need to ensure that the needs of people in rural areas are right at the heart of policy-making and I think that has come across very strongly during this debate. I also reiterate that I genuinely value rural communities. They are my communities. I have always lived in a rural community and I will continue to be a strong voice for rural communities in the department.

Farming, forestry and other traditional land sectors are essential for delivering so much of what we value in our countryside. However, businesses found in rural areas are just as diverse as those in urban areas. We know that around 80% operate outside agriculture and related sectors. In addition, more people in rural areas are employed in microbusinesses than in urban areas and yet, as the right reverend Prelate the Bishop of St Albans so clearly explained, there is significant potential for economic growth, with average productivity in rural areas being 86% of the England average. This was mentioned by the noble Earl, Lord Caithness.

Our manifesto was clear: sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people. Our approach to delivering this growth right across the country will focus on three pillars: stability, investment and reform. We have already started to deliver on our commitment to restore stability for farmers by continuing the rollout of the sustainable farming incentive. We will go further by optimising our schemes and grants, ensuring that they produce the right outcomes for farmers, and that includes small, grassland, upland and tenanted farms, while delivering food security and nature recovery in a just and equitable way.

We have recognised the specific challenges and opportunities that make rural economies distinctive, acknowledging the importance of funds such as the £110 million rural England prosperity fund, which provides targeted support to rural businesses and communities. We also know that a prosperous rural economy will need to be underpinned by improvements in rural connectivity—both transport and digital—the availability of affordable housing and energy, and access to a diverse range of community services.

The noble Lord, Lord Cameron, was particularly concerned about housing and I thank him for his support of our ambitions in this area. Home ownership is out of reach for too many—too few homes have been built and very few are genuinely affordable, as the noble Baroness, Lady Pinnock, said. Our housing shortage drives high rents and high prices. We are committed to improving the quality of life for people living and working in rural areas and part of addressing this is going to be through the biggest increase in social and affordable housebuilding in a generation. We want to work with councils and housing associations to build the capacity to ensure we deliver the homes that people need.

We will reform planning laws so we can build the homes our rural communities desperately need, while protecting our green spaces and the natural environment. Noble Lords mentioned the National Planning Policy Framework. We have launched a consultation to reform this and as part of that we will consider how to build more homes in the best way and introduce a wider set of growth-focused interventions that will build them in the places that people want to live in, supported by the correct infrastructure. A number of noble Lords asked about the land use framework. We intend to publish this later this year as a Green Paper.

The Government are also committed to tackling fuel poverty. It is our ambition that the warm homes plan will transform homes across the country by making them cheaper and cleaner to run, including the many households in rural areas that are not connected to the gas grid. That includes me. Decarbonising off-grid properties will reduce our reliance on fossil fuels and build our energy independence. It will protect customers from high and volatile energy prices, keep us on track for net zero and, at the same time, improve air quality.

The noble Baroness, Lady McIntosh, talked about the fact that a lot of the energy projects will have little value for local communities. I make the point that nationally significant infrastructure projects, NSIPs— that includes large grid connections—have community benefit programmes as part of the process that they have to go through, and work very closely with local communities. We will also be setting up Great British Energy. It will support local and combined authorities and community energy groups to roll out small and medium-scale renewable energy projects in their areas.

The Government recognise that people living in rural areas often have greater distances to travel to access essential services, such as employment, education and training, and other social and recreational activities. That has come across clearly in this debate. We understand that it is much more costly and time-consuming when you have to travel great distances and the travel connectivity is not good. The noble Baroness, Lady Humphreys, talked about some of the transport challenges and gave examples in her area. One thing we are determined to do is to deliver better bus services, and we have set out a plan of how we can achieve this. It is based on giving local leaders the tools they need to ensure that bus services reflect their needs. I am sure we would all agree that one size does not fit all when it comes to transport services.

Digitisation is at the heart of the Government’s agenda. We are committed to ensuring that rural communities, many of which are still reliant, as we have heard, on 3G, are not left behind as part of the switch off. In rural areas, 4G coverage is increasing thanks to the shared rural network, which the Government will continue to invest in to ensure coverage where currently no major mobile network operators provide 4G coverage.

While I am on the topic of digital, the noble Earl, Lord Caithness, asked about Project Gigabit. I think it covers 85% of UK premises at present; the idea is to have nation-wide coverage by 2030. I am very sorry, but I cannot confirm—I am going to keep saying this—the continuation of things and funding until we have gone through the spending review; unfortunately, I just cannot do that. It does not mean that it is not happening, but I cannot confirm anything.

The noble Lord, Lord de Clifford, asked about mobile coverage. He will be interested to know that the Minister of State for Data Protection and Telecoms recently wrote to Ofcom, on 28 August, asking it to update him on the steps it will be taking to improve its reporting of mobile coverage, including timescales for this work, by the end of October.

Opportunity can also be a challenge. Too many young people and children are defined by their background. It should not matter who you are or where you come from. The Government are committed to supporting rural schools in order to break the link between young people’s backgrounds and their success. As part of this, we will be recruiting 6,500 new teachers in key subjects.

We intend to boost rural and agricultural skills by reforming the apprenticeships levy into a growth and skills levy, to give businesses the freedom and flexibility to upskill their workforce, and by opening new specialist technical excellence colleges, to give rural communities the chance to fit skills to the needs of their local economies and empower rural business to play a bigger role in the skills revolution.

The noble Lord, Lord Cameron, talked about health, as did others. As we have heard, the delivery of and access to health services such as GPs, dentistry—which we have not heard about today but which is critical—and women’s health services is a particular challenge in rural areas, especially as it takes longer to access services due to longer travel times. At the time people are most likely to need care—namely, when they are getting older—they increasingly live in areas where it is most difficult to provide that care. In England, integrated care systems will have a key role to play in designing services that meet the needs of local people. To do this, they will need to work with clinicians and local communities right down at neighbourhood level.

We are doing more to use the transformative power of technology, such as virtual wards. I have seen virtual meetings with GPs and patients where I am in Cumbria. This allows care to be delivered into people’s own homes and in areas with a shortage of GPs or healthcare staff. Because of that, areas where rurality can be a barrier can benefit disproportionately.

Mental health is also a big issue. We want to make sure that mental health care is delivered in the community, close to people’s homes, through new models of care and support, so that fewer people need to go into hospital. We are setting up a young futures mental health hub for under-25s in every rural community. In addition, we are supporting charities that focus on farmers’ mental health and well-being through grant funding. This is helping them to offer support to farmers and their families, as well as helping to build resilience in farming communities.

The noble Lord, Lord Harlech, asked about crime. We will tackle rural crime through a cross-government approach—for example, by increasing police patrols in rural towns and lanes, and by punishing anti-social behaviour, agricultural crime and county lines, with stronger laws to crack down on farm equipment theft and fly-tipping. We are also actively looking at ways to better tackle livestock worrying.

A couple of noble Lords asked about vets. We are very aware of the challenges around veterinary services but, on a positive note, we have been doing farm visits with vets and have had a really positive response.

My noble friend Lady Ritchie asked about collaborative working—in fact, I met Mr Muir this morning. Collaborative working across the devolved Governments, through cross-departmental work and into communities is critical to the work we are carrying out.

I would be happy to have the right reverend Prelate the Bishops of St Albans’s recently published report, which we will take back to the department. He might be interested to know that on Thursday, Daniel Zeichner, the Rural Minister, will host a rural round table that will include the Rural Coalition.

I have run out of time, so I shall say that we recognise the importance of rural communities and businesses and continue to do everything in our power to ensure a prosperous future.

House adjourned at 7.56 pm.

Flood Prevention: Farmers

Baroness Hayman of Ullock Excerpts

Thursday 10th October 2024 Lords Chamber

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

My Lords, I thank the right reverend Prelate the Bishop of St Albans for securing this debate and welcome the opportunity to respond. This is a really important issue for farmers and rural communities, as well as for flood prevention. The Government recognise the right reverend Prelate’s commitment to these issues and to agriculture. He has made a long-standing commitment to supporting farmers, and we appreciate the work he does on that.

The noble Earl, Lord Devon, painted a pretty dramatic picture of what has happened in his locality in Devon because of flooding. I reassure him and other noble Lords that, although I do not have a magic wand and pots of cash, living in rural Cumbria I genuinely understand the devastating impact that floods can have on communities, homes and farmland.

The Government are mindful of the importance of farming to the country. British agriculture is fundamental to all of this Government’s missions. As we have heard, British farmers underpin our food and drink sector and support national food security. They create jobs and attract investment to our rural areas. They build economic resilience through nature-based solutions and play a crucial role in tackling biodiversity loss. They improve water and air quality and our resilience to climate change.

The Government also recognise the pressures that so many farmers are under. Climate issues have led to flooding in unprecedented ways, creating a real challenge for many farmers. A number of noble Lords mentioned climate change, particularly the noble Earl, Lord Russell. We are committed to maintaining food production and supporting thriving farm businesses, as well as protecting communities from flooding. As the right reverend Prelate clearly laid out, the impact of wet weather and flooding on farms is devastating and getting worse. It is becoming a real challenge for both farmers and government. Obviously, there were storms last year and this year, with a lot of wet weather—the summer was absolutely dreadful. In September, there was flooding, affecting properties right across the country.

Turning to some of the questions around this, I was asked by a number of noble Lords about the farming recovery fund and payments going forward from last winter and from spring this year. We are acutely aware of the challenges farmers have been facing because of this flooding. All farmers eligible for the initial farm recovery fund set up in April have been offered a payment. Unfortunately, further commitments around spending and the rollout of schemes is down to the spending review. I am sure that noble Lords will hear that an awful lot; I think we will all be very glad when it happens and we know where we stand on everything. I really appreciate the concerns that noble Lords have raised, including the right reverend Prelate, about the fact that this is an urgent issue, and we need to let people know what is what as soon as we can.

A number of noble Lords asked about the maintenance of existing flood defences. We are investing over £1.25 billion to build and maintain flood defences to scale up our national resilience. We will also review the programme with a view to ensure that flood risk management is fit for the challenges that we now face. Again, as part of the Government’s spending review we will look at this, but I can say that we have been spending over £200 million on maintenance, with an aim that our existing flood defences are kept in good order.

I want at this point to thank the people who work at the Environment Agency, local responders and many others, who work tirelessly to help communities when these incidents happen. We also sympathise very much with those whose homes and businesses have been damaged and who have faced so much disruption.

We also have to recognise that, as we adapt to climate change, farmers and land managers have an increasingly important role to play, and the Government very much welcome the willingness shown by farming communities to work together to better protect their local areas. I am aware of the project in Keswick—it is only up the road from me. We need to look at how we work with farmers to achieve these outcomes, because we want to support them to reduce the risk of flooding and coastal erosion through measures such as natural flood management. One way we could do this is through the ELM schemes, to provide payments to farmers to manage land and water in a way that can reduce flood risk to local communities. There are measures that benefit flood risk mitigation in all three components of ELMS: that is, the sustainable farming incentive, countryside stewardship and landscape recovery.

The floods investment programme was also mentioned. Under the current programme, the amount of funding a project can attract will depend on the damages it will avoid and the benefits that it will deliver. However, the impact of a project on agricultural land is included as part of the funding calculator and therefore is eligible for funding.

There are many actions within ELMS that farmers can apply for to protect and enhance the natural environment, and they can get payments for a range of actions to promote particularly flood management and prevention. These include support for water body buffering, soil health, farm woodland and hedgerows—all those things have been mentioned during the debate. The current Countryside Stewardship scheme offers payments, including the creation of small-scale run-off attenuation and storage, slowing flows in small watercourses, streams and on their flood plains, the creation of woodland and planting of hedges to slow flows, and the restoration of rivers and flood plains. We are expecting further flood risk benefits to arise when we roll out the updated higher-tier scheme; I hope that we will be able to provide more information on this fairly soon.

One of the two themes of the first wave of the landscape recovery pilot projects was restoring England’s streams and rivers, improving water quality, biodiversity and adapting to climate change. We hope that these will provide flood risk mitigation benefits to support farmers.

The right reverend Prelate mentioned the Minister, Daniel Zeichner, in his speech. It is a challenging time for budgets—it really is. However, I just want to assure noble Lords that the Minister is very serious about supporting farmers and looking to see the best way we can do that within the ELM scheme and other systems. I just wanted to reiterate that.

On the comments of the noble Earl, Lord Devon, on the importance of working together collaboratively, that will be incredibly important as we move forward, because the tighter the budgets, the more we can work together and the more you can actually achieve. We want to optimise the ELM scheme to produce the right outcomes for all farmers, and I thank the right reverend Prelate for his words of support for the work we are trying to do on this.

The noble Baroness, Lady McIntosh, mentioned reservoirs. We of course have a commitment to build new reservoirs—they are very much needed—so we will look very carefully at the suggestions that she made.

On the flood recovery framework and farming recovery fund that was mentioned, the flood recovery framework is activated only when there is large-scale and widespread flooding—the noble Baroness, Lady Bakewell, mentioned that.

A number of questions were asked about the future of these schemes. I am ever so sorry, but I cannot really say anything until after the spending review. The same applies to the question from the noble Earl, Lord Caithness, around the underspend, as it is all part of spending review discussions.

On the Flood Resilience Taskforce, better communications were mentioned. Part of that is improved co-ordination and communications between central government and the different agencies on the ground that have to deliver schemes. We had a meeting on 12 September and the next one is going to be in January.

The noble Earl, Lord Caithness, asked about droughts. The Flood and Droughts Research Infrastructure was announced on the 31 August 2024. This is going to be a £40 million initiative and it is the first UK-wide network focused on understanding the impact of extreme weather conditions across the country, so there is work taking place on that.

The noble Earl, Lord Devon, mentioned the need for water companies to work closely with farmers on flooding. We need to look at all options as to how we can work collaboratively, and we are doing a lot of work at the moment with water companies so it is something we need to look at.

We recognise the valuable role that farmers serve in this country. We want to do our best to back British farmers. The Minister, Daniel Zeichner, is working very hard to look at how we can make the ELMS work for farmers and for things like flood mitigation and food security. Getting all this right is a difficult balancing act, and we need to look at the best way we can achieve it. We want to do our best to support farmers in flood management and food security but also on prevention of flood. There are many schemes that can help support that, including the one in Keswick, which was mentioned.

I am very pleased that we had this debate. There have been some very interesting suggestions. I am sorry I cannot say more about funding; hopefully, at some point, we will have a much clearer picture and we can look at working together to get our best deal for farmers and flood prevention in the future.

Water (Special Measures) Bill [HL]

Baroness Hayman of Ullock Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

Moved by

[Baroness Hayman of Ullock]

That the Bill be now read a second time.

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

My Lords, I am delighted to begin the Second Reading of the Water (Special Measures) Bill. Improving water quality is a priority for this Government, and we have taken rapid action to ensure that water companies put customers and the environment at the centre of what they do. The Water (Special Measures) Bill is being introduced to drive rapid and meaningful improvements in the performance and culture of the water industry. The Bill not only delivers on the Government’s commitment to put water companies under special measures but is an important first step in enabling wider, transformative change across the water sector.

I am sure noble Lords will agree that there is a lack of public trust in the water industry, and widespread concerns about underinvestment in infrastructure, levels of pollution and failures to address spills of sewage. Between 2020 and 2023, water company executives paid themselves more than £41 million in bonuses, benefits and incentives, despite poor performance in the water sector, and only one-quarter of water company customers think that companies act in the interests of people and the environment. At the same time, the number of serious pollution incidents remains unacceptably high.

That is why this Government are taking swift action to turn around the performance of the water industry as a first step towards enabling long-term change. In his first week in post, the Secretary of State announced a set of immediate steps to improve the performance of the water industry. They include ring-fencing vital funding for infrastructure investment, placing customers and the environment at the heart of water company objectives, and working with Ofwat to strengthen protection for households and businesses when their basic water services are affected. However, this Government know that this is not enough to address the fundamental changes needed to the water system and that targeted legislative action is needed. This brings us to our consideration today of the Water (Special Measures) Bill.

Concerns about the performance of the water industry have risen right to the top of the public and political agenda in recent years. The water industry was privatised under the Water Act 1989. That Act was followed by the Water Industry Act 1991, which largely sets out the regulatory regime for the industry. The industry is regulated principally by the Environment Agency in England and Natural Resources Wales in Wales, along with the Water Services Regulation Authority—Ofwat—and the Drinking Water Inspectorate. The Bill makes new provisions to improve the regulation of water and sewerage companies and gives new and extended powers to these regulators.

I turn to the detail of the provisions. As I have noted, the core provisions of the Bill serve to strengthen the powers of the regulators to hold water companies to account for poor performance. The measures it introduces are intended to complement each other in a way that will ensure that the regulators are better equipped to identify and respond to water company failings. It will encourage behaviour change to ensure that water companies are delivering for their customers and the environment, from the start of the next water industry investment period that is due to begin in April 2025. Accordingly, the Bill provides Ofwat with a new power to establish rules for the water industry relating to governance and remuneration. This power will allow Ofwat to make rules around performance-related pay and the introduction of a fit and proper person test to ensure that water company bosses are not rewarded where performance is not up to scratch.

The Bill also includes provision to make obstruction of the general investigatory powers of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate punishable by imprisonment and allows for executives to be held personally liable for obstruction where the offence has been committed with their consent, connivance or neglect. This will help the water industry regulators to carry out effective investigations and will bring criminal charges against persistent lawbreakers.

To further ensure that non-compliance is tackled, the Bill includes provisions to enable the Environment Agency and Natural Resources Wales to issue automatic and severe penalties for certain offences, as well as provisions to strengthen environmental civil sanctioning powers so that regulators can impose a penalty on the civil standard of proof for water industry offences. This will ensure that water companies face rapid repercussions where it is immediately clear that they have acted unlawfully, and that rapid enforcement action is taken against minor to moderate offences before they can become a more serious matter.

To ensure that the regulators are able to make full use of their expanded and new powers, the Bill also provides for enhanced cost-recovery powers for the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate to ensure that water companies bear the cost of non-compliance, in line with the “polluter pays” principle. In addition, the Bill contains provisions to ensure the independent monitoring of all water company outlets. These provisions place a requirement on water companies to publish discharge data at 100% of emergency overflows and publish data on discharges from emergency overflows in near-real time. The Bill also places annual pollution incident reduction plans on a statutory footing, increasing transparency around water company operations. The Bill will also bring forward provision to modernise the existing special administration regime for the water industry, to bring it in line with special administration regimes for other regulated sectors and to ensure that taxpayer money is protected in the event of a water industry special administration regime.

Collectively, these measures represent the most significant increase in enforcement powers in a decade. This will help to ensure that water companies are delivering for customers and the environment as we move towards the largest-ever investment period for the water industry, with an £88 billion spending package proposed for the next price review period.

I turn to delegated powers and devolution. The Government are committed to working closely with the devolved Governments to tackle shared problems, including the issues facing the privatised water industry. My officials have worked closely with Welsh counterparts during the development of the Bill, and I am delighted that most provisions in the Bill are expected to apply to both England and, at the request of Welsh Ministers, Wales. Although the Bill does not apply to Scotland or Northern Ireland, my officials have also engaged with these devolved Governments during the Bill’s development.

With regard to the Bill’s powers, it contains provisions both to amend primary legislation and to confer a limited number of delegated powers on regulators and the Secretary of State. To reflect the evolving nature of the issues facing the water industry and the changing expectations of customers, the Bill contains eight legislative and three non-legislative delegated powers. These provisions contain a mix of powers conferred directly on regulators—for example, the power to set rules in relation to remuneration and governance—and powers that will be enacted via the affirmative resolution procedure, such as the power to amend relevant environmental regulations. These delegated powers will enable government to keep pace with and react to developments in the water industry. I assure noble Lords that these powers will be subject to all appropriate scrutiny and safeguards.

Since the Bill’s introduction there has been some inaccurate reporting on the effects of its provisions. I would like to take the opportunity to correct some of these misconceptions, to ensure that we can have a fully informed and helpful debate.

First, it has been reported that some of the Bill’s measures—for example, those that will enable the banning of bonus payments and those that enable imprisonment for obstruction offences—already exist in law. Let me explain why this is not the case. Although it is possible for Ofwat to set expectations with regards to executive remuneration, it does not have the power to set legally binding rules. The Bill introduces such a power, meaning that Ofwat will be able to stop the payment of bonuses to executives where performance has not been up to scratch—for example, in the areas of consumer matters, environmental performance, financial resilience and criminal liability. Similarly, although the obstruction of regulators can be punished by imprisonment, that is currently possible only in extremely limited, emergency circumstances. The Bill strengthens the maximum penalty for all cases of obstruction to imprisonment for up to two years. It also makes that offence triable in the Crown Court and, importantly, ensures that executives can be held liable for wrongdoing, which is not currently the case.

Secondly, there have been reports around the use of special administration regimes to nationalise water companies and on the impact of the special administration regime clauses on customer bills. I want to be clear. Special administration is not a form of renationalisation. It is a tool to ensure that vital public services continue to be provided after a company fails. The Government would take no ownership or management of the company during a special administration regime. It would cost billions of pounds and take years to unpick the current ownership model; it would slow down our reforms, leave sewage pollution to get only worse and stall much- needed investment. There is a very high bar for the imposition of a special administration regime. The Government and Ofwat will always act to protect consumers as a priority, and any intervention that would increase customer bills would be considered very seriously and as a last resort.

Having spoken about what the Bill will do, it is important to note as well what it does not cover. This Bill focuses specifically on measures relating to the regulation of water companies, taking immediate action in response to the poor performance of the water industry in recent years. However, the Government are clear that the Bill alone will not be enough to fix our water system. It is an immediate down payment on the wider reform that is needed after years of failure and environmental damage. It is for this reason that the Government have also announced a review to fundamentally transform how our water system works and clean up our rivers, lakes and seas for good.

Through this review, we will examine holistically the framework that underpins our water sector; we will invite views from a range of experts and stakeholders; and we will hold a public consultation to ensure the proposals are robust and radical enough to meet the public’s appetite to clean up our polluted waterways. I am sure that many noble Lords here today will take a keen interest in the work of this review, and I have already had discussions with many in this House about wider issues facing the water sector. I look forward to working with noble Lords closely as the review progresses, and further detail on this will come forward later this autumn.

To conclude, I know that there is considerable support, both within Parliament and among the public, for this Bill. I hope that Members of your Lordship’s House will agree on the importance of working together to reset and transform the water sector through these first crucial steps and the work to come. I look forward to what I am sure is going to be a passionate debate; I would expect nothing less for a Bill of this importance and I am greatly looking forward to hearing noble Lords’ contributions. I hope that your Lordships will support the Bill and ensure that we work together to strengthen our regulators and hold water companies to account.

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

My Lords, this has been a very interesting and worthwhile debate. I thank all noble Lords who have spoken for their thoughtful, informative and constructive comments.

As we have heard, the Bill is going to be used to drive meaningful improvements in the performance and culture of the water industry, as part of our wider efforts to ensure water companies deliver both for customers and for the environment. Many campaign groups, as well as parliamentarians, have called for measures to hold water companies to account. We also know that there is huge public support for the Government to do something. There is clear and broad recognition of the need for action. Let me now take the opportunity to address some of the points and questions raised during the debate.

First, I would like to stress that the Bill goes beyond the previous Government’s ambition. It is not true that the Bill does not contain anything further than measures put in place by the previous Government. For example, the Bill will go beyond the current regulatory framework. To give a couple of examples, it will provide legal powers to ban bonuses—currently, you can only set expectations—and it will also require water companies to report in near real time on discharges from emergency overflows, which are at present largely unmonitored.

The noble Duke, the Duke of Wellington, the noble Earl, Lord Russell, the noble Lord, Lord Blencathra, my noble friend Lady Young of Old Scone, the noble Earl, Lord Devon, and many other noble Lords were particularly interested in what exactly the review is going to do. As I said, the Bill alone is not enough to fix our water system; it is only an immediate down payment on the wider reform that is needed after many years of failure and environmental damage. As I mentioned, the review is going to be carried out to fundamentally transform how our water system works so that we clean up our rivers, lakes and seas for good. We will invite views from a range of experts, covering areas such as the environment, public health, consumers, investors, engineering and economics. We will have a public consultation to test that any proposals are robust and ambitious enough to clean up the pollution from our waterways. Through our review, we will look at long-term wider reform of the water sector as a whole, including considering and clarifying the roles of regulators. We expect this work to culminate in shaping further legislation and intend to set up further details about the review later this autumn. It is also really important that specific measures are consulted on during the passage of the Bill, and we will be looking to do so.

The noble Baroness, Lady Jones, and my noble friend Lord Sikka particularly asked about nationalising water companies. As I have said previously, the Government have no intention to nationalise the water companies. We are focusing on improving the performance of the water industry as an urgent priority. The measures in the Bill are designed to do exactly that.

As we have said, it will cost billions of pounds and take years to unpick the current ownership model, during which time underinvestment in infrastructure and sewage pollution will only get worse. Research that has been commissioned by the Consumer Council for Water, which we have heard about—

[Lord Sikka (Lab)]

First, can the Minister say how many billions of pounds, and can she publish that calculation? Secondly, she says it will take a long time, but the Government are going to integrate the newly created companies to manage the railways, and there are numerous mergers and takeovers everywhere where new entities are accommodated. Could the Government publish a paper to see what the complications would be? Although I recognise some of the complications, I do not think that any of this is insurmountable.

[Baroness Hayman of Ullock (Lab)]

Rather than get into a discussion around this, as I have a lot of questions to answer, I suggest that perhaps the noble Lord and I—and the noble Baroness, if she so wishes—take this away into another meeting and discuss it further when we have more time.

The noble Baroness, Lady Jones of Moulsecoomb, asked about the special administration regime, as did other noble Lords, and she asked particularly about profits for shareholders and creditors. The special administration regime is there to enable a seriously underperforming or insolvent water company to be put into special administration, with the requirement that vital public services—that is, water and wastewater—are continued to be provided pending a rescue package and transfer to new owners. This contrasts with normal administrations, where the appointed administrator is focused on the creditors’ interests only.

A number of noble Lords—the noble Duke, the Duke of Wellington, the noble Baronesses, Lady Parminter, Lady Pinnock and Lady Bakewell, and my noble friend Lady Young of Old Scone, in particular—asked why the Bill is not being used to reform Ofwat or the Environment Agency. The Bill introduces the most significant increase in enforcement powers for the water industry regulators in a decade and is designed to give them the teeth they need to take tougher action against water companies in the next investment period. However, we want to go further. Through the review, as I mentioned, we will look at the regulators in order to carefully consider their roles and responsibilities and how we can ensure that they operate as effectively as possible. So that will be part of the review.

The noble Lord, Lord Douglas-Miller, asked whether the regulators were adequately resourced to implement all the new provisions in the Bill. Through the new cost recovery power in the Bill, we will enable the Environment Agency to fully recover costs for the full extent of its water company enforcement activities. That will include prosecutions and civil sanctions, revocation notices of permits, and pollution incidents. In addition, the EA is already recruiting up to 500 additional staff for inspections, enforcement and stronger regulation, increasing compliance checks and quadrupling the number of water company inspections by March next year. This will be fully funded by around £55 million per year through increased grant in aid funding from Defra and additional funding from water quality permit charges levied on water companies. I hope that helps to answer the noble Lord’s question.

There were also questions around the detail of Ofwat’s rules. The noble Lords, Lord Blencathra and Lord Remnant, mentioned this. We feel that it is more appropriate for Ofwat, as the independent regulator, to determine the specific performance metrics that should be considered when setting the rules. Allowing Ofwat to set out in the rules the performance metrics to be applied will also enable those standards to be more easily amended—subject to the relevant procedural requirements, of course—where or when it is appropriate to do so in the future. Ofwat would need to consult with relevant persons, including the Secretary of State, Welsh Ministers, the Consumer Council for Water and others, before such rules were finalised. I also reassure noble Lords that Ofwat will issue a policy consultation in October on the scope of the rules.

Consumers were mentioned a number of times. First, on representation on boards, as we go through the Bill, we will look at this in more detail, but the idea behind the Bill is that Ofwat will be required to issue rules on consumer representation. Customers largely foot the bills for water company decisions, so we believe it is right that they have a say where their interests are at stake. Ofwat will need to consult with relevant persons, including the Consumer Council for Water, before finalising the rules on performance-related pay, and fitness and propriety and customer representation. I think my noble friend Lord Whitty asked about some of those issues.

The noble Lord, Lord Roborough, asked in his speech just now about further increases to customer bills. Where increased costs are a result of penalties being issued by the regulators—for example, under the new automatic penalties regime—the penalties will come out of water company profits and not from customers. Where costs are unrelated to penalties—for example, where they will fund new and improved infrastructure—we are working closely with the water industry regulators to see how we can best minimise the impact of measures introduced by the new legislation on customer bills. We do not want to see the customers bearing the brunt of these new actions.

A number of noble Lords, including the noble Lords, Lord Remnant, Lord Douglas-Miller and Lord Cromwell, and the noble Earl, Lord Devon, asked about investor confidence. Private sector investment is at the core of how we grow our economy. The Government are committed to establishing a strategic framework in order to deliver long-term stability, and which is conducive to attracting the sustained investment in the sector that we need. The Bill will deliver a clear and consistent regulatory framework for the water industry and its investors. I do not think anyone would think that investors have a lot of confidence in much of the water industry as it stands. On 10 September, Defra and Treasury Ministers held a round table with investors where they outlined how the Government will work in partnership to attract the billions in private sector investment that we desperately need to be able to clean up our rivers, lakes and seas.

On that issue, there was also discussion around attracting talent. A number of noble Lords talked about the fact that it is more stick than carrot and asked how we are going to attract people into this. We believe it is right that companies and their executives are held to account for basic and fundamental performance requirements. Should companies meet their performance expectations, we believe that executives should rightly be rewarded, and there are also previous and existing examples of similar rules in other sectors. I will give a couple of examples. The financial services sector previously had a set cap on the level of bonuses—somebody mentioned that; I am sorry but I cannot remember who it was—and fit and proper person tests are also conducted by the Financial Conduct Authority and the Prudential Regulation Authority in that sector. Those sectors have continued to attract talent.

The noble Earl, Lord Devon, asked about ensuring that water companies invest sufficiently when considering pressures such as climate change and population growth, and about ring-fencing money for improvements. In July, Ofwat announced in its draft determinations a proposed £88 billion worth of expenditure between 2025 and 2030, which will be the largest investment in infrastructure that has ever been made by the water industry. We hope that that investment will deliver much of the work needed to achieve the issues that the noble Earl referred to.

The pollution incident reduction plans were discussed by many noble Lords during the debate. One question was: why have we not included a duty to implement the plans rather than just publish them? I think the noble Baroness, Lady Parminter, in particular talked about this. We say that these plans should be seen as part of the broader package of powers for regulators which exist and which are strengthened through the Bill to reduce pollution incidents.

The Environment Agency already has access to a range of tools to enforce against pollution incidents and this Bill is designed to supplement this with its provisions for automatic penalties and for Ofwat to ban bonuses when water companies have not met environmental standards. Water companies will also be required to report on overall progress on the actions that were set out in the previous plans. A specific duty to implement the plan would make enforcement more difficult, we believe, as it would cut across the wider legal requirements for pollution reduction.

The noble Baronesses, Lady McIntosh, Lady Browning and Lady Pinnock, all talked about sustainable drainage systems—SUDS. This is a complex issue. Existing planning policy requires that SUDS are included in all new major developments unless there is clear evidence that that would be inappropriate. This is in addition to requirements that SUDS should be given priority in new developments in flood-risk areas. However, I am aware of the issue around the previous legislation that has been sitting in front of us for 14 years, so I want to assure noble Lords that the Government are currently assessing how best to implement their ambitions on SUDS, while also being mindful of the cumulative impact of new regulatory burdens on the development sector. We are having regular discussions and trying to co-ordinate joint work with MHCLG officials on this issue. We want to move this forward.

The impact assessment was mentioned. There is an impact assessment for the Bill—I am sure noble Lords will be delighted to hear that—but it is currently with the Regulatory Policy Committee. We will publish it as soon as it has concluded its review. We are hoping that will be fairly soon.

The timeline for implementation was mentioned. Our ambition is to implement the provisions to give the regulators the powers they need to take tougher action against water companies for the next investment period, which is due to start in April next year.

The use of delegated powers was mentioned by the noble Duke, the Duke of Wellington, the noble Lord, Lord Sandhurst, and my noble friend Lady Young of Old Scone. I want to reiterate the reassurances I made in my opening speech that the provision of delegated powers will be subject to appropriate scrutiny and safeguards. We believe the powers are necessary to ensure that the provisions in the Bill keep pace with the changing requirements on the water industry and the changing expectations of customers. A full justification for the inclusion of delegated powers in the Bill is available through the delegated powers memorandum which has just been published.

On the statutory instruments for new penalties, we will be consulting on whether new automatic penalties can be used. Parliament will debate and vote on secondary legislation before any changes are made, so we intend to bring that before the House.

A few noble Lords mentioned local issues. The noble Earl, Lord Devon, talked about Devon, not unexpectedly, and my noble friend Lord Lipsey talked about the River Wye. I was impressed that he got away with that word. When I was in the other place and we had a similar debate, I got ticked off and had to change what I had said. But we are concerned about the issue of poo in the River Wye and he is right to raise it. There are also issues in Cumbria, where I live, around Lake Windermere and the other lakes, as mentioned by the noble Lord, Lord Inglewood. This is something that I personally feel we need to sort out. Our national parks are hugely important. They should be peaceful, beautiful places, not places that have been damaged by sewage overspills and other pollution. I reassure noble Lords that cleaning up iconic sites such as the River Wye and Lake Windermere is a top government priority. We want to get this sorted. The 2024 price review package that I mentioned earlier will include funding for improvement projects at priority sites and we are also working closely with the Welsh Government, particularly on the issues around the River Wye.

I am just about out of time. If I have missed anything that I should have answered, we will of course check Hansard and I will get back to people in writing, but once again I thank all noble Lords who have spoken today for their valuable contributions. It is clear that we agree on the importance of addressing issues in the water sector swiftly and decisively and that there is a consensus on the core aims of the Bill. The water industry really does need an overhaul, so I look forward to continuing constructive engagement with noble Lords. My door is always open. I commend the Water (Special Measures) Bill to the House and beg to move.

Bill read a second time and committed to a Committee of the Whole House.

Wild Atlantic Salmon

Baroness Hayman of Ullock Excerpts

Thursday 12th September 2024 Grand Committee

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

My Lords, I am pleased to respond to this Question on wild Atlantic salmon. I thank the noble Lord, Lord Forsyth, for raising this important matter, and all noble Lords for their speedy contributions—it is a shame that we did not have longer. As the noble Lord, Lord Roborough, said, the noble Lord, Lord Douglas-Miller, did a lot to draw attention to this while he was the Minister, and I thank him for his work because not enough attention has been paid to it in the past.

I acknowledge the importance of wild north Atlantic salmon, a protected and iconic species. Young salmon undergo a complex transformation so that they can leave our rivers and migrate thousands of kilometres to feed in cold north Atlantic waters. These salmon spend at least a year in the Atlantic before returning to our rivers to spawn. But, as we have heard, over the last 30 to 40 years there has been a significant and ongoing decline in salmon stocks, not only in UK rivers but across much of the north Atlantic. We have heard some very frightening figures for the rapidity of that decline.

Historically, there has been a strong tradition of commercial and recreational salmon fishing right across the United Kingdom, bringing in tens of millions of pounds annually. Now, there is only limited commercial salmon fishing in Scotland, and recreational salmon fishers operate largely on a catch-and-release basis to protect the remaining stocks, as we have heard.

The pressures facing Atlantic salmon are serious. They are wide ranging and often difficult to manage. As we have heard, they include fishing, climate change, habitat degradation, invasive species, disease and genetic introgression, to name just a few of the challenges facing the industry. Without increased conservation efforts, there is a real risk that we will see our remaining wild salmon stocks drop further—the noble Lord, Lord Forsyth, was clear on this in his introduction. As other noble Lords have said, according to the International Union for Conservation of Nature’s red-list criteria, Atlantic salmon are now endangered in Great Britain and near threatened globally.

Due to the Atlantic salmon’s huge geographic range, it is vital that we work with international partners to protect this species. The 1984 convention for the conservation of salmon in the north Atlantic put an end to almost all fishing for Atlantic salmon over 12 nautical miles from shore and established the North Atlantic Salmon Conservation Organization—NASCO —of which the UK is a member. Measures agreed by NASCO have resulted in significant further reductions in fishing effort and have driven improvements in salmon management more broadly.

Having said this, stocks are still not recovering, so the Government welcome NASCO’s recently published strategy and action plan, which aims to prioritise and drive actions necessary to slow the decline of wild Atlantic salmon populations and demonstrate that restoration is possible. The target for this is within the next 10 years. NASCO will now focus on increasing our understanding of the pressures on salmon; on developing best practice around the management of salmon habitat, aquaculture, stocking and fisheries management; and on increasing collaboration and accountability for the delivery of salmon protection work.

Our domestic situation and approach echo the international picture. But, before delving into this, I should clarify that, although Defra leads on our international salmon work, domestic salmon policy is a devolved matter where it happens in Scotland, as we have heard. Between 2014 and 2020, commercial salmon netting was banned in Northern Ireland, Wales and England, and, in 2016, a prohibition on retaining any salmon caught in coastal waters was introduced in Scotland.

Recreational catch and release rates are between 89% and 96% across the UK. This has been achieved through a combination of voluntary and mandatory measures. Despite this, most recent stock assessments continue to show a downward trend, with the majority of the UK’s salmon rivers having unsustainably low salmon populations.

I am fortunate to live alongside a river myself. The River Marron is a salmonid river, so I have personally seen what is happening and am aware of the stark reality of the situation. However, there are ways we can improve things and there is some hope. For example, a few years ago on our land, a weir was removed from our river to aid the passage of salmon. There are other examples where removing barriers to free up the passage of Atlantic salmon has assisted an increase in salmon numbers, such as on the Derbyshire Derwent, Yorkshire Don, River Calder, River Dee and River Tweed, but clearly, we need to do more. We need to build on this to restore stocks on more salmon rivers. It is too early to confirm specific actions in England, but we have committed to clean up Britain’s rivers and to speed up nature’s recovery. I want to ensure that salmon and other migratory fish see the greatest possible benefit from these commitments.

I will now address some of the specific points raised by noble Lords today. Farmed fish and their welfare was clearly central to the debate, and we want to see the highest standards of animal welfare. Of course, the welfare of farmed animals in Scotland is a devolved matter for the Scottish Government to address, but I consider this to be a matter that we also need to take seriously as a Government. I will be writing to Mairi Gougeon to ask her to set out clearly what protections are in place, the levels of mortality, sea lice and antibiotic use, as well as the number of escapees—how many salmon are getting out of these farms—so that we have a clearer picture of the situation in Scotland. I am also looking to arrange meetings with my counterparts in the devolved Administrations and will discuss this, among other matters.

My noble friend Lord Grantchester talked about the importance of healthy peatlands. This of course is also devolved in Scotland, but we think that healthy peatlands are incredibly important for restoring nature and improving salmon stocks. The noble Lord, Lord Vaux, talked about the Sitka spruce. Again, in Dumfries and Galloway that is a devolved matter, but I think we need to see an end to forestry monoculture. I have discussed this with Forestry England, and I know that is the approach that it is taking.

The noble Lord, Lord Forsyth, talked about moving to more sustainable salmon farming and the noble Duke, the Duke of Wellington, talked about the organic farm that he had seen in Ireland. I am aware that AquaCultured Seafood Limited is seeking to build the UK’s first commercial land-based salmon farm in Grimsby. Land-based salmon farming does not put additional pressure on wild salmon populations in the way that open-net salmon farming does, because the fish are then isolated from that environment. As a Government, we are encouraging sustainable innovation in the salmon farming sector to increase our environmental standards. I would be very happy to look at a visit to an organic salmon farm and I thank him for suggesting that.

Predation was raised by a number of noble Lords: the noble Earl, Lord Shrewsbury, and the noble Lords, Lord Forsyth, Lord Thomas and Lord Bellingham. Given the poor status of salmon stocks predation may, under certain conditions, have significant impacts—we are aware of that. It is slightly nuanced, in the sense that the predators are often protected themselves, so we need to be careful about how and when such predators can be managed, but it is something we are very aware of.

The noble Lord, Lord Thomas, mentioned the Save the Spring project. To be honest, I did not know much about it, so if the noble Lord would like to send me some more information about it I would be really interested to take a look. Likewise, the noble Earl, Lord Shrewsbury, mentioned the project on the River Frome. My daughter has just moved to Frome, so this is something I should take an interest in.

The noble Earl, Lord Caithness, and the noble Lords, Lord Bellingham and Lord Roborough, talked about by-catch and netting of salmon. This could well be a contributing factor to declining wild salmon populations, so we are actively working with NASCO to understand this risk better. Following this year’s annual meeting, at the UK’s request and with agreement from other parties, NASCO has submitted a request to the International Council for the Exploration of the Sea to include salmon on its by-catch monitoring list in order to help us better understand the scale of the issue and inform any mitigations.

[Lord Bellingham (Con)]

I thank the Minister for giving way. It is not just by-catch that is of concern but international vessels that are fishing using sonar deliberately and specifically for salmon. They may be wiping out whole shoals of fish at one time.

[Baroness Hayman of Ullock (Lab)]

The noble Lord makes a very important point. I thank him for reminding me of it.

The noble Lord, Lord Roborough, also talked about the impact of barriers. Between 2019 and 2023, the Environment Agency and its partner organisations mitigated 58 barriers on England’s salmon rivers. Following that, the Environment Agency is conducting a review of further barriers to fish passage and intends to make recommendations on what government support is required to further move this on. We will consider that in due course.

The noble Viscount, Lord Trenchard, talked about hatcheries and stocking. NASCO has this year reviewed and updated its stocking guidance to further clarify the risks associated with stocking practices and appropriate mitigations. This is something else that the Environment Agency is reviewing.

The noble Lord, Lord Moynihan, raised the issue of the River Wye, which is an issue that we fully recognise. Natural Resources Wales and the Environment Agency are working with a number of different agencies and organisations. I am sure he is very aware of this, but I would be very happy to work with him to move forward with this issue, if he has input that he can bring.

The noble Earl, Lord Shrewsbury, mentioned sand-eels. I am afraid I will have to write to him on that matter.

Finally, my noble friend Lord Campbell-Savours asked some detailed and specific questions. With the limited time I have—I have only a few seconds left—I will have to respond to him in detail in writing.

To conclude, I once again thank the noble Lord, Lord Forsyth, for securing this important debate. I assure all noble Lords that I am committed to taking action in this area.

[Lord Forsyth of Drumlean (Con)]

I think we still have some time, so can I just pick the noble Baroness up on the point she made about predators and how some of them are protected? That is indeed the case, but it is because they are protected that the populations have grown so strongly. It makes them a great threat to this fish, which is an endangered species.

I will also pick up the point that she made about devolved matters. Now that this has been designated as an endangered species, and with the Government’s international treaty obligations to deal with that issue, surely it is incumbent on her and her department to bring the devolved nations together, as she indicated she was prepared to do, to work out a plan so that the United Kingdom’s international responsibilities in respect of protecting and maintaining biodiversity are met.

[Baroness Hayman of Ullock (Lab)]

The noble Lord just made some really important points. I am extremely keen to do joined-up work with the devolved Administrations because that is the way we move forward, particularly on issues such as this. As I said, I will write to the relevant Minister in the Scottish Parliament to look for a meeting. If we are to make progress on these kinds of issues, we have to work together. It is the only way we will move forward.

Environment and Climate Change Committee Report: An Extraordinary Challenge: Restoring 30 per cent of our Land and Sea by 2030

Baroness Hayman of Ullock Excerpts

Wednesday 11th September 2024 Grand Committee

[Lord Blencathra (Con)]

My Lords, in standing in for my noble friend Lord Roborough, who could not be present at the start of this debate, I must tell the Committee that the last time I clutched a Dispatch Box desperately seeking inspiration was Thursday 20 March 1997. I was the last Conservative Minister to answer a departmental Question at 3.15 pm, immediately followed by John Major answering his last PMQs, and then we prorogued for the general election. Some 28 years later I am an example of His Majesty’s policy of patching up and mending old things, and putting them to work again.

I need to declare my interests as on the register but to go further too. I remain for the next three months the deputy chair of Natural England. I have checked with the clerks and, while I can talk factually about nature, Natural England, this report and the last Government’s response, under the Addison rule I cannot speak officially for Natural England, nor answer questions about its activities or advocate its policies—only the Minister can do that. Because of my position in Natural England, I am automatically on the Joint Nature Conservation Committee, so I leave it to the Minister to say what a brilliant job we are doing in Natural England.

I welcome the Minister to her post. There is no one better on the Labour Benches in the Lords to do it, and she is an excellent addition to the Defra ministerial team.

I commend the noble Baroness, Lady Parminter, and all the noble Lords who conducted the 30 by 30 inquiry, on their recommendations. I also commend the 16 noble Lords who have spoken today. They made excellent points, including in the superb speech by my noble friend Lord Goldsmith of Richmond Park, who is welcome to take this seat back any time he likes.

A lot has happened since the report was published in July 2023, and not just the change of Government. Noble Lords have read the last Government’s response, and in the changed circumstances I see no point in rehashing it all today. The report called for national parks to be given a new statutory duty to protect nature, and Section 245 of the Levelling-up and Regeneration Act imposed a new duty to do just that; I hope that my noble friend Lord Harlech will be reassured by that. As I recall, that was the Lord Randall amendment in the Lords.

The report called for local nature recovery strategies to be given statutory underpinning in local development plans. Schedule 7 to the levelling-up Act did that; I believe that was the Baroness Parminter amendment. On SSSIs, I say to my noble friend Lord Harlech that Natural England has now moved fully to assessing the condition of SSSI features at the site scale, and the focus is on bringing SSSI condition assessments up to date and in line with the EIP target to complete this by the end of January 2028—although that is highly dependent on not cutting Natural England’s grant in aid.

Natural England is also progressing the EIP target to have action under way and on track by January 2028, which will bring 50% of SSSI features into favourable condition. Natural England is continuing to look for improvements in the approach to monitoring —to make more use of modern technology, such as earth observation, to increase the contribution of participatory science, and to utilise condition assessments gathered by third parties, such as ENGOs, which my noble friend Lord Lucas called for—and we aim to grow that.

I say to the noble Baroness, Lady Young of Old Scone, that I have been involved in about six new SSSI designations or extensions. They may not be many in number but two were absolutely massive, including a large one down in west Cornwall—which was slightly controversial—and another large one near RAF Fairford and the waterworks around there.

The report underplays the role played by national nature reserves, which I argue are a legitimate component of other effective conservation measures. I submit that the country’s NNRs meet the OECM criteria defined in CBD 15 and in the Government’s nature recovery Green Paper. There are currently 221 national nature reserve sites, which comprise 110,000 hectares or 427 square miles. That is 0.85% of England’s area. Natural England manages 134, the Wildlife Trusts 50, the National Trust 20, local authorities 29 and the RSPB, National Parks, other NGOs and other government agencies 34.

Let me cite a superb example: the new, supersized Purbeck Heaths NNR announced in 2020. Seven organisations manage it: Natural England, the National Trust, the RSPB, the Amphibian and Reptile Conservation Trust, the Dorset Wildlife Trust, Forestry England and the Rempstone Estate. The new NNR is larger than the original NNR, which was 996 hectares—it is now 3,331 hectares, a 234% increase. It is better, as it is increasing biodiversity and creating a more dynamic and resilient landscape, and it is more joined up, as it has a huge continuous grazing area and landscape-scale objectives.

Another excellent example is the Somerset Wetlands “super” NNR which links up six pre-existing national nature reserves on the Somerset Levels and Moors. It is managed in partnership by Natural England, the Environment Agency and five other NGOs. The crucial point is that some say NNRs should not be included in the OECM category nor count towards 30 by 30, since they are not statutorily protected—but that is a feeble point. These organisations are all approved by Natural England to manage reserves properly and bring about species recovery and conservation. Thus, I say to the Minister that they should be included as part of our 30 by 30 targets, since they may be managed by other effective means, as my noble friend Lord Lucas pointed out.

Finally on national nature reserves, paragraph 83 of the report said:

“We recommend that the Government enable and resource Natural England to develop and publicise accessible digital and offline tools and communications to enable members of the public to learn about and engage with their local protected areas”.


I agree entirely but, before doing so, we need to sort out proper online publicity for the 134 national nature reserves run by Natural England. I invite everyone, including the Minister, to search “visit a national nature reserve” on Google. Up will pop some very sexy sites with superb photos, but they are all from the National Trust, the RSPB, the Wildlife Trusts and NNRs run by similar organisations. Down that list somewhere will be a GOV.UK site called “National Nature Reserves in England”. Click on that and it will reveal 11 regional categories. Click on “North West NNRs” and it will reveal seven more categories. If the Minister clicks on “Cumbria”, that will list 37 NNRs—without a single map to help you. If she clicks on “Bassenthwaite Lake”, she will get this:

“The reserve is a shallow, balanced nutrient lake in the north-west of the Lake District. Main habitats: open water”.


To paraphrase Bob Geldof, is that it? It is the most beautiful landscape—after Ullswater and Blencathra, of course—and there is not a single photo of it, nor of any other national nature reserve, featured on GOV.UK. No wonder the NNRs managed by the other organisations have five times the visitor numbers. We all want people to access nature for the benefits it brings to health. I hope the Minister will have far more success than I have had over the last six years trying to get a dedicated site for national nature reserves, rather than buried in the bowels of GOV.UK.

The report, in paragraphs 73 to 75, urges the Government to prioritise working with the overseas territories. As the Minister will know, 94% of the United Kingdom’s biodiversity is not in Great Britain and Northern Ireland but in our 14 overseas territories, their unique islands and their 6.4 million square kilometres of ocean. The Darwin Plus scheme applies to our OTs.

I was the Minister way back at the first Earth Summit in 1992 in Rio, which launched the Darwin Initiative. I must admit, as a new, five week-old Environment Minister, I had not a clue what I was launching. I read the brief and had no idea how successful the scheme would turn out to be. Now, the Government have funded over 1,275 projects at a cost of £230 million, achieving both biodiversity conservation and multi- dimensional poverty reduction. Twelve years ago, I worked with our overseas territories for a few years and saw at first hand the splendid work the Joint Nature Conservation Committee did in our OTs and how the OTs desperately wanted more JNCC input, if only it could afford it.

Minister, it is an easy and impressive win for us in here in the United Kingdom to support the Blue Belt programme and the overseas territories biodiversity strategy being worked up at this precise moment by the JNCC and Defra. The JNCC has also done work on creating blue finance criteria, so that companies can invest in nature recovery projects in our United Kingdom’s oceans and our overseas territories’ seas and know that it is not genuine and not bluewashing.

The report made some very important recommendations on marine monitoring, and discussing all the implications could be a full day’s debate in itself. The last Government’s response pointed to the targets in the EIP and said that monitoring is very complex. Indeed it is. Natural England identified our marine protected areas in just 10 years. That was a splendid achievement, but identifying and designating them is one thing; managing them is another. All of us here can stand on a piece of land and have a fair idea of what it is, its condition and what we think we would like to do to improve it, but we can stand at the edge of the ocean and we have not got a clue what is happening under the surface. If we cannot measure it, we cannot manage it.

All I can say today is that I encourage the Government to step up all marine monitoring efforts, which are essential for biodiversity and carbon capture and form part of our 30 by 30 target. I agree entirely with my noble friend Lord Caithness, the noble Baronesses, Lady Boycott and Lady Jones of Moulsecoomb, and my noble friend Lord Banner, on bottom trawling. I have been deeply involved in all this for the last six years and, as your Lordships know, I can bore for England—or Natural England—on it, but let me give some general observations and advice to the Minister, if I may be so impertinent.

Much of the Government’s growth talk has been about building houses, and more houses are urgently needed. I accept that not all so-called green-belt land is sacrosanct and there are poorer bits which can be built on, but genuine high-quality green belt must be protected. Growth and nature are not exclusive; they are complementary. If the Government build houses on grey belt land, they must ensure that there is green space right around them for gardens, space for nature and rewilding, tree-lined streets and not just a token little green park 15 minutes away. I agree with my noble friend Lord Gascoigne, who made that exact same point. Nature recovery is essential in our towns and cities, not just the countryside.

On the countryside, I appeal to the Minister to maintain the £2.4 billion expenditure on ELMS and innovation grants. Farmers are key to nature recovery, as well as producing the food we need.

My main disagreement with my noble friend Lord Banner is that, in my experience farmers excel with carrots rather than sticks. I hope the Government will take on board the points made about tenant farmers by my noble friends Lady Rock and Lady McIntosh of Pickering.

Also, Minister, please get the message across to all those doing big infrastructure projects to consult Defra’s arm’s-length bodies, including Natural England, at a very early stage to look at what protected species might be affected. Workarounds can then be done in the early stages, but if they wait until the bulldozers are about to demolish the bat roosts, the ancient woodlands or the Ramsar sites, then delays will occur—delays caused not by the intransigence of Defra’s arm’s-length bodies but by the law.

Over the last few years, the Forestry Commission, the Environment Agency and Natural England have liaised to increase co-operative working on the ground. That makes sense. If we are to deliver 30 by 30, then we have to work together. If, for example, we look at a river catchment area, the Environment Agency will have a view on river flows and dredging, the Forestry Commission will have a view on what trees should be planted on the banks or nearby and Natural England will have a view on what other flora and fauna, such as beavers or voles, could be present. By co-operating, we get the best possible solutions to reduce flooding, increase woodland and recover nature and wildlife, and that will help deliver 30 by 30. Working together would assist in removing the uncertainty that concerned the noble Earl, Lord Devon. My plea to the Minister is that all the Ministers, in the Commons and here, and the directorates in Defra collaborate in the way that the three ALBs I mentioned are collaborating on the ground at operational level.

As the Government look to create three new national forests and nine new river footpaths, deliver the best possible nature recovery programmes in ELMs and revise their EIP targets, can we ensure, for example, that the forests link in with existing SSSIs, national nature reserves or landscape recovery projects to create wildlife corridors which are more joined up and protected, as my noble friend Lord Gascoigne suggested? Our national forests could also be part of our 30 by 30 targets, as well as the ELM and landscape recovery schemes, provided they meet the criteria. The take-up of schemes for landscape recovery has been incredibly excellent and is beginning to make a real difference for nature recovery: that is farmers volunteering to farm for food and nature. A time may soon come when these could also be included in our 30 by 30 target, provided that they meet the quality thresholds.

Let me conclude on this note: the one area where the Government cannot blame the Tories—

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

Is there just one?

[Lord Blencathra (Con)]

There is more than one, but one area is our Environment Act, which has given us the tools for nature recovery for the first time in our history. I invite all colleagues to look at Sections 98 to 116, which include “Biodiversity gain”, the “duty to conserve and enhance” nature, “Local nature recovery strategies”, “Species conservation strategies”, “Protected site strategies”, controlling tree felling and “Habitats Regulations”. Add in “Conservation Covenants” in Part 7 and the ELM schemes from the Agriculture Act and we have the greatest raft of measures for nature recovery that this country has ever seen. As nature recovers in those areas, then they can become protected and could qualify for 30 by 30. I suggest to the noble Baroness, Lady Jones of Moulsecoomb, that these powers are better than the new commission she suggested, but I do wish her a speedy recovery for her trusty right boot, provided it is not used on me.

Indeed, the Labour manifesto, on page 58, calls it “our Environment Ac.t” I did not expect it to say, “Michael Gove’s brilliant Environment Act”, but what I take from that wording is that they will tweak the EIP targets and tweak some other things, but they will not undermine the excellent new levers in our Environment Act. Let us use every lever in that Act, not just to bend the curve on nature loss, but to achieve real, sustained and progressive recovery of nature in this country.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Baroness, Lady Parminter, for securing today’s debate and for her excellent chairmanship of the committee, which came out with this excellent report. I thank all members of the Environment and Climate Change Committee for their work. This has been an excellent and important debate. This is an area in which is challenging to move forward, and it is something that we need to get a grip on.

I thank noble Lords who have kindly welcomed me today and over the past few weeks. People have been generous and supportive, and I appreciate it very much. It is genuinely an honour to hold this position, following the example of the noble Lord, Lord Goldsmith, sitting opposite. I welcome the noble Lord, Lord Blencathra, to his role. As I am going to have to follow him in every single debate, it could be quite fun.

The report represents a wealth of expertise and insights into the state of nature in this country and offers many valuable recommendations on how we can make the changes that we need to rise to what the report calls “an extraordinary challenge”. I assure noble Lords that this Government are committed to charting a new course and ensuring that nature is truly on the road to recovery.

The Secretary of State has confirmed the Government’s intention to launch a rapid review of the Environmental Improvement Plan, to make sure it is fit for purpose so that it will deliver on our ambitious targets, including 30 by 30. We therefore think that this debate and consideration of the recommendations in the committee’s report are very timely. We want to make sure that those recommendations are properly considered as we carry out the work of the review of the EIP. While this work is clearly newly under way—we are a very new Government—I will do my best to address and respond to the points raised during the discussion as best I can.

As we have heard clearly today, our biodiversity is in crisis. Without nature we have no economy, no food, no health and no society. However, we now stand at a moment in time when nature needs us to defend it. Critical to those efforts is what we have been debating today: the 30 by 30 target to protect 30% of land and sea by 2030. As we have heard, it was the UK’s international leadership that helped to secure a global 30 by 30 target at the UN biodiversity summit in December 2022. I thank the noble Lord, Lord Goldsmith, for keeping going on this issue until he achieved it. What is the word I am looking for? Persistence, that is the word. Of course, he was supported in that by the noble Lord, Lord Benyon, and others. Their leadership made an ambitious commitment here in the UK, which we have to deliver on land and at sea.

Targets are meaningless if you do not actually deliver them, so I am pleased that the new Labour Government have renewed that commitment, and we are now focusing on how we can deliver it for the long term. That will be critical to supporting our wider priorities, including cleaner rivers, lakes and seas—the first of two water Bills will be coming shortly—and boosting food security; we have heard about farming. Those priorities also include protecting communities from the dangers of flooding and delivering our legally binding environmental targets.

With just over five years remaining until 2030, we are rapidly approaching the halfway point of this decade, yet unfortunately we are still one of the most nature-depleted countries in the world. That is why I am grateful for the contributions today; they are valuable in helping to inform how we move forward.

What is clear is the sheer scale of the extraordinary challenge we are facing. We have not yet seen the urgent step change that the report rightly calls for. Achieving 30 by 30 will require a clear vision and a delivery strategy to drive the urgent progress we need, but one that draws on the work already taking place across government and beyond. The 30 by 30 programme is about bringing these efforts together to ensure that more nature recovery actions have a lasting long-term legacy.

Importantly, it is also about collaboration between and right across sectors. The Government intend to take immediate action to realise the urgent step change needed, and are currently in the process of reviewing our approach. Later this year we hope to confirm the criteria for land that counts towards 30 by 30 in England in order to set a clear and ambitious standard to ensure that only areas that are effectively conserved and managed can contribute towards the commitment. In addition to confirming the criteria, later this year we will begin piloting the process for recognising land that already meets those criteria.

Building on the committee’s recommendations, that will help us to develop a process to identify land beyond protected areas that meets the 30 by 30 criteria and can be formally recognised as other effective area-based conservation measures, as was mentioned in the debate. These areas represent a unique opportunity to take a more inclusive approach and recognise where nature is being effectively protected outside of those designated sites. We desperately need a clear strategy to chart our course to meeting that target, and it is important that we continue to drive that work forward. This includes ensuring that our protected areas are delivering as they should be for nature.

Our national parks and national landscapes and the Broads—collectively, our protected landscapes—are extremely special places. We know that they cover nearly one-quarter of England and contain around half of England’s priority habitats, but we also know that they continue to suffer the effects of climate change and biodiversity loss. The noble Baroness, Lady Jones, mentioned Windermere and pollution. This is clearly an area that we have to tackle quickly, which is why we are prioritising our water Bill. We are committed to ensuring that these iconic landscapes become wilder and greener and deliver a significant contribution towards the 30 by 30 target in England.

At sea, the Government have taken significant steps to protect our marine environment. We have 181 marine protected areas, including three highly protected marine areas, and as a priority we need to work out how we are going to properly provide protection for them.

The noble Baroness, Lady Boycott, and others talked about bottom trawling. I assure noble Lords that we think it is extremely concerning and we understand its negative impacts. Our marine regulators have assessed all fishing activities on the protected species and habitats in our MPAs and identified bottom-towed fishing as a major pressure, so it is very much on our agenda. To support our 30 by 30 target, the Marine Management Organisation has introduced by-laws, which we heard about from the noble Baroness, Lady Boycott, to restrict the use of bottom-towed gear over sensitive habitats. More recently, in March the MMO introduced a new by-law restricting the use of bottom-towed gear over rock and reef habitats in 13 MPAs. That means that around 60% of our marine protected areas are now protected by by-laws that limit the use of damaging fishing gear used for bottom trawling. We are pushing that further and continuing to work on strengthening protections. Evidence was gathered last year on the impacts of fishing on seabed sediments, and further by-laws are being produced for consultation. So I assure noble Lords that we are taking the issue seriously and moving forward on it.

We are aiming for 48% of marine protected species and habitats to reach a healthy state by 2028, with the remainder in recovering condition. Natural England and the JNCC are developing an MPA monitoring strategy.

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

I will try to remember where I was and what I was talking about. Oh yes—I was making lots of promises, was I not?

I talked about the fact that we are developing an MPA monitoring strategy in order to address progress on marine areas. We want to deliver this in March 2028, basically to make sure that we are making continuous progress in this area.

I turn to the specific points made in the debate; if I miss any questions, I will of course write to noble Lords afterwards. I just want to confirm that, later this year, we will confirm the criteria for land counting towards 30 by 30 in England; that was raised by a few people.

The requirement for long-term protection is one issue that was raised; clearly, it is really important. We know that committing land to long-term management can be an extremely challenging prospect for landowners, even those who want to deliver and work for nature conservation; we know that this has been hampered by short-term funding cycles and management agreements. What we are actively doing at the moment is considering the committee’s recommendation, as we review our approach to achieving 30 by 30, to ensure that we establish the most appropriate timescales for the long term and support people who want to work to that.

A number of noble Lords asked about SSSIs. In particular, my noble friend Lady Young of Old Scone talked about the importance of how they are counted, while the noble Baroness, Lady Parminter, talked about the quality of SSSIs being of critical interest and importance. We recognise the committee’s recommendation that, in order to count towards 30 by 30, they have to be in good condition. We are looking at how we can reflect the condition of SSSIs in our approach.

The noble Baroness, Lady McIntosh, asked specific questions regarding Natural England’s resources. Some of them were quite complex, so we will write to her with the detail.

The monitoring of protected sites also came up. The noble Lord, Lord Banner, asked about monitoring, as did my noble friend Lord Whitty, who is no longer in his place. The environmental improvement plan was mentioned; I mentioned it previously.

The noble Lord, Lord Lucas, asked specifically about the six-year cycle for looking at SSSIs. I want to let him know that the Joint Nature Conservation Committee has moved from a six-yearly assessment cycle, so that is not how it is going to continue. Instead, we are moving to a risk-based process for SSSIs, so that we can be much more targeted and efficient in how we assess them. As part of this, Natural England is developing a long-term prioritised monitoring programme and is working to make better use of new technologies such as remote sensing.

Citizen science and partnership working were mentioned. I assure noble Lords that citizen science is already being used to support assessments; for example, we are working with organisations such as the British Trust for Ornithology and the Botanical Society of Britain and Ireland in this area.

The noble Baroness, Lady Jones, asked about protected landscapes. Again, protecting these important landscapes is obviously incredibly important. The new Government are committed to working on how we can improve our protected landscapes so that they offer more to 30 by 30—basically, achieving their full potential going forward, because we know that, at the moment, they are not.

The noble Baroness, Lady Rock, asked about continuing the Farming in Protected Landscapes programme. I am not fobbing her off in any way at all and will come back to this when we talk about the budget but, at the moment, we are simply still looking at the spending review. I assure noble Lords that we have not made any final decisions about this issue, but clearly will be doing so.

The noble Lord, Lord Gascoigne, raised the review of the environmental improvement plan, which I mentioned earlier. I assure him that the review I mentioned will be completed by the end of the year. The idea is to provide a clear vision on how we are going to use it to achieve our environmental goals.

Marine monitoring, including HPMA monitoring, was mentioned by a number of noble Lords. The committee made a recommendation on expanding the current marine monitoring programme, both inshore and offshore. I am sure noble Lords are aware that this is an extremely complex process that requires long-term vision and, of course, investment. We want to work in close collaboration with Natural England, the JNCC and Cefas on what the future of that marine management should look like and the best practice to deliver against the statutory targets that have been set. It is also important that any data they collect complies with accessibility standards and is publicly available.

The noble Earl, Lord Devon, who has kindly given me apologies for having to get his train, asked about marine net gain. For the record, we are currently working to develop options, including timescales for the operation of that policy. It has not disappeared; we will provide more information in due course.

Further on marine, the noble Lord, Lord Blencathra, asked about the Blue Belt. I can give him a firm yes; we support the Blue Belt, which is very important.

The noble Baroness, Lady Jones, asked who the Minister responsible for international development is. I can confirm that it is Mary Creagh MP.

The noble Lord, Lord Blencathra, asked about overseas territories, including Darwin Plus. The committee rightly recognised that the overseas territories will be integral to the UK’s contribution to the global biodiversity framework goals and targets, and calls for effective partnership working. Clearly it is for the individual territories to decide how they want to work within this and how they want to work with us, but we are working closely with the Governments and Administrations of the overseas territories to develop a new overseas territory biodiversity strategy. I assure noble Lords that we are working hand in hand and looking to move forward in this area.

The noble Baroness, Lady Jones, asked about the Global Ocean Treaty. I confirm that we fully agree with her on the importance of the Agreement on Biodiversity beyond Natural Jurisdictions for protecting our marine environment, especially for achieving 30 by 30 for the ocean under the global biodiversity framework. It is important that we show progress on that; we want to make progress and to work with the international community to deliver on these agreements. My understanding is that at the moment the FCDO and Defra teams are working together to come up with a realistic timeline to introduce the necessary legislation for UK ratification.

The noble Baroness, Lady Miller, asked about citizen science and partnership working. These are critical. That is something that we are building through the work we are doing in looking at how to achieve results. The role of partners is going to be incredibly important. This is a huge collaborative effort and we have to work in partnership. The public sector, the conservation sector, farmers, developers and business: we all have to come together if we are genuinely going to achieve these targets.

The noble Earl, Lord Caithness, asked about partnership details for specific organisations. I will just say that we are looking right across the piece to see how we can deliver with partners.

My noble friend Lord Grantchester mentioned the devolved Administrations. This is an important opportunity to work collaboratively with the devolved Administrations as we review and develop our approach here.

The noble Lords, Lord Gascoigne and Lord Harlech, asked about building and the environment. The green belt in particular was mentioned. We are consulting on what we are referring to as the grey belt, which are the areas that are designated as green belt but are not of good standard. Part of the reason for consulting on and talking about the grey belt is to make sure that we protect the green belt that is of value—pulling out the areas that are not, but protecting the areas that are important.

There was a lot of discussion around ELMS. I shall try to cover a few bits but clearly time is ticking on. Just to confirm, we are absolutely committed to ELMS. My honourable friend Daniel Zeichner, the Farming Minister, is working really hard, talking to stakeholders and looking at how we develop ELMS to make it more fit for the future, particularly around such things as nature-friendly farming. Our manifesto said that

“food security is national security”:

we want to work with farmers and other stakeholders, including tenants. We take the needs of tenants and their rights very seriously. There is a lot of good work going on there.

That brings me to the Budget. As I say, we are still in discussions and nothing has been agreed or decided yet on whether there will be any cuts to the farming budget.

The noble Lord, Lord Lucas, mentioned the OECMs. Again, we will be looking at the committee’s recommendations around this to develop a process to identify land outside the designations. In that same vein, the noble Lord, Lord Blencathra, talked about national nature reserves. I just say that many of these are already in SSSIs, so already contributing.

Finally, the right reverend Prelate the Bishop of Norwich talked about forest schools. My granddaughter has just finished three years at a forest school. She has thrived and grown and it has been the most wonderful experience for her, so I have huge admiration for the work that they do.

Once again, I thank the noble Baroness, Lady Parminter, for securing today’s debate and her committee for all its work. It is a huge piece of work and can greatly inform the Government as we actively consider the recommendations it sets out. I look forward to working constructively with everybody in this Room as we go forward and will write if I have missed anyone’s question.